EDITORIAL: Euro adoption will be a “piece of cake”

The Minister of Finance and the Central Bank Governor are to submit an application to the European Commission and the European Central Bank for the preparation of an extraordinary convergence report concerning the adoption of the Euro on January 1, 2008.
As the final countdown for euro adoption gets into full swing, the limited voices of protest calling for a one-year delay and or for a devaluation of the Cyprus pound will die out and the whole country will be ready to march forward to euro adoption.

In our opinion, Cyprus will have no major difficulty in adopting the euro because of the ease with which this country has been adapting to change. They changed from piastres to mils and then to cents, from miles to kilometres, and the okes to kilos and nobody complained.

In line with the smooth transition of the stock market to a euro-based trading environment where millions of stocks change hands, we expect that the whole country will also embrace and adopt the common European currency with the same ease.

The changeover however, may be even smoother if the Ministry of Finance and the Central Bank take into consideration a number of factors.

1)      Protest notes from AKEL and some parts of EDEK should be ignored since these are being made to impress the public and to have a back-up plan to say “I told you so” in case things go wrong.

2)      Devaluation noises should be quelled and the message given to everybody that since May 2005 when the euro application was made and Cyprus entered the ERM, even if we wanted to Cyprus could not devalue the currency. All it can do is allow it to go up or down 2.25% away from the central parity of 0.585274 or 1.7086. In reality, Cyprus is now allowing the CYP to slide lower towards its parity rate, which may well become the new rate at which the CYP will be locked with the euro in early July.

3)      Once the CYP is locked, then all retail establishments should be forced to follow dual pricing, at the new fixed central parity rate, so that the public gets used to seeing both prices.

4)      Cypriots should be told that euro-phobia as heard from taxi drivers and retailers in Greece will not apply here since Greece was used to having constant devaluations before it entered the euro-zone and converted a low value currency to a high value currency. In our case, the CYP is stronger than the euro and since we are used to a “hard currency”, the changeover impact will be minimal.

5)      The public should be encouraged to use credit cards for all transactions during the changeover period of January 2008, when both currencies will be legal tender. This way they will be spared the risk of a rip-off when kiosks, bakeries and retailers hand back change in euro coins.

6)      Our worst fear is that the rip-off will not come from prices rounding up higher, but when change is handed back, as in January 2008, the public can pay for goods in Cyprus pounds and euros, but only receive their change in euro coins.

7)      The ‘name-and-shame’ list of enterprises who are found to be taking advantage of the changeover to hike prices should be enforced without exception.

8)      Banks should be encouraged to change CYP into euros well before the January 2008 changeover day, in order to avoid long queues, which may give the impression that “the euro brings hardship.”

9)      The idea to give calculators to every household is good, but the government should encourage practical solutions as to how prices quoted in euros can be converted back into Cyprus pounds and vice versa for comparison purposes.

10)  The euro needs a voice. The existing seminars being held for 400-500 professionals at a time (bankers, accountants, insurers, investors, teachers) is an excellent idea, but the government should buy air-time and space in newspapers to bombard the nation with constant messages of why the euro will be good for the nation. Fortunately, the promotion budget bottleneck has been resolved and the campaign can now get off the ground.