PM: No plans to switch to euro
THE TRNC has no plans to switch to the euro in the face of further losses in the value of the Turkish lira, Prime Minister Tufan Erhürman said this week — despite initially appearing to suggest that such a move was on the table.
Dr Erhürman raised eyebrows on Tuesday — a day that saw the British pound hit 6.50TL, before falling back later in the week — when he said that the government was considering “radical measures”, which included the possibility of “moving to a different currency”.
His comments were interpreted by some as meaning that the TRNC would adopt the euro — currently changing hands for around 5.50TL — as its official currency.
On Wednesday the PM, during a
TV interview, said that while the effects of the TL’s devaluation were felt like a “gale” in Turkey, they were akin to a “tsunami” in North Cyprus.
He acknowledged it will be the “people who will suffer” because prices for property and cars, rent, private education fees and some bank loans are set in sterling.
On Thursday, however, following his weekly meeting with President Mustafa Akıncı, Dr Erhürman dismissed the euro speculation.
“The impression that we have decided to pass to the euro . . . is wrong,” he said.
“We are continuing consultations with Turkey because of [budget] deficits we expect to come about.”
Following meetings which continued late into Thursday night, Dr Erhürman issued a written statement yesterday outlining new measures taken by the government. They included the use of the “Price Stabilisation Fund” to stave off a huge 41 kuruş-per-litre increase in petrol pump prices, and subsidies for milk.
The new measures followed a decision by the TRNC Central Bank on Tuesday to ban TL earners from borrowing in foreign currency, while also ending 100 per cent mortgages.
Following the announcement, home loans are now restricted to a maximum of 80 per cent of a property’s value, while credit deals for motor purchases have been capped at 75 per cent of the vehicle’s price.
Economists who spoke to Cyprus Today were split over the suggestion of switching to another currency.
Ünal Akifler said he was a long-term supporter of adopting the euro — used in South Cyprus — “so long as certain conditions are met”.
“If it were me governing this country, I would be bold and would take that step,” he declared.
“However it will not come without consequences. Turkey would have to support this, which she will not . . .
“Then there is the issue that the Turkish Cypriots do not have any involvement in the euro mechanism, as indeed they don’t have for the Turkish lira.
“Everything concerning finance is connected to Turkey, and it would not be easy to switch to another currency.”
Okan Veli Şafaklı said, however, that changing the country’s official currency would “only land us in a much worse place”, adding: “The TRNC stands on its feet because of the help of Turkey . . . The government needs to take a ‘Robin Hood’ approach: tax the rich and not the poor.”
Göksel Saydam said it was “almost impossible” to adopt the euro because of the criteria set by the European Union.
“These include things like an annual inflation rate not exceeding 1.5 per cent and a budget deficit of not more than 3 per cent of GDP,” he explained.
Meanwhile TRNC officials dismissed unsubstantiated Greek Cypriot media reports that there had been a “rush” of Turkish Cypriots depositing cash in banks in the South lately as “political”.