Cyprus And Malta Prepare For New Currency

by Ulrika Lomas, Tax-News.com, Brussels

19 July 2007

With less than six months to go before the adoption of the euro by Cyprus and Malta, the Commission has assessed the state of practical preparations for the introduction of the euro in the two islands, as well as in the European Union countries which yet have to adopt the euro.

The assessment concluded that Cyprus has made good progress but must speed up its preparations now. Malta's practical preparations, meanwhile, are well advanced.

"While the adoption of the euro requires the respect of the conditions set out in the Treaty, efficient and timely practical preparations play an important role for a smooth changeover. Both Cyprus and Malta must now finalise their preparations to ensure that the introduction of the euro is a success, as was the case in Slovenia", announced Joaquín Almunia, European Commissioner for Economic and Monetary Affairs.

The Commission has adopted the fifth report on the practical preparations for the adoption of the euro. It focuses on the recent developments in Cyprus and Malta, following last week's Council decisions that they fulfil the necessary conditions to adopt the euro in January 2008. The report also pays special attention to the preparations in Slovakia, which aspires to adopt the euro in 2009.

Cyprus adopted an updated version of its National Changeover Plan in June. Euro coins are being produced by the Mint of Finland following a public tender. Cyprus estimates at 400 million the number of coins needed for the domestic market. Commercial banks will start receiving euro cash in the second half of October 2007, a process known as 'frontloading'. Afterwards, retailers will be provided with euro cash by commercial banks, so that they can give change in euro as from 1 January. The general public will be able to buy euro coin starter-kits from early December.

To address fears, still widespread, about abusive price increases during the changeover process, the Cypriot government has made it compulsory for retailers to display prices both in the national currency and in euro as from September. In June, the government also launched the Fair Pricing Code urging businesses not to attempt to profit from the changeover.

This month, Malta further refined what was already a detailed and comprehensive changeover plan, now renamed the "Final Masterplan". The Maltese coins are being produced by the French Mint, and domestic needs are estimated at around 200 million coins. In order to address consumer fears about price increases around the changeover date, Malta has implemented a whole set of measures, including the FAIR (Fair-pricing Agreements in Retailing) initiative, launched in January 2007, which has received strong support from the business sector; more than 5,000 businesses have chosen to adhere to its terms.

The Commission praised Malta's communication activities on the euro, saying that they were "exceptionally comprehensive and of a very high quality".

Meanwhile, the report concluded that Slovakia's changeover plan is quite comprehensive, but that several important elements need to be further defined. These include details on the frontloading operation, the withdrawal of koruna cash from circulation and the communication strategy. The Commission also recommended that starter-kits for the general public should be foreseen, so that citizens have sufficient amounts of euro coins at their disposal for payments immediately on the changeover day. The EC also urged further measures to ensure consumer confidence in stable pricing around the changeover.

Although some of the other EU countries have stated publicly that they will aim at adopting the euro in 2010 or subsequent years, none, with the exception of Romania (2014), has an official target date at this point.

From January 2008, with the membership of Cyprus and Malta, the euro area will contain 15 out of the 27 EU countries and 318 million out of the EU's 493 million population.

Recommended