EU hails smooth transition to euro use in Cyprus, Malta

The European Commission on Thursday hailed the smooth introduction to the euro in the Mediterranean island states of Cyprus and Malta, which both adopted the common currency on January 1.

"All available evidence suggests that the changeover operation is proceeding very smoothly and without any noteworthy incidents," the EU's executive arm said in a statement.

That sentiment was shared by the Frankfurt-based European Central Bank, which opined that "the cash changeover is progressing smoothly and according to plan, thanks to the timely and comprehensive preparations and cooperation among all stakeholders."

After Wednesday's first working day since the currency switch the share of euro banknotes in circulation was already over 50 percent in both Cyprus and Malta, the E#CB added in its statement.

Malta and Cyprus became the 14th and 15th members of the eurozone on Wednesday after painstaking preparations and coordination between the governments and central banks.

The Commission said that by Tuesday around 40 percent of citizens in both countries had "only or mostly euro cash in their wallets and purses."

According to a European Commission survey retailers gave change exclusively in euros in over 90 percent of all cash transactions, although on Monday there had been some shortage of change at retail outlets while banks were closed for the New Year holiday.

On Wednesday 36 percent of Maltese and 28 percent of Cypriots said they had paid for goods using euros, favourable results compared to the 19 percent figure registered when Slovenia adopted the euro a year ago.

The smooth transition came despite the start of the post-holiday winter sales.

Moody's Investors Service reflected the satisfaction with the smooth currency change by upgrading the foreign and local currency government bond ratings of Cyprus to Aa3 from A1 and of Malta to A1 from A2.

"Moody's views the adoption of the euro by Cyprus and Malta as a significant credit positive because it all but eliminates the risk of a currency crisis, thereby insulating their economies from external financial shocks," said senior Moody's analyst Tristan Cooper.

In both countries the euro has been introduced under a "big bang" system with dual circulation of the old and new currencies for one month.

The euro will thus become the sole legal tender as of February 1, 2008, although both national central banks will redeem old banknotes for ten years and coins for two years.

The 15 eurozone nations are: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia and Spain.