Brussels, 16 July 2007
With only 5½ 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. It concluded that Cyprus has made good progress but must speed up the preparations now. Malta's practical preparations 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", said Joaquín Almunia, European Commissioner for Economic and Monetary Affairs.
The Commission today 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.
The 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 ("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 profit from the changeover. It is, of course, crucial that the Code is implemented effectively and on a country-wide basis.
The euro communication campaign shall now gather full speed. Only this will ensure that the more vulnerable sections of population and the public at large understand the monetary change and become rapidly familiar with the euro coins and banknotes. Enhanced familiarity is key to raise awareness of the benefits of being part of the euro area and to give reassurance about the changeover process.
Malta in July further refined what was already a very detailed and comprehensive changeover plan, now renamed 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 consumers' 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 receives strong support from the business sector since more than 5,000 businesses have adhered.
Malta's communication activities on the euro are also exceptionally comprehensive and of a very high quality.
Concerning Slovakia, the Report concludes that the country's changeover plan is quite comprehensive, while several important elements need to be further defined. This concerns, inter alia, details on the frontloading operation, the withdrawal of koruna cash from circulation and the communication strategy. The Commission also recommends 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 as from €-day. Moreover, further measures should be taken to ensure consumer confidence in stable pricing around the changeover.
Although some of the other EU countries have mentioned publicly to 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 count 15 out of the 27 EU countries and 318 million out of the EU's 493 million population.
Since Economic and Monetary Union (EMU), in 1999, inflation has been at around 2% on average in the euro area compared with double-digit figures in some of its members in the early 90s. Both long- and short-term interest rates remain historically low even after the recent monetary tightening by the European Central Bank. EMU also protects against external shocks, including the surge in global commodity prices, in a fast changing global economy.
The euro has been a strong catalyst for trade and financial integration
within the euro area.Nowadays, more than half of the exports of the euro area go
to other euro area members. The euro has also become the second most important
global currency, an achievement accomplished in only a few years after its
launch. The euro’s advancement as an international currency has been
particularly pronounced as a denomination currency for the issue of
international debt securities.
For the national changeover plans see: