ECONOMY

Trepidation as Cyprus prepares for historic E-day

NICOSIA – Traffic comes to a halt at a busy Nicosia intersection while leather-clad motor-cops rush through a police convoy escorting a security van carrying precious cargo – Cyprus’s new euro currency. The presence of armed guards outside banks during a euro delivery and the blur of police sirens on the highway as the European Union currency is given safe passage to its destination are the most visible signs that a historic chapter is unfolding. On January 1, this Mediterranean island of less than a million people will adopt the single European currency less than four years after it joined the 27-member bloc. Nevertheless, Cypriots are anxious about what this transition might bring, as there are fears that life will become more of a struggle as prices rocket. As Cypriots enjoy a high standard of living – reaching 90 percent of the EU average – there is a sentimental attachment to the Cyprus pound even if it does not have quite the same stature as the euro on world markets. «We have to live with the euro to find out how it will affect the cost of living. Psychologically people expect the worse,» menswear retailer Christofis Christofi told AFP. «I’m ready for the euro but I think we should have stayed with the pound. If the euro is so good why hasn’t Britain changed over to it?» he added. Housewife Anastasia Kolokasides echoed the same sentiments, saying the pound’s demise will be a negative factor for ordinary folk. «The euro might be good for big business but what has the EU done for us? I can only see life becoming more expensive,» she told AFP. Recent EU surveys show that nearly 70 percent of Cypriots believe that eurozone entry will bring about higher inflation and an opportunity for profiteers to have a field day. But the Cyprus central bank predicts that prices will not go up, arguing that price hikes did not occur in most other countries after adopting the single currency. «The perception in the minds of the people is one thing; what actually happens is another. It doesn’t stand up statistically,» central bank senior manager Kyriacos Zingas told AFP. Price fall predicted «We feel prices will come down slightly as the big supermarkets are committed to rounding down prices,» he added. As 1 pound is equivalent to -1.71, the cost of items instantly seems more expensive, leaving large companies little room to hike prices in the confusion on January 1, say analysts. They say adopting a stronger euro can only be good for the economy as it will attract more foreign investment, stimulate growth and increase stability as the government will have to abide by stringent fiscal requirements. The European Union has congratulated Cyprus for its euro-entry preparations. «We’ve done a pretty good job as we’ve been told. If there are going to be difficulties it will be in the first few days as people queue up at the banks,» said Zingas. The government has worked hard to ensure that profiteering will be contained to a minimum with Finance Ministry officials keeping a close eye on price fluctuations. The public is encouraged to report any alleged case of price fixing, while laws have been introduced to make euro profiteering a criminal offense punishable by a custodial sentence. In order to familiarize Cypriots with the symbol of global wealth, dual pricing of goods has been in effect since the summer and will continue until September 2008. Some 300,000 euro converters have been dispatched to households, while an advertising awareness blitz features the island’s top sport stars including tennis ace Marcos Baghdatis. «I don’t think the euro will be a problem for anybody aged under 50 but the elderly will find it tough, most of them still calculate in shillings,» kiosk owner Efthymios Strouthos told AFP. «In the long term, the euro is good for business because it’s a strong currency used by millions of Europeans, and Cypriots are familiar with it as many travel or study in Greece,» he added. The Cyprus pound will remain legal tender for the first month of 2008, with change given in euros, and banks will continue to exchange pounds free of charge until June 30. The government estimates that most Cyprus pounds will be out of circulation within the first 15 days of euro transactions. Around 600 million pounds’ worth of old notes will be shredded while coins worth 40 million pounds will be melted down for scrap metal. They will be replaced by -1.73 billion notes put into circulation along with coins worth -100 million. Nevertheless, adopting the euro comes with greater responsibility as the central bank advises Cypriots to become familiar with euro notes as they are more prone to forgery. «There is a security issue with the euro being a widely used currency,» said Zingas.