Cyprus And Malta Change To Euros
- December 28th, 2007
- Posted by EUEditor
Two of the small states of the European Union, Cyprus and Malta, change their currencies over to Euros on 1.01.08.
The accession of the two countries to the “Euro area” — abandoning the Cypriot Pound and Maltese Lira — will mean that 15 of the 27 EU member countries will be using the joint currency.
BACKGROUND ON EURO MEMBERSHIP
All member countries of the European Union are committed by treaty to eventually take up the Euro.
They have to qualify for it by meeting set standards in economic management and performance: on inflation; containment of budget deficits; exchange rate stability; long-term interest rates; and a measure of the “compatibility” of each country’s legislation, e.g. statutes of its reserve bank.
Some able to qualify — Denmark, Sweden and the United Kingdom — have postponed the transition.
Benefits of the Euro are attached to the removal of exchange and trading costs, and the possibility of enacting direct transactions eventually anywhere within the European Union, currently the world’s largest integrated economy. (See EUAustralia, Spending Euros in Slovenia, 21.1.07).
CHANGING CURRENCIES
The currency change-over in any country is always accompanied by fanfare all over the continent, generated by the EU media machine, (see picture, promotional hoarding at the European Commission, in Brussels — EC image), and also by intense task-force activity to get all of a country’s financial and banking services ready by “€-Day”.
Organisers have seen to it that new Euro bank notes will be ready on the day, at all of the ATMs (Automated Teller Machines) at banks and other places – a total of 550 in Cyprus, 154 in Malta.
They have also had coins minted; in the Euro area, while the denominations are standardised, each country has its own design on one side of every coin.
BENEFITS TO CYPRUS AND MALTA
The European Commission has published an appraisal of economic impacts of the change in the two countries:
“As small islands, Malta and Cyprus share similar economies: both have limited natural resources, making them strongly import-dependent – especially in goods and energy. This makes them more vulnerable to external shocks, such as oil price hikes. However, throughout the 1990s and early 2000s, Malta and Cyprus experienced significant economic growth. Their accession to the EU in May 2004 and to the euro area in January 2008 is the logical way to anchor their economic stability.
“Since their accession to the EU, Malta and Cyprus have undertaken a remarkable fiscal adjustment to achieve ‘sound’ and ‘sustainable’ public finances as required … Between 2003 and 2006, the budget deficit fell from 6.3% of GDP to 1.5% in Cyprus, and from 10% to 2.6% in Malta. Despite the upward trend in the years preceding EU accession, both countries have significantly reduced their public debt since 2004.
“The inflation and interest rate criteria have also been met …”
“The Euro will continue to bring growth and stability to the two island states. It will help preserve price stability, and will bring the benefit of the Euro area’s historically low interest rates.
TOURISTS AND TRADERS
“It will also reduce costs for travellers, a major advantage for Malta and Cyprus which are important tourist destinations. Trade will be given a boost by the elimination of transaction costs and exchange rate risks – a great benefit for these two import- and export-dependent economies, which will be now able to reap the full benefits of the single market.”
Reference:
EC, Changeover to the Euro in Cyprus and Malta. http://ec.europa.eu/economy_finance/thematic_articles/article10547_en.htm, (28.12.07)
See also, background on the Euro and Euro area, EC, MEMO/07/596, 21.12.07.