Cyprus and Malta gear up for euro launch

Filed on December 31, 2007

NICOSIA - The tiny Mediterranean islands of Cyprus and Malta began the final countdown on Monday to bid farewell to their national currencies ahead of their entry to the eurozone on January 1.

Cyprus pounds and Maltese lira will be replaced by euro notes and coins from midnight on December 31 as the number of countries using the single European currency rises to 15.

Shops, banks and businesses on the islands—which together have populations of just about 1.4 million—have been gearing up for the euro for several months amid consumer concerns it will lead to rising prices.

Malta is planning a fireworks display in the port of Valetta to mark the switchover, while Cyprus is planning celebrations at its finance ministry.

The European Commission set the two on the path in May by ruling they had met the strict macroeconomic criteria needed to become members of the eurozone.

According to the official exchange rate, one euro is worth 0.585274 Cyprus pounds and 0.4293 Maltese lira.

In Cyprus, stars such as tennis ace Marcos Bagdhatis were recruited to front a marketing blitz and Cyprus President Tassos Papadopoulos even said the new currency would help efforts to reunite the country, divided since the 1974 Turkish invasion.

‘We are optimistic that the adoption of the euro will create more favourable conditions leading to a solution that will actually reunite Cyprus, its economy, territory, institutions and society at large,’ Papadopoulos said.

Huge queues extended outside banks across Nicosia last week as people got their first chance to lay their hands on the euro, delivered in high-security convoys.

Cyprus, an island with a population of less than a million, joined the 27-member European Union less than four years ago and enjoys a high standard of living topping 90 percent of the EU average.

But a recent survey found 70 percent of Cypriots believe euro entry will lead to inflation and profiteering.

‘The euro might be good for big business but what has the EU done for us? I can only see life becoming more expensive,’ said housewife Anastasia Kolokasides.

The government has moved to quash these concerns, promising officials will closely monitor price fluctuations and new legislation to outlaw price-fixing with offenders risking possible jail terms.

The central bank predicts prices will not go up.

‘The perception in the minds of the people is one thing, what actually happens is another. It doesn’t stand up statistically,’ central bank senior manager Kyriacos Zingas told AFP.

Battling similar fears in Malta, the government signed 12 price stabilisation accords with importers for the period between October 2007 and March 2008, covering 6,700 products and services.

Maltese trade union UHM has deployed some 200 undercover buyers to check for abusive price rises in shops.

Analysts say adopting a stronger euro can only be good for the Cypriot economy as it will attract more foreign investment, stimulate growth and increase stability as the government will have to abide by stringent fiscal requirements.

In addition, Cyprus’s key tourism industry attracts a large number of euro-wielding EU citizens, although eurosceptic Britain is the island’s largest single market.

Malta hopes the adoption of the single currency will help the economy transform itself into a high-technology investment magnet.

‘Malta became a very attractive place for investment from Europe and outside Europe at the moment we said we would be joining the eurozone,’ Maltese Prime Minister Lawrence Gonzi told AFP recently.

From January 1 ‘it will be more so... in all sectors targeted for tranformation,’ he added, citing six sectors including information technology.

Cyprus pounds can still be used for the first month, but experts believe most will be out of circulation within 15 days with around 600 million pounds worth of notes set to be shredded and 40 million pounds in coins to be melted down.

In Malta, central bank chief Michael Bonello voiced concern that people are hoarding stockpiles of a currency which risks becoming worthless unless converted, with the equivalent of about 466 million euros stashed in people’s homes.

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