Although cyprus stands at the crossroads of three continents in the Eastern Mediterranean, it is firmly rooted in the family of European nations. The Republic of cyprus joined the European Union (EU) in 2004 and together with Malta will become a member of the ‘Euro’ zone from 1st January 2008. In practical terms this marks the end of the cyprus Pound - and the people of cyprus will join more than 310 million citizens in the 13 EU member states already using the Euro as their single Currency.
As you would expect, a great deal of planning and preparation has gone into making such a significant, historic change to the economic and commercial culture of cyprus – and the move is intended to further improve the cohesion of trading between countries within the Euro zone.
One immediate impact will be the removal of the transaction charge associated with converting one Currency to another. In effect this will make purchasing something in cyprus as straightforward as buying something in Greece, Italy or Germany for example. Although there are other variables at play in the cyprus property market – such as the introduction of VAT on land during 2008 – the introduction of the Euro will make it easier for people elsewhere in the Euro zone to buy property. The uncertainty and instability arising from exchange rate fluctuations will be one less factor to worry about! Obviously, the laws of economics still apply and areas enjoying strong demand are likely to see rising prices. That said, the ‘Window of opportunity’ is always open to those prepared to take informed action sooner rather than later…
A key decision was deciding the rate at which the Euro will be substituted for the cyprus Pound. The Council of the EU confirmed this in July 2007: €1 = £0,585274.
A great deal of planning has gone into making the changeover as effortless as possible for the ordinary consumer. Therefore, from 1st September 2007 through to 30 September 2008 there will be dual display (in Pounds and Euro) of the prices of goods and services. Although the existing Currency will be withdrawn from circulation at the end of January 2008, this move is designed to give people familiarity with the relative value of the Euro against the cyprus Pound.
In anticipation of the adoption of the Euro – and based on the experience of consumers in other Euro zone countries – concern has been expressed about the temptation for some traders to perhaps ‘round up’ prices and profit from what should otherwise be a straightforward conversion from one Currency to another. For this reason, the Fair Pricing Code will apply from 10 July 2007 until 10 July 2008. This voluntary code encourages transparency in the pricing of goods and services during the changeover period. All subscribers will be awarded a logo. The commitments under the Code include the avoidance of unjustified price increases, transparency in pricing policies and consumer information and assistance.
Implementation will be officially monitored to ensure that exploitation does not take place. This will be in the form of ‘Euro-Observatories’. The Euro-Observatories are responsible, at regional level, for monitoring the introduction of the Euro, the legality of transactions and the transparency of professional practices, for referring citizens to any source of information and for hearing, mediating and providing assistance to citizens in respect of Euro changeover issues. The Euro-Observatories are hosted at the District Offices.
On 1 January 2008 the Euro will become the official Currency of cyprus, replacing the cyprus pound. Euro banknotes and coins will be put into circulation and will become legal tender in the Republic of cyprus. In parallel, all accounts with banks and cooperative credit institutions that are denominated in pounds will automatically be converted into accounts denominated in Euro, free of charge.
For a period of one month (1 – 31 January 2008) after the adoption of the Euro, banknotes and coins in cyprus pounds will circulate in parallel with the Euro and will be accepted for payments. All non-cash transactions (such as cheque, card etc.) will be carried out exclusively in Euro. Businesses should give change only in Euro.
After the end of the ‘parallel circulation period’ banks and cooperative credit institutions will exchange banknotes and coins in pounds for banknotes and coins in Euro, free of charge up to a ceiling (£1.000 per customer per transaction for banknotes and £50 for coins). And for deposit, any amount of banknotes and coins in pounds, until 30 June 2008 (six months after the Euro adoption date).
The Central Bank of cyprus will continue to exchange, free of charge, banknotes in pounds for Euro for 10 years after the Euro adoption date (until 31 December 2017), and coins in pounds for 2 years after the Euro adoption date (until 31 December 2009).
From 1 February 2007 cash in cyprus pounds will cease to be legal tender and will not be accepted for payments. All payments will be carried out in Euro.
Although introduction of the Euro is arguably a contentious issue, the motives for so doing are driven by a desire to provide important benefits to the economy as a whole - such as low inflation and interest rates and sound public finances. These conditions are seen by the government as conducive to fostering economic growth, investment and employment to the benefit of citizens.
On a practical level there are other attributes which should assist the realisation of the broader goals. These include the reduction of Currency exchange rate risks and costs (especially for traders, students studying abroad, and tourists visiting cyprus); greater price transparency; easier access to the Euro area capital markets; fostering of foreign investment; reinforcement of the country’s position in the EU.
For further information you can visit the national website for the Euro at www.euro.cy
The Toll Free telephone helpline for the Euro is: 8000 2008
District Offices may also be contacted by telephone for further enquiries:
Nicosia: (00357) 22804152
Limassol: (00357) 25806420
Larnaca: (00357) 24801803
Famagusta: (00357) 23812069
Paphos (00357) 26801105
