Note: all information provided are subject to the copyright of the original owners which are credited thereof..

EURO CLOUDS DISPERSED

Source: Cyprus Weekly

By Bouli Hadjioannou

THE clouds that had been hanging over Nicosia’s euro entry were dispersed this week after opposition Disy dropped its reservations on key bills following high-level assurances that Cyprus was ready for the common currency.
The government’s plans to adopt the euro next January 1, risked derailment after Disy signalled last week that its support could not be taken for granted.
Its bombshell came a day after Akel, the biggest party in the government of Tassos Papadopoulos, said it would vote against the bill.
Akel is insisting on a one-year delay to give time for more generous social measures. And it has warned of tough times ahead if the pound is replaced by the euro this January.

As Disy and Akel traded accusations over which party was being immature, President Papadopoulos sent off a lengthy letter to opposition leader Nicos Anastasiades explaining why it was crucial for Cyprus to stick to the timetable.Finance Minister Michalis Sarris and Central Bank governor Christodoulos Christodoulou followed this up with a meeting at Disy headquarters.

The meeting gave Disy the opportunity to secure additional assurances that everything was on track for a smooth transition.
“I would like to thank both the Minister and the Governor because they gave us the significant data that we asked for to persuade us there are no grounds to delay the approval of the bills and those who voice scepticism and objections are not justified,” the Disy leader said.
Sarris also undertook to try to move the dates for new VAT rates to that they do not coincide with the euro, Anastasiades added.
The minister told reporters that the meeting with Disy had focused on the significant benefits from euro adoption that far exceed any possible difficulties that Cyprus may face during the transition period.

“We have already assured the leadership of Disy that the government has been working for a long time to successfully deal with these difficulties and possible challenges,” he said.The government accepts full responsibility for the success of this venture.
“We believe that everything will go smoothly and that our entry into the eurozone will allow us to make the best of significant benefits for all Cypriots and keep any possible negative repercussions from the transitional period to a minimum,” he said.
And he gave assurances that the euro will not come at the expense of social benefits.

“There is no dilemma between a social state and the introduction of the euro. On the contrary, our entry into the eurozone will guarantee macroeconomic stability and economic robustness which will allow us to continue our social policy,” the minister said.
Despite Akel’s calls, the government remained steadfast that a one-year delay was not possible.

“We already fulfil the criteria for our entry into eurozone. There is no reason to delay and if we create the conditions justifying a postponement, we will not be able to enter for many years,” he said.

The Central Bank governor was even blunter.
“If there are any dangers, then these stem from the possible postponement of our entry on January 1, 2008. And if there are some concerns, these concerns are made even larger from the possibility of a postponement,” Christodoulou said.

Any delay would put the economy in a disadvantageous position. “We have already covered a large part of the way and it is not easy, if not impossible to postpone and turn back without serious repercussions,” he added.But Akel would not budge an inch. “We will fight for the party’s views. We will not budge because we are sure that our calculations are correct,” said House president and Akel general secretary Demetris Christofias.
He said the fiscal deficit stood at only 1.3% – Θ140m below the 3% set by the Maastricht criteria. The government could use this money for social benefits, he said.

“We want more care for the people, not to say we will put the money aside for difficult times. The state must help those people that need it. This is Akel’s position,” he added.

Legal framework for the euro
THE four bills that were voted on in the House of Representatives yesterday set out the legal framework for the transition to the euro and amend the law on the Central Bank to satisfy EU requirements.

They cover:

The conversion into the euro based on a rate to be fixed in July.
The dual display of prices starting from the first day of the month immediately after the fixing of the exchange rate and continuing through to six months after the adoption of the euro.

Exceptions will be made for sums lower that 1 cent of a pound; digital price displays; bus tickets and tickets issued electronically including airline and ferry tickets; parking metres; handwritten receipts. The minister has the right to issue a decree making exemptions in cases where dual display of prices is technically unfeasible or disproportionately expensive.

Issues pertaining to interest rates. References to the pound will be replaced by the euro
Laws and regulations with fines will be given in euros.

The exchange of notes and coins. The Central Bank shall exchange banknotes for 10 years and coins for two years free of charge. Banks and co-op credit societies will offer a similar service free of change for six months after the adoption of the euro – but with a Θ1,000 per person limit per transaction for banknotes and a Θ50 per person per transaction in the case of coins.

All accounts at banks and co-op credit societies will be converted into euros free of charge.
A Euro Observatory will be set up in each district to protect consumers in connection with the introduction of the euro.
The law covers the conversion of companies’ share capital in euros.

Authorities will have to publish fees and levies for services rendered by public authorities within three months of the fixing of the rate.
The pound will continue to be legal tender for one month after the introduction of the euro.

Any person infringing the law faces an administrative fine of up to £100,000 before the euro is adopted and 170,000 euro from euro adoption date.
Pound-denominated duty stamps held by the public on the euro adoption date shall not be used to pay duty but may be exchanged for euro-denominated duty stamps of an equivalent total value for one month after the adoption of the single currency.

The same applies for postage stamps that can be exchanged for dual denominated or euro denominated postage stamps of an equivalent total value up to the last day of the year in which the euro was adopted. Pound denominated postage stamps issued before August 2, 1978 may not be exchanged.
The law on the Central Bank eliminates any discrepancies in existing legislation to ensure full compliance with the acquis once Cyprus is a member of the eurozone.

Following a debate in the House Finance Committee authorities undertook to address concerns raised by MPs.

These include:

To inform the Supreme Court so that a decision is taken on whether regulations are needed as regards previous judgements.
Amend the criminal law so as to protect signatories of cheques issued in Cyprus pounds before January 1 and presented for payment afterwards.
Amend the tenant’s protection law to protect tenants from possible eviction due to disagreement on the rent following the final conversion
To make it a criminal offence to impede the entry of an inspector from the Euro Observatory to enter premises and inspect papers.
Officials argued against proposals to extend the dual circulation period of the pound and the euro beyond the current one month. Both the government and the governor of the Central Bank argued that the quicker the national currency is withdrawn, the smoother the transition to the new state of affairs

Let’s work together Marfin chief tells BoC

‘Our aim is friendly cooperation,’ says Andreas Vegenopoulos

MARFIN Popular Bank extended a hand of friendship to its main local rival, telling the Bank of Cyprus it wanted to work together to build a ‘national champion’.
“Our aim is a friendly cooperation that will serve the employees and shareholders of the two banks and the economy of Cyprus as a whole,” MPB CEO Andreas Vgenopoulos told an EGM on Monday – days after MPB became BOC’s biggest shareholder with a stake of 8%.
“Friends of the Bank of Cyprus, a new relationship begins between us,” the Greek financier said.
His call came only hours BOC’s top management said they could not see how the island’s two largest banks could cooperate without violating competition rules.
And despite the friendly overture, Vgenopoulos’ address was not free of criticism.

Attacked

He said BOC had rushed to attack MPB after it bought the 8% stake from the Bank of Piraeus without first trying to determine what its intentions where.
BOC was extremely good at organic growth, but seemed unprepared for major strategic decisions, he hinted. Vgenopoulos, who has shaken the local banking scene with his tough talk and quick footwork, pledged MPB would not sell off its stake in BOC.
“It is a strategic investment that we will never sell,” Vgenopoulos said.
The investment marked the completion of the first stage of long-term strategy, leading eventually to a merger when the conditions are right.
MPB had bought the BOC stake because it did not want it to fall into foreign hands.
“Foreign banks have their shares on foreign stock markets and they do not care what profits a subsidiary makes, provided these profits go to the mother company,” he said.

And he added: “But if the price of the share of the Bank of Cyprus falls, this will seriously affect the revenue of Cypriots and affect consumption,” he said.

The local banking scene faced tough competition from abroad with foreign banks poised to come to Cyprus.
“Do you think that Eurobank will just have one branch in the country. According to my information, the Bank of Piraeus and another three big banks from abroad may come to Cyprus,” he said.

Controlled

In the event of a Cyprus settlement, 14 Turkish banks will also be players, seven of which are controlled by foreign capital.
“That is why we urge the leadership of BOC to cooperate and at the appropriate time to a merge our banks with the aim to create a national champion,” he said.

MPB had not made any hostile move, yet it had come under attack from BOC as to its intentions.
“We are the biggest shareholders and I think we deserve more respect. We urge the friends of the Bank of Cyprus to keep a lower profile and to come to negotiations so that we can build a future together,” he said.

MPB would not make a public offer for BOC and planned to put a temporary halt on new initiatives for mergers for the next year, he said.
BOC’s attempt to merge with Piraeus weakened their argument that they were committed to autonomous growth.
And he said BOC had entertained the idea of buying HSBC’s 21% share in Laiki in the past. The deal had not gone through not because of concerns over competition, but because agreement could not be reached between the two.