On New Year's eve, Cyprus and Malta, the latest European Union (EU) countries to join the euro zone, the single currency club within the EU, are embracing the euro six years after the euro coins and banknotes came into circulation.
As from Tuesday, Cypriots and Maltese, the 14th and 15th eurozone member after Slovenia which joined euro zone on Jan. 1 this year, will see their former national currencies be replaced by the new euro coins and banknotes.
Under the decision adopted by EU finance ministers in July, the exchange rate will be 0.585274 Cyprus pound and 0.429300 Maltese lira to 1 euro respectively.
A dual circulation period will run until Jan. 31, 2008 in Cyprus and Malta, during which payments can be made using both former currencies as well as the euro.
In Cyprus, commercial banks started receiving euro coins from the Central Bank of Cyprus on Oct. 22, and euro banknotes on Nov. 19.
The Central Bank of Cyprus estimated that the banking sector would be supplied with approximately 80 percent in value of all euro banknotes needed for the national economy before Jan. 1, and 64 percent of the necessary coins.
Recent survey results indicated that the Cypriot enterprises were well prepared for the changeover and have not experienced any significant problems.
In Malta, the frontloading of the banking sector with euro cash by the Central Bank of Malta started in mid-September. The central bank estimated that about 92.5 percent in value of the 41.5 million euro banknotes that are needed to replace the Maltese lira will be supplied to banks before new year, as well as 71 percent of the 140 million euro coins needed in the Maltese economy.
The supply of euro cash to the business sector started on Dec. 1. According to recent survey results, Maltese businesses were also well prepared for the euro.
After the joining of Cyprus and Malta, the euro zone will include a population of 320 million out of the EU's total 495 million and account for nearly three quarters of the EU's GDP, totaling 11,603 billion euros in 2006.
However, Cyprus and Malta will be the two smallest economies of the euro zone, contributing 0.17 percent and 0.06 percent respectively to the area's GDP, and 0.24 percent and 0.13 percent to its population.
In 2006 Cyprus' GDP per capita was 92 percent of the EU average while Malta's was 77 percent.
Cyprus and Malta hope the eurozone membership could help expand the trade volume between them and other eurozone countries as there is no more need to exchange national currencies, which not only saves the transaction costs, but also removes exchange rate risks.
The two countries also eye for more investment both from other eurozone countries and from outside EU.
The free movement of the single currency within the single market gives a large boost to the integration of financial markets across the euro zone. Investors, such as banks, are no longer limited to local markets. This in turn will facilitate and promote investment and growth.
However, recent surveys showed that nearly three quarters of Cypriots and about two-thirds of the Maltese fear price increases on the occasion of the changeover.
The European Commission said the evolution of prices has been exceptionally good since the launch of the euro, with most member states registering their lowest inflation rates for five decades, despite a series of adverse shocks including an increase in oil prices and appreciation of the euro against the U.S. dollar.
Source: Xinhua
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