Cyprus and Malta win final word to start using euro next year

The European Union on Tuesday gave Cyprus and Malta final approval to start using the euro next year, taking to 15 the number of nations sharing the currency.

Diplomats said finance ministers had voted to allow the two tiny Mediterranean nations to join the currency zone on Jan. 1. They were also to set the exchange rate for the Cypriot pound and Maltese lira as the two currencies are swapped for the euro, but details were not immediately available.

Cyprus and Malta will bring just over 1 million people to the 318 million who now use the euro. Their economies account for only 0.2 percent of euro-zone gross domestic product.

Both entered the European Union in May 2004. Only one other country that joined the EU at the same time — Slovenia — has so far adopted the euro.

The largest of the EU newcomers — Poland, Hungary, the Czech Republic, Romania and Bulgaria — have yet to set a date. Estonia had originally planned to join next year but will delay membership as its growing economy sees inflation surge, a problem that has also slowed Latvian and Lithuanian plans. Slovakia is scheduled to join in 2009.

Cyprus and Malta worked hard to meet the strict EU economic standards for euro nations, with Cypriot workers agreeing to calm wage demands that could hike inflation while Malta paid off debt to cut its budget deficit below the EU maximum of 3 percent of gross domestic product.

To keep their shared currency stable, euro nations are also supposed to keep overall public debt below 60 percent.

However, even the largest euro economies have had trouble with these rules and euro candidates can be accepted if they can show that they are on track to meet these limits.

Cyprus became part of the EU a month after Greek Cypriots voted against a United Nations plan that would have led to reunification with the breakaway Turkish Cypriot state in the north of the island. EU officials have warned Turkish Cypriots against starting to use euro as their currency on their own initiative