Cyprus, Malta convert to euro

Mediterranean islands welcome new currency with outdoor celebrations.

cyprus euro biz 88 224 (photo credit: Bloomberg)
cyprus euro biz 88 224
(photo credit: Bloomberg)
EU newcomers Cyprus and Malta adopted the euro Tuesday, bringing to 15 the number of countries using the currency that has increasing clout over the slumping US dollar. The small Mediterranean islands, both former British colonies, scrapped the Cyprus pound and Maltese lira at midnight. Despite the New Year's Day bank holiday, Cypriot banks opened central branches in Nicosia and other major cities for a few hours Tuesday to exchange pounds for euros. No problems were reported. Finance Minister Michalis Sarris joined a line at a branch in the capital's Eleftheria Square. "Just like many other people, I've come to convert my remaining pounds into euros," he told The Associated Press. Eleni Kouta, 50, said she found the process "very easy." "We're very much in favor of this change, because we're European," she said, lining up in Nicosia with her husband and three children. "It's what we wanted and makes it easier for us to travel." Both countries welcomed the euro with outdoor celebrations, including a fireworks display in Malta's rainy capital, Valletta. Maltese Prime Minister Lawrence Gonzi had to wait a bit to get euros, after the first automated teller machine he tried to use just after midnight did not work. He was obliged to used a different ATM. Gonzi said membership of the euro zone made Malta more attractive for investors. "The risk of currency fluctuation disappears completely, so an investor now knows that he is investing in an economy which is strong... that has the potential for growth and where the risk and the costs have disappeared completely," he said in an interview with Associated Press Television News. The euro has risen more than 11 percent against the dollar over the past year, and nine East European countries are waiting to convert. "The euro is a strong and stable currency," EU Commission President Jose Manuel Barroso said, hailing the two countries' adoption of the currency. "Along with the economic reforms the EU and member states have undertaken, [the euro] is a reason why the European economy is still growing, despite some difficult challenges caused by high energy and commodity prices." Only the southern, Greek-speaking part of ethnically divided Cyprus will formally use the euro. The government in the North is recognized only by Turkey, but many Turkish Cypriot merchants will also accept euros along with Turkish lira. "We're sorry to say good-bye to our pound, but happy to welcome the euro," Cyprus President Tassos Papadopoulos said moments after midnight. Cyprus's euro coins are inscribed in both Greek and Turkish, with designs that include the mouflon, or wild sheep, a national symbol. Malta's 1-euro and 2-euro coins bear the Maltese cross. In both countries, the old currencies will remain in circulation together with the euro until January 31. The EU Commission said the cash changeover should be completed "in a couple of days," and that virtually all cash transactions would be carried out in euros. Combined, the economies of Cyprus and Malta - EU members since 2004 - account for less than 0.3% of the euro zone's gross domestic product. Both easily met the requirements for limiting deficits and inflation, but euro adoption has also brought public skepticism. An EU poll found 74% of Cypriots and 65% of Maltese believe the euro will drive prices upward. The September survey also found 44% of people in Cyprus and 33% in Malta would be sorry to see their national currencies replaced. "I believe the euro will be abused, in the sense that people will not know what kind of change they should get" when they pay with Maltese lira, said Valletta hotel chef Kurt Murin, 20. Joe Vella, a cafe bartender in the Maltese capital, said he was happy enough with the old currency. "I don't like to be bothered, so ideally things should have stayed as they were," he said. "But now we have to go for it." The 12 countries that have joined the EU since 2004 are obliged to convert to the euro eventually. Slovenia was the first to meet the targets and joined on January 1, 2007. Of the nine remaining countries, only four have linked their currencies to the euro in an exchange-rate trading band, a key step toward membership. Current members of the euro zone are Austria, Belgium, The Netherlands, Finland, France, Germany, Ireland, Italy, Luxembourg, Portugal, Spain, Greece and Slovenia. New EU members Slovakia, Estonia, Latvia and Lithuania have joined the exchange-rate mechanism; others with further to go before adopting the euro are Bulgaria, Hungary, the Czech Republic, Poland and Romania.