EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 15 January 2007  
at the request of the Cypriot Ministry of Finance 
 on a draft law regulating the adoption of the euro and the currency changeover 
(CON/2007/1) 
 
Introduction and legal basis  
On 27 November 2006 the European Central Bank (ECB) received a request from the Cypriot Ministry of 
Finance for an opinion on a draft law regulating matte rs relating to the adoption of the euro and the 
smooth changeover from the Cyprus pound to the euro (hereinafter the ‘draft law’).  
The ECB’s competence to de liver an opinion is based on Article 105(4) of the Treaty establishing the 
European Community and on the first and second indent s of Article 2(1) of Council Decision 98/415/EC 
of 29 June 1998 on the consultation of the European  Central Bank by national authorities regarding draft 
legislative provisions1, as the draft law relates to currency ma tters and means of payment. In accordance 
with the first sentence of Article 17.5 of the Rule s of Procedure of the European Central Bank, the 
Governing Council has adopted this opinion. 
 1. Purpose of the draft law and general observations 
1.1 The aim of the draft law is to comprehensively adapt Cypriot law with a view to implementing the 
national changeover plan for replacing the Cyprus  pound with the euro and facilitating the smooth 
changeover to the euro (Section 3 of the draft law) . The draft law contains provisions relating to a 
wide range of topics concerning the changeover, including the establishment and duration of a dual 
circulation period (Section 4), conve rsion and rounding rules (Section 5), the dual display of prices 
(Section 7), references to national interbank refe rence rates (Section 8), monetary references in 
legal instruments (Section 9), the withdrawal of  legal tender banknotes and coins (Section 10), the 
redenomination of public and corporate debt (Sec tions 15 and 16) and the redenomination of share 
capital (Sections 18 and19). The draft law also empo wers the Council of Ministers and the Minister 
of Finance to adopt certain legal instruments fo r the purpose of regulating in more detail issues 
relevant to the application of the provis ions of the draft law (Sections 21 and 22).  
                                                     
 
1  OJ L 189, 3.7.1998, p. 42.  
 
2 1.2 The ECB welcomes the Cypriot Government ’s initiative to prepare for adoption and 
implementation of the measures necessary and appr opriate for the introduction of the euro, which 
are to apply after the conditions for its introduction have been fulfilled.  
1.3 The following comments on the draft law are ma de based on Council Regulation (EC) No 1103/97 
of 17 June 1997 on certain provisions relating to the introduction of the euro2, Council Regulation 
(EC) No 974/98 of 3 May 1998 on the introduction of the euro3 and Council Regulation (EC) 
No 2866/98 of 31 December 1998 on the conversion rates between the euro and the currencies of 
the Member States adopting the euro4.  
 2.  Technical comments 2.1 Section 5(1) of the draft law provides that all monetary amounts, denominated in Cyprus pounds 
and to be paid or accounted for in euro, or denomin ated in euro and to be paid or accounted for in 
Cyprus pounds during the dual circulation period , must be converted and rounded in accordance 
with the provisions or Articles 4 and 5 of Regul ation (EC) No 1103/97. The ECB appreciates the 
usefulness of this provision as a public informa tion and legal certainty measure. However, in 
general, repetitions in national legal acts of directly applicable provisions of Community law and 
preferably also specific references to such provi sions should be avoided. The consulting authority 
may wish to consider whether a more general refe rence to the relevant Community legal act would 
serve the legitimate purposes of Section 5(1) of the draft law. Similarly, Sections 15(1), 16(1) and 
18(1) of the draft law repeat the contents of Article 14 of Regulation (EC) No 974/98, while 
Section 15(3) thereof repeats part of Ar ticle 5 of Regulation (EC) No 1103/97.  
2.2 Section 5(2) of the draft law lays down the rounding rules applicable to monetary amounts arising 
from intermediate computations which are not  to be paid or accounted for. The ECB’s 
understanding of this provision is  that it provides for conversions from Cyprus pounds to euro, but 
not vice versa. In the interests of clarity and le gal certainty, it is suggested that the consulting 
authority should provide for conversions from eu ro to Cyprus pounds during the dual circulation 
period.  
2.3 Section 6(1) of the draft law provides that, where any provision of national law has been adopted 
for the purpose of transposing a Community legal act , and that Community legal act refers to an 
amount denominated in euro which the national pr ovision has denominated in Cyprus pounds, the 
original reference in euro in the Community lega l act in question must be reintroduced as from the 
euro adoption date, ‘by deleting the amount denom inated in pounds and replacing it by the amount 
                                                     
 
2  OJ L 162, 19.6.1997, p. 1. Regula tion as amended by Council Regulati on (EC) No 2595/2000 (OJ L 300, 29.11.2000, 
p. 1). 
3  OJ L 139, 11.5.1998, p. 1. Regulati on as last amended by Council Regula tion (EC) No 1647/2006 (OJ L 309, 9.11.2006, 
p. 2). 
4  OJ L 359, 31.12.1998, p. 1. Regulation as last amende d by Council Regulation (EC) No 1086/2006 (OJ L 195, 15.7.2006, 
p. 1). 
 
3 denominated in euro’ in the Community legal act. Moreover, Section 6(2) of the draft law provides 
that, where any national provision adopted for the purpose of transposing the acquis  
communautaire  refers to an amount denominated both in  pounds and in euro, the reference to 
pounds must be deleted as from the euro adoption date. It is unclear whether the aim of these 
provisions is to ensure that any monetary am ounts that are denominated in Cyprus pounds in 
national legislation which implem ents Community legal acts should automatically be understood to 
refer to the amounts in euro specified in the Co mmunity legislation or whether further formal 
amendments of national law provisions are required.  As the wording of these provisions could also 
be interpreted as requiring that the affect ed national law provisions should be further formally 
amended, the ECB recommends that their wording should be clarified.  
2.4 Section 10(2) of the draft law provides that, for a period of six months from the euro adoption date, 
banks and cooperative credit societies must accep t the deposit of banknotes and coins in Cyprus 
pounds, subject to no quantitative restrictions (s ub-paragraph (a)), and must exchange banknotes 
and coins in Cyprus pounds for banknotes and co ins in euro subject to certain quantitative 
restrictions (sub-paragraph (b)). The ECB understa nds that the starting point for the six month 
period stipulated in Section 10(2) is intended to be the cash changeover date (i.e. the date on which 
euro banknotes and coins will acquire the status of legal tender in Cyprus), rather than the euro 
adoption date, notwithstanding that, in the case of  Cyprus, the two dates are intended to coincide5. 
The ECB draws the consulting authority’s attention to the importance of their actual coincidence as 
a precondition for the operation of Section 10(2) an d would for that reason invite the consulting 
authority to consider the advisability of adapting the definition of ‘euro adoption date’, in Section 2 of the draft law, so that this encompasses both the date on which the abrogation of the derogation 
will enter into force and the date on which euro ba nknotes and coins will acquire the status of legal 
tender in the Republic of Cyprus. 
2.5 Among other things, Section 14 of the draft law provides that ‘cheques denominated in pounds and 
dated no later than six months after the euro adop tion date shall be presumed to have been drawn 
before the euro adoption date and shall be valid as cheques payable in the equivalent in euro for six 
(6) months from the euro adoption date’. While a ppreciating the practical difficulties inherent in a 
requirement for proof to be furnished before a post-dated cheque can be declared valid, the ECB 
draws the consulting authority’s attention to the fact that the provision effectively extends the 
status of cheques drawn in Cyprus pounds as va lid means of payment by five months beyond the 
one month dual circulation period stipulated in Sec tion 4 of the draft law. Moreover, since the draft 
law is not consistent with the existence of a phasi ng-out period, this provision is also not entirely 
consistent with the national changeover plan, as it currently stands. Finally, while consistency 
                                                     
 
5   It follows from the Communication from the Commission to  the Council, the European Parliament, the Economic and 
Social Committee, the Committee of the Regions and the European Central Bank, ‘Fourth report on the practical 
preparations for the future enlargement of the euro area’ COM(2006) 671 final of 10.11.2006 
(< http://ec.europa.eu/economy_financ e/publications/euro_related /2006/com2006_671final_en.pdf >) that it is not the 
intention that the euro should be  introduced in Cyprus as a scriptural curren cy only, for a transitional period prior to the 
actual cash changeover. 
 
4 between the changeover plan and national law is a matter for coordination at domestic level, there 
has to be consistency between the Community law provisions (i.e. amendments to Regulation (EC) 
No 974/98 establishing the changeover scenario for Cyprus) and national law. Thus, the current 
provisions appear to be compatible only with th e introduction of the euro under the scenario of a 
‘big-bang’ with a phasing-out period.  
 3.  Other observations  3.1  The ECB understands that, in the Cypriot legal system, all legal acts (laws and regulations) enter 
into force on the date of their publication in th e Official Gazette of the Republic, unless they make 
an explicit reference to another date.
6 While most of the provisions of the draft law explicitly link 
the start of their proposed legal effects to the euro adoption date, certain other provisions (e.g. 
Sections 7 and 17) contain no specific provision on their entry into force. These provisions would only make sense (i) if they were to be accompan ied by a clear indication of the event on which 
their entry into force is conditional (the day foll owing the publication of the decision to abrogate 
the derogation that Cyprus currently enjoys) and (i i) if that date precedes the date of the actual 
adoption of the euro/cash changeover by sufficient tim e to enable them to have their proposed legal 
effects. In the case of Section 7, an additional practical consideration is the definition of the 
conversion rate to be used for the dual display of prices during the period after the abrogation of 
the derogation and before the euro adoption date, i. e. prior to the actual entry into force of the 
irrevocable conversion rate between the euro a nd the Cyprus pound. The ECB is nevertheless 
satisfied that Section 7(4) of the draft law adequately addresses this issue.  
3.2 The name of the sub-unit of the euro used  throughout the text of the draft law is ‘ σεντ/ς’, in Greek 
characters. While the only possible transliteration into  Greek characters of the name of the sub-unit 
of the single currency is ‘ σεντ/ς’ and while, until the time of the adoption of corrigenda to the 
Greek language versions of the texts of Re gulation (EC) No 1103/97 and Regulation (EC) 
No 974/98, ‘cent/s’ was also retained for the Greek  language versions of those Regulations, the use 
of the name ‘ σεντ/ς’, in Greek characters, is not warranted under Community legislation.
7 It 
follows that the only name for the sub-unit of the si ngle currency that the legislator can legitimately 
use in Cyprus, other than ‘ λεπτό /ά’, is ‘cents’ in Latin characters.  
 
                                                      
6  See Section 7 of the Interpretation Law (Cap.1), as amended by Law 11/1989. 
7  The consistent reference in Community le gal acts to ‘differences in alphabet’ s uggests that the original intention was not 
merely to prevent Member States from unilaterally adopting di vergent names for the single currency and its sub-unit, but 
also to oblige them to spell the name of the single currency identically, subject nevertheless to the constraints inherent in 
the use of different alphabets in different Member States. 
 
5 This opinion will be published on the ECB’s website. 
  Done at Frankfurt am Main, 15 January 2007. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET