Cyprus euro transition smooth, but with minor glitches

Cyprus joined the euro-zone on New Years day becoming the 14th European Union member state to adopt the common currency, with most of the conversion going well despite minor difficulties in some shops and smaller bank branches running out of new notes and coins.

The introduction of the euro was a landmark in the history of Cyprus, with feelings muted as some people saw benefits of joining the eurozone, while others were sceptical that they had lost the power of a strong Cyprus pound, just as the French gave up the franc and Germans abandoned the mark.

The Central Bank of Cyprus too has relinquished its exchange and interest rate setting authority, decisions that will now be taken jointly at the European Central Bank in Frankfurt.

Finance Minister Michalis Sarris said at a public celebration moments after midnight that joining the eurozone was an indication of the island’s healthy economy and that “it was a tough ride getting here”. He also congratulated his Maltese counterpart and read out a letter sent to Malta’s president from Tassos Papadopoulos, as the smaller Mediterranean island state also adopted the euro an hour after Cyprus, raising the eurozone members to 15.

Sarris said later on Tuesday that the whole operation went smoothly and that most of the Cyprus pound notes and coins will have been collected by mid-January, with some people holding on to samples of bygone days as memorabilia.

Few cases were reported of kiosk owners and foreign staff at some bakeries not coping with the new currency and mixed change, or running out of euros and giving change in CYP coins. Pharmacies and fast-food outlets working on Tuesday seemed to have adjusted well with their cash tellers showing both currencies in receipt as well as change.

But some people also had some simple questions that remained unanswered, possibly due to the delay in the information media campaign and the absence of practical examples for people to identify with.

When Cyprus applied to join the Exchange Rate Mechanism (ERM2) and subsequently headed towards adopting the European single currency as its own, the conspiracy theories of this generally pessimistic nation took a quantum leap with everything that went wrong being blamed on the euro in the run up to the January 1, 2008 date of adoption.

Spiraling fuel prices, a drop in tourism, rising property prices and more expensive tomatoes in the traditional salad were all blamed on the anticipated use of the euro, a negative attitude reflected in all recent Eurobarometer surveys that showed low levels of confidence in the euro and the Eurozone club.

 

— Shiny new coins

 

But Cypriots mulled the streets as usual Tuesday, many fiddling with the shiny new coins in their pockets they had secured after standing in long queues at local banks the previous day.

Others showed more confidence and dispelled doomsday theories, with older men proudly displaying the crisp new European banknotes they got when a handful of bank branches in all towns opened for two hours to help the public with the exchange.

“We travelled to Greece many times with my wife and we learned how to use the euro there,” said one of the regulars at a coffee shop near the central Eleftheria Square. “We brought some back with us and we just kept them to be ready,” he added.

Michalis Antoniou of the Employers and Industrialists Federation (OEV) said that “not all our problems can be blamed on the euro. We have to fix those on our own.”

But he justified the public’s concerns over fears that consumer goods would get more expensive as enterprises would rush to hike their shelf prices in order to gain from the conversion.

“Citizens should be very careful and check the new money whenever they pay or get change,” Finance Minister Sarris warned, adding that converter calculators were sent to all households.

 

— 9/10 businesses ready

 

The Cyprus Chamber of Commerce and Industry (KEVE) reported that nine out of ten businesses on the island were ready for the “big bang” changeover at midnight of December 31, 2007, after which the stronger Cyprus pound was replaced with 1.7086 euros. Payments in pounds will continue throughout January but change will be given in euros.

Municipal parking meters and taxi cabs have been exempt from the rule until they adjust their equipment, while water dispensing machines will probably continue to receive CYP coins until the end of January.

Some petrol stations too left the conversions to the last minute, with Greek-owned EKO the only one to say it accepts euros.

President Papadopoulos, Michalis Sarris and Central Bank Governor Athanassios Orphanides, as well as former Finance Minister Makis Keravnos and one-time Central Bank chief Christodoulos Christodoulou joined European Health Commissioner Marcos Kyprianou in collecting the first notes a few seconds after midnight from a special ATM machine in front of the Ministry, a few hundred metres away from the capital’s main square where the New Year celebrations and concerts were taking place.

The government has set up more than a dozen Euro-observatories with inspectors stationed in all towns to ensure that profiteering does not take place when Cypriots buy goods in euros in January. Violators will be charged with a first fine of 1700 euros in addition to being listed on a “name and shame” directory.

Major retail stores such as Carrefour, Debenhams and the local supermarket chains Alfa Mega and Orphanides Public, as well as a further 7,000 shops have all pledged to maintain their prices during the conversion and even round them down as part of a ‘fair pricing code’ for the new currency.

 

— Starter kits

 

Banks saw queues of customers getting longer and longer as the final day of the year approached, with 250,000 special kits sold to consumers and 40,000 starter kits to merchants in order to stock with enough coins and small-denomination notes for the first few days of January.

This followed a month-long frantic stocking up of about 380 million new notes and coins in safes of more than 450 bank branches, with police sirens wailing as they escorted security trucks for the deliveries of the crisp money borrowed from Finland until Cyprus prints its own stock. The Cyprus coins have been minted with three distinct designs on the obverse side – the national Moufflon wild goat’s head, the Phoenician-era Kyrenia ship and a phallic statue symbolising fertility. Food, travel and sex, one could say.

Companies also rushed to secure their sorting machines and fake detectors, with Demetris Mytilinelis of Man Digital Cyprus saying that restaurants and retail shops were his best clients buying detectors worth about 100 euros, while he sold a dozen coin sorting machines worth several thousand euros to banks.

“We expect the most fakes to be in 50 euronotes as all paper money and coins will be brand new,” he said, echoing warnings raised by the European Central Bank. He added that with so many tourists on the island, especially in summer, the number of fakes in circulation is bound to rise.

As the Central Bank prepares to collect 600 mln Cyprus pound notes and 1900 tonnes of coins, it also warned of lower-value one and two lira coins from Turkey that are identical to the one and two euro coins making their way to the island from the occupied north.

Greek and Turkish Cypriots alike are getting used to the new currency that bear the Greek and Turkish markings of ‘Kypros’ and ‘Kibris’ on the coins as a sign that uniformity may help bring down the barriers separating the two communities by war since 1974.

In any case, the biggest frustration has come from sentimental die-hards who refuse to relinquish the ‘sovereignty’ of the Cyprus pound and its hundred cents to a currency controlled in Frankfurt.

Others continue to refer to the thousand-part ‘mils’ that were replaced by cents two decades ago, while some older people even insist on trading in shillings, of which 20 made up the pound before independence in 1960.