ince 2004.

Cyprus
The area of the Republic of Cyprus under government control
has a market economy dominated by the service sector, which accounts
for 78% of GDP. Tourism, financial services, and real estate are the
most important sectors. Erratic growth rates over the past decade
reflect the economy's reliance on tourism, which often fluctuates
with political instability in the region and economic conditions in
Western Europe. Nevertheless, the economy in the area under
government control grew by an average of 3.6% per year during the
period of 2000-06, well above the EU average. Cyprus joined the
European Exchange Rate Mechanism (ERM2) in May 2005 and adopted the
euro as its national currency on 1 January 2008. An aggressive
austerity program in the preceding years, aimed at paving the way
for the euro, helped turn a soaring fiscal deficit (6.3% in 2003)
into a surplus of 1.5% in 2007. As in the area administered by
Turkish Cypriots, water shortages are a perennial problem; a few
desalination plants are now on line. After 10 years of drought, the
country received substantial rainfall from 2001-04 alleviating
immediate concerns. Rainfall in 2005 and 2006, however, was well
below average, making water rationing a necessity in 2007.

Czech Republic
The Czech Republic is one of the most stable and
prosperous of the post-Communist states of Central and Eastern
Europe. Growth in 2000-07 was supported by exports to the EU,
primarily to Germany, and a strong recovery of foreign and domestic
investment. Domestic demand is playing an ever more important role
in underpinning growth as the availability of credit cards and
mortgages increases. The current account deficit has declined to
around 3.3% of GDP as demand for automotive and other products from
the Czech Republic remains strong in the European Union. Rising
inflation from higher food and energy prices are a risk to balanced
economic growth. Significant increases in social spending in the
run-up to June 2006 elections prevented, the government from meeting
its goal of reducing its budget deficit to 3% of GDP in 2007.
Negotiations on pension and additional healthcare reforms are
continuing without clear prospects for agreement and implementation.
Intensified restructuring among large enterprises, improvements in
the financial sector, and effective use of available EU funds should
strengthen outpu