Brussels, 02/05/2005 (Agence Europe) - Last weekend, Malta, Cyprus and Latvia joined the European exchange rate mechanism II (ERM II), which is the antechamber of the euro. They join three Member States which joined in the latest wave (Lithuania, Estonia and Slovenia), which decided to link their currencies to the euro in June 2004, plus Denmark. This stage, of a minimum duration of two years, is a pre-condition of joining the single currency, alongside the other Maastricht criteria. The central parity of the Maltese lira has been set at 0.429300 MTL to the euro, that of the Latvian lat at 0.702804 LVL, and that of the Cypriot pound at 0.585274 CYP. The currencies may fluctuate by 15% either side of these pivotal rates.
According to the 2004 convergence report, these three Member States were in line with the Maastricht criterion on nominal long-term interest rates last year, but needed to rectify certain incompatibilities in their national legislation with articles 108 and 109 of the treaties and the statutes of the European Central Bank System (ECBS) and the European Central Bank (ECB). Latvia, which is hoping to adopt the euro in 2008, has to focus its efforts on reducing inflation (6.2% in 2004), as the inflation rate may not exceed that of the three Member States with the best scores by more than 1.5 points. Cyprus and Malta must continue to reorganise their public accounts. There deficits were 4.2% and 5.2% respectively in 2004 and are set to fall below 3% in 2005 and 2006. In 2004, the level of their debt exceeded the reference value of the treaty (60%), with 71.9% in Cyprus and 75% in Malta, for which the Commission is anticipating a gradual increase from 2006.