Saturday, November 13, 2004

One step forward, one step back

Updated The still-divided nation of Cyprus, it's northern third still run by a Vichy government under the aegis what amounts to Turkish military occupation, having recently obtained membership in the European Union, now wants to enter into the Exchange Rate Mechanism, or ERM2, to prepare the way to adopt the euro as currency by 2007. However, it has one big hurdle to overcome: the IMF. From AFP for October 30:
The Cypriot government must maintain its tight fiscal policy if the island is to enter the eurozone, an International Monetary Fund (IMF) official said in Nicosia Friday. ...

"Successful participation in the ERM2 and ultimately the euro area are of paramount importance, and some sacrifices are needed," Thomas Richardson told a news conference at the end of a regular biannual visit to compile a report on Cyprus.
Such "sacrifices," of course, are to be made by the Cypriots, not by international banks and major lender nations that finance the deals.
The government is seeking to curb public spending by raising the retirement age of civil servants, enforcing a wage and jobs freeze in the public sector and prohibiting supplementary budgets. ...

In its preliminary conclusions, the IMF said Cyprus must also be prepared to take further measures to achieve fiscal adjustment targets.

These include more aggressive collection of back taxes, increasing fees for government services, streamlining social benefits and, if necessary, a "limited tax increase."
Tax increases, which can affect those not in need of government services, is of course a very last resort.

Updated to revise some poor phrasing which could have been read as saying that the Cypriot government, rather than that of the northern, Turkish-occupied third of the island, was the Vichy regime.

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