The government of Cyprus approved the national changeover plan on 13 July 2006. It was prepared by the National Advisory Committee which is in charge of coordinating the national preparations for the introduction of the euro. The Central Bank of Cyprus published the cash changeover plan in June 2006.
Cyprus envisages a “big bang” scenario with a dual circulation period of one month.
Cyprus’ national changeover plan generally covers most of the practical issues for the introduction of the euro. However, further measures are necessary to enhance consumer confidence in stable pricing around the changeover, such as a comprehensive fair-pricing strategy agreed between consumers and retailers. Moreover, the national changeover plan is still short of detail in many respects and several important elements need to be further defined (e.g. the frontloading and subfrontloading operations, the organisation of the backflow of national cash, the dual display of prices, etc.).
Â
Financial sector and enterprises
Frontloading of euro banknotes and coins by the Central Bank of Cyprus to commercial banks is planned between October and December 2007. Moreover, banks will provide enterprises, in particular retailers, with euro cash before €-day so that they can give change exclusively in euro as from 1 January 2008. Prepacked coin starter kits containing a suitable structure of denominations for initial transactions will be available both to businesses and the general public. The details, including on the timing of the frontloading operations, are still to be decided.
Commercial banks will only hand over euro cash in their transactions with customers as from 1 January 2008. As regards the conversion of the country’s cash dispensers (ATMs) the present plan provides that ATMs will initially issue 10-, 20- and 50-euro banknotes. Replacing the 50-euro banknotes by 5- euro notes should be envisaged, particularly during the early phase of the cash changeover. This will reduce the amount of change which retailers need to return in cash transactions.
A campaign urging citizens to deposit hoarded legacy cash with banks, or to spend it well before €-day, is planned.
The Central Bank of Cyprus will continue to exchange national coins free of charge until the end of 2009 and national banknotes until the end of 2017. Commercial banks will be obliged to exchange Cyprus pound banknotes free of charge up to the amount of CYP 1000 per customer per transaction, and Cyprus pound coins up to CYP 50 per customer per transaction until 30 June 2008. Individual banks have the option of increasing these ceilings for their own transactions. This protracted period of free exchange by commercial banks sends an ambiguous signal to the public and risks prolonging the cash changeover. It would be preferable to confine the free exchange to the period of dual circulation in order to prompt citizens to exchange their legacy cash as quickly as possible.
Â
Public administration
The Ministry of Finance coordinates the preparation of the public sector. The adaptation of all computer systems used by the public administration is expected to be implemented by September 2007.
On 22 June 2006, the government approved the three designs for the national sides of the euro coins. As Cyprus has no national mint, the euro coins will be produced abroad.
All three authorities responsible for the protection of the euro banknotes and coins against counterfeiting (the national central office and national analysis centres for counterfeit banknotes and coins) are situated within law enforcement. In relation to practical preparations on the protection of the euro, Cyprus has participated in training actions and cooperated in the framework of the relevant groups of the Commission, ECB and Europol.
Â
Consumers and the general public
The mandatory dual display of prices will start one month after the fixing of the conversion rate.
The obligation to display prices both in Cyprus pounds and in euro is planned to enter into force one month after the Council adopts the decision lifting Cyprus’ derogation and determines the conversion rate. It will apply until six months after the introduction of the euro.
In order to address consumers’ fears of abusive price increases around €-day, the national changeover plan provides for the establishment of euro observatories which will monitor whether the dual display of prices is carried out according to the provisions of the law on the adoption of the euro in Cyprus, which is planned to be adopted at the end of 2006.
Â
Communication activities
In the framework of the Partnership agreement which the European Commission signed with Cyprus on 5 May 2006 the Commission will implement various communication activitiesin co-operation with the Cypriot authorities. A high-level conference, an exhibition and a seminar for local journalists will be organised, publications, promotional material and portable stands produced and opinion polls conducted.
Â
Â
