Cyprus, Malta convert to euro as currency gains over slumping dollar - East Valley Tribune: Business

Cyprus, Malta convert to euro as currency gains over slumping dollar

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Posted: Tuesday, January 1, 2008 8:35 pm | Updated: 9:29 pm, Fri Oct 7, 2011.

NICOSIA, Cyprus - EU newcomers Cyprus and Malta adopted the euro Tuesday, bringing to 15 the number of countries using the currency with increasing clout over the slumping U.S. dollar.

The Mediterranean islands, both former British colonies, scrapped the Cyprus pound and Maltese lira.

Maltese Prime Minister Lawrence Gonzi had to wait a little before getting his hands on the new currency. An automated teller machine did not work when Gonzi tried to withdraw euros, and he was obliged to use a different ATM.

Both countries welcomed the euro with outdoor celebrations, including a fireworks display in Malta’s rainy capital, Valletta.

The euro has risen more than 11 percent against the dollar during the last year, and nine East European countries are waiting to convert.

The euro’s strong exchange rate of $1.4599 on Monday — up 79 percent from its lowest point of 82 cents in 2000 — has given more pocket power to European tourists in the United States, while curtailing the movements and spending of many American tourists and workers abroad. U.S. budget and trade deficits, along with recent interest rate cuts by the Federal Reserve, have undermined the dollar’s value.

“We are in a region that could have some geopolitical surprises,” Cypriot Finance Minister Michalis Sarris told The Associated Press.

“Although the pound has been a loyal and faithful servant of the Cyprus economy, we felt that things could happen that could destabilize a small open economy, so it was to your benefit to join the euro zone as soon as possible.”

Only the southern, Greek-speaking part of Cyprus will use the euro. The government in the north is recognized only by Turkey, but many merchants will also accept euros along with Turkish lira.

Cyprus’ euro coins will be 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 will bear the Maltese cross.

“We’re sorry to say goodbye to our pound but happy to welcome the euro,” Cyprus’ president, Tassos Papadopoulos, said moments after midnight on the island.

Combined, the economies of Cyprus and Malta account for less than 0.3 percent 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.

A European Union poll found 74 percent of Cypriots and 65 percent of Maltese believe the euro will drive prices upward. The September survey also found 44 percent of people in Cyprus and 33 percent in Malta would be sorry to see their national currencies being replaced.

“This makes us complete Europeans,” Maltese hotel worker Mark Ferench said minutes after the celebrations started. “This is the culmination of our European Union membership.”

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 Jan. 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 include 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 farther to go before adopting the euro are Bulgaria, Hungary, the Czech Republic, Poland and Romania.

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