Frequently asked questions concerning the Euro

Transcription

1 Frequently asked questions concerning the Euro INTRODUCTION OF THE EURO 1. When will the Euro be introduced? The official date for the introduction of the Euro in Cyprus as the official national currency is the 1 st of January When will the Cyprus Pound be withdrawn from the market? The Cyprus Pound banknotes and coins will remain in circulation for one more month after the date of the introduction of the Euro. The time between 01/01/2008 and 31/01/2008 will be referred to as the period of parallel circulation of the two currencies. 3. When will the Bank start dealing solely in Euro? The Bank will be dealing solely in Euro as from the 1 st of January For how long will the Bank be accepting Cyprus Pounds? Will there be a charge during the exchange? The public will be able to exchange Cyprus Pounds into Euro until the 30 th of June The Bank will exchange Cyprus Pound banknotes and coins into Euro, without any charge, as follows: Banknotes up to CYP1.000 per person/per transaction Coins up to CYP50 per person/ per transaction In addition, as of 01/01/2008 the Central Bank of Cyprus will be exchanging Cyprus Pound banknotes and coins for 10 and 2 years respectively, without any direct or indirect charge. 5. What is the Cyprus Pound / Euro exchange rate? On the 10 th of July 2007, the Council of the European Union, during the meeting of the Finance Ministers (ECOFIN) held in Brussels, set the conversion rate at which the Euro will replace the Cyprus Pound on 01/01/2008 at 1 = (i.e. 1 Euro = Cyprus Pounds). The conversion rate will apply as from 01/01/2008, whereas, for the period until 31/12/2007, the Cyprus Pound / Euro exchange rate will continue to be determined by free market forces. 6. What is the round-off? The conversion of the prices from Cyprus Pounds into Euro will be made through the irreversible exchange rate of the Euro in relation to the Cyprus Pound which is expressed with 6 decimal digits: 1 Euro = Cyprus Pounds. Please note that the use of the reverse exchange rate during the conversion either from Cyprus Pounds to Euro or from Euro to Cyprus Pounds, is not permitted. The amount in Euro is calculated with 6 decimal places and then rounded up or down to two decimal places. To be precise, when the third decimal digit is

2 smaller or equal to 4, the amount is rounded down whereas when it is equal or larger to 5, it is rounded up. Examples of the Round-off Conversion Rate: 1= Amount to be converted Calculation Result before round-off Round-off 11 11/ / / / / Where can I find more information on the Euro? For more information you can visit the following official websites: National website for the Euro Ministry of Finance Central Bank of Cyprus European Central Bank 8. Can customers open accounts in Euro prior to 01/01/2008? Of course they can. The Bank already offers the possibility of opening an account in Euro. The Conversion of Cyprus Pounds to Euro is presently carried out based on the current exchange rate. 9. Do the customers themselves need to make provisions to convert their accounts to Euro? No. The Bank has made provisions so that the currency of all customer accounts be automatically converted from Cyprus Pounds to Euro, based on the locked exchange rate on the 1 st January The customers are not required to take any action. 10. Will there be a charge for the conversion of an account from Cyprus Pounds to Euro? The Bank will convert the balances of all existing accounts in Cyprus Pounds to Euro, based on the locked conversion rate, without any extra charge. 11. What are the impacts of the Euro on the terms and conditions of the current loans? The only change that will occur is where the interest rate is linked to a rate in Cyprus Pounds, in which case after the 1 st January 2008, the link will apply to the respective rate in Euro. For example, the Bank s Base Rate in Cyprus Pounds will be replaced by the Bank s Base rate in Euro. Loans in Foreign Currency will not be affected.

3 12. What are the impacts of the Euro on existing fixed deposit accounts that mature after the 1 st January 2008? On 01/01/2008 the balances of the existing fixed deposit accounts in Cyprus Pounds will be converted to Euro based on the locked conversion rate. There will be no change on the terms and conditions of the fixed deposit accounts, whereas, neither the interest rate nor the maturity date will be affected in any way. 13. Are the interest rates for deposits and loans in Euro the same in all Eurozone Member-states? The interest rates in the inter-banking market, i.e. those that apply for transactions between banks (which are normally very large amounts), are directly connected to the monetary policy of the Euro-system and therefore are practically the same across all Member-states of the Eurozone. Interest rates in the Eurosystem are defined by the prevailing financial environment conditions in the Eurozone, and based on the Euro-system interest rates, the short-term market rates are defined. The retail banking interest rates (for loans and deposits) continue to show some deviation from country to country. This occurs as the interest rates the banks set for their clientele, depend on the cost of lending the banks face in the interbanking market, but also on other factors that are linked to the customers creditworthiness, the conditions that prevail in the local financial market, the operating costs, etc. 14. What will happen to cheques in Cyprus Pounds? Cheques issued in Cyprus Pounds dated after the Euro has been introduced (01/01/2008), will no longer be valid. Therefore, the customers are requested to avoid issuing or accepting post-dated cheques in Cyprus Pounds. For this reason, the Bank will ensure that cheque books in Euro are issued in due time. ECONOMY 15. What are the benefits from the introduction of the Euro? Based on official statements from the Ministry of Finance, the main benefits are: Economic and Social progress More favourable lending terms Minimisation of the cost and risks from the currency conversion Long-term financial stability Member of a strong European Union with a solid fiscal policy Savings on resources due to the reduction of the interest rates that apply on the national debt Transparency on prices - more fierce competition lower prices for the consumers Businesses will have direct access to the capital markets of the Eurozone Establishment of a stable business environment Strengthening of the state s social responsibility Positive outcomes on the political issue

4 16. What new conditions and what challenges will the introduction of the Euro bring? According to official statements from the Ministry of Finance, the main new conditions and challenges are: Interest rates will be set by the European Central Bank The ability to influence the exchange rate will cease to exist Permanent rationalisation of the public finances will be attained 17. Is the public concern that the Euro will lead to prices increase, justifiable? There is a possibility that prices for the lower-value products will increase marginally due to the rounding-up effect, while the phenomenon of profiteering may also appear, thus leading to price increases. However, the constant and timely flow of information provided to the public and the precautionary measures taken by the government are expected to limit significantly the profiteering phenomenon. It is also expected that certain product prices will fall due to savings on foreign exchange commissions charged, with the introduction of the Euro. In addition, the Ministry of Finance will establish Euro-observatories whose aim will be to protect the consumers through the monitoring of the introduction of the Euro, the legitimacy of the transactions, the transparency of the professionals practices and the directing of the public towards every available source of information. In general, it is expected that prices will not experience substantial, if any, rises with the adoption of the Euro. 18. How long will the dual display of prices last? By law, the dual display of prices will apply from September 2007 until September What are the implications of the Euro on the salaries? The transition towards the Euro will have no implication on the value of income. Salaries will be converted into Euro based on the «locked» exchange rate while the purchasing power of income is expected to remain unchanged. CURRENCY 20. What does the Euro symbol signify? The symbol of the Euro ( ) derives from the Greek letter epsilon which is the initial letter of the word Evropi, meaning Europe, (a word derived from the Ancient Greek Mythology female name, Evropa), while the two horizontal lines represent the stability of the currency. The official abbreviation of the Euro is EUR. 21. Which are the Euro banknotes and coins? There are seven different denominations of Euro banknotes in circulation; 5, 10, 20, 50, 100, 200 and 500 Euro, and eight different Euro coin denominations; 1, 2, 5, 10, 20, 50 cents, 1 and 2 Euro. Images of the currency can be viewed on the Central Bank of Cyprus website:

5 Banknotes: Coins: Why are there big denominations in Euro such as 500? Large denomination Euro banknotes were necessary, to substitute for largedenomination national banknotes (such an example were the large-denomination German, Deutschemark, banknotes). 23. What are the counterfeit safety features of the bank notes? Security features incorporated into the banknotes can be found in the European Central Bank website: Will our Euro banknotes in Cyprus be different to the ones of the other Eurozone Member-states? The bank notes will be the same as those of the other Euro member-states. The illustrations on the bank notes depict 7 architectural eras of the cultural history of Europe and they do not portray any particular monuments of any European country. 25. Will the coins be different to the ones of the other Member-states of the Eurozone? Euro coins for each member state across the Eurozone have one common side, and one national side that is different for each member-state. In the case of Cyprus, on the of 1 and 2 Euro coins the statuette of the Pomos village will be depicted, on the 10, 20 and 50 cent coins the Kyrenia boat, and on the 1, 2 and 5 cent coins the mouflon will be depicted.