The Cypriot government is expected to decide in the next 15 days whether to make a formal application to join Exchange Rate Mechanism II, the first step towards adopting the euro currency, according to media reports Wednesday. Countries must remain within the ERM for at least two years before adopting the euro, and must meet the other four stringent "Maastricht criteria" governing the size of the budget deficit, public debt, interest rates and inflation. The Financial Mirror of Cyprus reported both the government and the Central Bank of Cyprus had intended to adopt the euro as soon as possible. However the island's large budget deficit, which hit more than 6 per cent of gross domestic product (GDP) in 2003, was the main reason why it was not among the states -- Slovenia, Estonia and Lithuania -- that joined ERM II in June.
