Final countdown to the euro in Cyprus and Malta
Cyprus and Malta will adopt the euro from January 1, 2008 bringing to 15 the number of European Union countries that share the same currency.
The final practical preparations are well under way and banks, retailers and consumers seem to be ready for the changeover. Banks and enterprises have been receiving supplies of euro banknotes and coins to be able to –handle- transactions in euro as from 1 January. Euro coin mini-kits have also been available for citizens since early December, to help them familiarize themselves with their new currency before €-day.
Cyprus and Malta will adopt the euro on 1 January 2008 at the rate of 0.585274 Cyprus pounds and 0.429300 Maltese lira to one euro. This means that one Cyprus pound corresponds to €1.71 and one Maltese lira to €2.33. From January, the euro area will include 15 out of the 27 EU countries and a population of 320 million out of the EU’s total of 495 million. 2008 will mark the second enlargement of the euro area since 2002 – Slovenia having already adopted the single currency on 1 January 2007. The final practical preparations for the euro changeover in Cyprus and Malta are proceeding well and according to the countries' national changeover plans.
The euro changeover in the first group of countries in 2002, and more recently in Slovenia, is estimated to have caused a one-off increase in prices of 0.1-0.3 percentage points. This means that if the average price rise in the year of the changeover was €2.30 for an EUR100 basket of purchases, no more than thirty cents of this increase can be attributed to the euro.
Commercial banks started receiving euro coins from the Central Bank of Cyprus on 22 October, and euro banknotes on 19 November. The Central Bank of Cyprus estimates that the banking sector will be supplied with approximately 80% (in value rather than volume) of all euro banknotes needed for the national economy before 1 January, and 64% of the necessary coins. Businesses, notably retailers, are currently receiving euro cash from their banks. This will ensure that they can give change exclusively in euro as from day one and will help speed up the cash changeover. Moreover, since 3 December, a total of 40,000 pre-packed euro coin starter-kits for businesses (worth €172 each) and 250,000 mini-kits for the general public (worth €17.09 each) have been on offer.
Recent survey results indicate that the Cypriot enterprises are well prepared for the changeover and have not experienced any significant problems. About 7,130 businesses, including larger retailers and banks, are participating in a Fair Pricing Code launched by the government in July 2007 whereby they commit to behave fairly and not to seek advantage from the changeover. A logo displayed on shop windows attests to their adherence to the Code. The dual display of prices in the Cypriot pound and euro has been compulsory since September, helping consumers to get used to the new scale of values. Its implementation is monitored by five Euro-Observatories whose inspectors regularly visit retail outlets throughout Cyprus. The Ministries of Finance and of Commerce and Industry monitor price developments in cooperation with the statistics office and consumers’ associations.
The euro area was established on 1 January 1999, when 11 of the then 15 European Union Member States adopted the euro by irrevocably locking their bilateral exchange rates. The 11 were: Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland. Greece adopted the euro in 2001. The euro banknotes and coins were introduced on 1 January 2002, after a transitional period of three years (one year in the case of Greece) during which the euro could be used as book money, while national banknotes and coins were still used in cash payments.
Slovenia was the first of the 10 European countries that joined the EU in 2004 to adopt the euro, on 1 January 2007. Cyprus and Malta will follow on 1 January 2008, bringing the number of euro-area Member States to 15. The euro area will then include 318 million out of the EU’s total 493 million population (see IP/07/1982).
How big are Cyprus and Malta?
Cyprus had a population of 778,684 at the beginning of 2007 and Malta 407,810. They are the two smallest economies of the euro area, contributing 0.17% and 0.06% respectively to the area’s GDP, and 0.24% and 0.13% to its population. In 2006 Cyprus’s GDP per capita was 92% of the EU average. Malta’s was 77% (see Eurostat release STAT/07/179 of 17 December 2007)
What about the other 12 EU countries?
As of January 2008, of the 12 EU countries that have not yet adopted the euro, 10 have what is known as a derogation, which means that they do not presently fulfil the necessary conditions to fully participate in the final stage of Economic and Monetary Union (= adoption of the euro). They are the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland and Slovakia (of the group that joined the EU in 2004), Bulgaria and Romania, which became EU members in 2007, and Sweden. Denmark and the United Kingdom have opted to stay out for the time being, and negotiated two Protocols to that end which are annexed to the Maastricht EU Treaty. However, the new Danish government announced in its programme on 22 November 2007 that it wished to give the Danish electorate the possibility of a fresh vote on the opt-outs concerning the euro and three other EU policies.
Which EU countries to adopt the euro next?
The country with the closest target date for adoption of the euro is Slovakia, which aims to do so on 1 January 2009. The Commission and the ECB will assess the fulfillment of the degree of convergence reached by all the Member States with a derogation – including Slovakia – in their next regular convergence reports in spring 2008. Romania has set its target date at 2014. The other EU countries with a derogation have no specific target date but have expressed the intention to switch to the euro at some point between 2010 and 2014. (financialmirror)
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