Cyprus

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Cypruss road to euro adoption
Presentations to secondary school students
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Contents

• Money functions and forms
• The Central Bank of Cyprus
• Cypruss road to euro adoption
• The withdrawal of the Cyprus pound and the
  adoption of the euro
• 5. Euro notes and coins

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1. MONEY FUNCTIONS AND FORMS
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Money functions and forms
What is money?

• Notes
• Coins
• Deposits

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Money functions and forms
Forms of money

• Before the appearance of money, people exchanged
  goods and services with other goods and services
  (barter)
• Significant transaction costs but also practical
  constraints (e.g. bread, shoes, haircut)

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Money functions and forms

• Functions of money
• Medium of exchange (i.e. means of
  payment)-enables convenient exchange of goods and
  services
• Store of value (or financial asset)-allows
  wealth to be accumulated and saved
• Unit of account (i.e. measure of
• value)-used for the calculation of
• payments and prices

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2. THE CENTRAL BANK OF CYPRUS
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The Central Bank of Cyprus

• The Central Bank of Cyprus (CBC) was established
  in 1963, shortly after Cypruss independence

• It is the institution which issues notes and
  coins

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The Central Bank of Cyprus
The primary aim of the Central Bank of Cyprus
To ensure price stability (low inflation) so
that money maintains its value over time
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The Central Bank of Cyprus
How does the CBC ensure price stability?

• It uses
• monetary policy
• and
• exchange rate policy

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The Central Bank of Cyprus
How does the CBC ensure price stability?
Monetary policy -excessive increase in supply of
money leads to rise in prices, thus by setting
the interest rate (price of money) the Bank
attempts to affect the quantity of money (supply
of money) and prices Exchange rate policy
-maintains the value of the Cyprus pound against
other currencies (exchange rate)
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The Central Bank of Cyprus
Other main responsibilities of the CBC

• Management of the Republics currency reserves
• Bank regulation and supervision
• Banker to the government
• Management of the issue and circulation of
  currency

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3. CYPRUSS ROAD TO EURO ADOPTION
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Cypruss road to euro adoption
The euro area comprises 13 countries of the
European Union which have adopted the euro

• Belgium
• Germany
• Greece
• Spain
• France
• Ireland

• Italy
• Luxembourg
• The Netherlands
• Austria
• Portugal
• Finland

• Slovenia

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Cypruss road to euro adoption

• 1 May 2004
• Accession of Cyprus to the
• European Union
• 1 January 2008
• Target date for the adoption of
• the euro
• Provided we satisfy the
• necessary conditions, i.e. the
• convergence criteria
• (better known as the Maastricht criteria)

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Cypruss road to euro adoption

• The European Central Bank (ECB) is the central
  bank for the euro area
• The basic task of the ECB is the maintenance of
  price stability in the euro area

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Cypruss road to euro adoption
The benefits of euro adoption for the citizens of
Cyprus

• Price stability
• Easier comparison of prices across euro area
  countries, since prices will be expressed in the
  same currency
• Elimination of exchange rate risks for
  businesses for transactions in euro
• No currency conversion costs (and no
  commissions)
• Travelling to euro area countries (and to
  countries outside the euro area) will be easier

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4. THE WITHDRAWAL OF THE CYPRUS POUND AND THE
ADOPTION OF THE EURO
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Dual display of prices
The withdrawal of the Cyprus pound
and the adoption of the euro

• What do we mean by this?
• The price of each product will be displayed
  simultaneously in Cyprus pounds and in euro.
• For how long?
• From September 2007 until June 2008.
• Will it be compulsory for businesses?
• Yes, the dual display of prices will be
  compulsory by law for the above period. Some
  shops may implement it voluntarily for a longer
  period.

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Period of parallel circulation January 2008
The withdrawal of the Cyprus
pound
and the adoption of the euro
Cash in pounds will be an acceptable form of
payment
Change will only be given in euro
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The withdrawal of the Cyprus

pound and the adoption of the euro
On 1 January 2008, automatic conversion, free of
charge, of

• Bank accounts
• Loans
• Wages and pensions
• Subsidies and other payments
• No changes in value, just changes in numbers

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1 February 2008
The withdrawal of the Cyprus

pound and the adoption of the euro

• Completion of the changeover to the euro
• Circulation of the euro only
• The Cyprus pound will not be accepted in
  transactions.

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How will the change be made from pounds to
the euro?

• Banks and cooperative credit societies will
  continue to convert Cyprus pound notes and coins
  into euro until 30 June 2008, free of charge
• Central Bank will continue to exchange notes for
  euro until 2017 and coins until 2009

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Examples of conversion and rounding

• With a hypothetical conversion rate of 1
  0,585274
• To convert Cyprus pounds into euro, we divide
  the amount in Cyprus pounds by the conversion
  rate
• using all six decimals
• e.g. 10/0,585274 17,086014
• which is rounded to 17,09
• To convert euro into Cyprus pounds multiply the
• amount in euro with the conversion rate
• e.g. 40 x 0,585274 23,410960
• which is rounded to 23,41

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5. EURO NOTES AND COINS
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Euro notes
Appearance of euro notes (front view)
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Euro notes
Appearance of euro notes (rear view)
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Appearance of euro coins (common side)
Euro coins
Irrespective of the national side design, euro
coins (as well as euro notes) circulate in all
the euro area countries their acceptance as a
means of payment is compulsory
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National side of euro coins (Cyprus)
Chosen themesCivilization (Idol from Pomos)
History (Ship of Kyrenia)Nature (Mouflon)
Euro coins
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Further information

• National web page for the euro
• www.euro.cy
• Central Bank of Cyprus
• www.centralbank.gov.cy
• European Central Bank
• http//www.ecb.eu/
• http//www.ecb.eu/bc/html/index.el.html
• European Commission, Directorate General for
  Economic and Financial Affairs
• http//ec.europa.eu/economy_finance/index_en.htm
• European Commission
• http//ec.europa.eu/
• The euro
• http//ec.europa.eu/euro/

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