Cyprus to profit from euro conversion

— New coins and notes to cost CYP 15 mln/EUR 25.7 mln

Cyprus expects to break even or make a small profit from the changeover to the euro as of January 1, 2008, on the expectation that while the total cost of printing of the new notes and coins will amount to CYP 15 mln (EUR 25.7 mln), such costs will be covered from the non-conversion of Cyprus pound coins and notes.

The Board of Directors of the Central Bank, chaired by Governor Christodoulos Christodoulou, decided to transfer some CYP 5 mln (EUR 8.6 mln) from the 2005 Central Bank surplus of CYP 8.2 mln (EUR 14 mln) to a Special Fund to finance the cost of producing the future Cyprus euro coins and notes.

Cyprus is set to officially adopt the euro on January 1, 2008. There will be a one-month period allowed for the simultaneous circulation of euros and Cyprus pounds, after which the Cyprus pound coins will be removed from circulation, followed by the notes, which may only be exchanged at the banks.

A senior official told the Financial Mirror that the Central Bank expects the cost of withdrawal and subsequent destruction of the Cyprus pound notes to be very low.

As for the coins and in tandem with what occurred with other European nations that adopted the euro, Central Bank officials expect a “55% conversion rate of the Cyprus pound coins”, with the remaining 40-45% lost or forgotten to be handed back.

Previous experience with other European nations has shown that the 1-, 2- and 5-cent coins are “either forgotten or people simply do not bother to exchange them for euros.”

According to Central Bank estimates, the value of the total Cyprus pound coins in circulation is CYP 40 mln (EUR 68.5 mln), so a 40-45% “no-show” would net the government some CYP 16-18 mln (EUR 27.4-30.8 mln), which will more than cover the total CYP 15 mln (EUR 25.7 mln) cost of producing the euro notes and coins.