Cyprus, Malta adopt the euro

NICOSIA, Cyprus -- EU newcomers Cyprus and Malta adopted the euro at midnight this morning, bringing to fifteen the number of countries using the currency with increasing clout over the slumping U.S. dollar.

As the Mediterranean islands, both former British colonies, scrapped the Cyprus pound and Maltese lira, politicians led ceremonies at midnight, becoming the first to withdraw pastel euro bills from ATMs.

The euro has risen more than 11 percent against the dollar during 2007 and nine East European countries are waiting to convert.

The euro's strong exchange rate of $1.4599 on Monday -- up 79 percent from its lowest point of 82 cents in 2000 -- has given more pocket power to European tourists in the United States, while curtailing the movements and spending of many American tourists and workers abroad. U.S. budget and trade deficits, along with recent interest rate cuts by the Federal Reserve, have undermined the dollar's value.

"We are in a region that could have some geopolitical surprises," Cyprus Finance Minister Michalis Sarris told The Associated Press.

"Although the pound has been a loyal and faithful servant of the Cyprus economy, we felt that things could happen that could destabilize a small open economy, so it was to your benefit to join the euro zone as soon as possible."

Only the southern, Greek-speaking part of Cyprus will use the euro. The government in the north is recognized only by Turkey, but many Turkish Cypriot merchants will also accept euros along with Turkish lira.

Cyprus' euro coins will be inscribed in both Greek and Turkish, with designs that include the mouflon or wild sheep, a national symbol. Malta's 1 euro and 2 euros coins will bear the Maltese cross.

Combined, the economies of Cyprus and Malta account for less than 0.3 percent of the euro zone's gross domestic product. Both easily met the requirements for limiting deficits and inflation, but euro adoption has also brought public skepticism.

A European Union poll found 74 percent of Cypriots and 65 percent of Maltese believe the euro will drive prices upward. The September survey also found 44 percent of people in Cyprus and 33 percent in Malta would be sorry to see their national currencies being replaced.

"The old people, it is a bit difficult for them to learn, they prefer the old money," said Raimondo Grech, fruit shop owner at a market in Valletta's old town.

The 12 countries that have joined the EU since 2004 are obliged to convert to the euro eventually. Slovenia was the first to meet the targets and joined on Jan. 1, 2007. Of the nine remaining countries, only four have linked their currencies to the euro in an exchange rate trading band, a key step toward membership.

Current members of the euro zone include Austria, Belgium, The Netherlands, Finland, France, Germany, Ireland, Italy, Luxembourg, Portugal, Spain, Greece and Slovenia.

New EU members Slovakia, Estonia, Latvia and Lituania have joined the exchange rate mechanism; others with farther to go before adopting the euro are: Bulgaria, Hungary, the Czech Republic, Poland and Romania.