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)
Date: 2007-01-15
Institutions: European Central Bank
Subjects: Cyprus, euro, monetary integration, money, national law

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  matters  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  deliver  an  opinion  is  based  on  Article  105(4)  of  the  Treaty  establishing  the 

European Community and on the first and second indents 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 matters and means of payment. In accordance 

with  the  first  sentence  of  Article 17.5  of  the  Rules  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), conversion and rounding rules (Section 5), the dual display of prices 

(Section  7),  references  to  national  interbank  reference  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 (Sections 15 and 16) and the redenomination of share 

capital (Sections 18 and19). The draft law also empowers the Council of Ministers and the Minister 

of  Finance  to  adopt  certain  legal  instruments  for  the  purpose  of  regulating  in  more  detail  issues 

relevant to the application of the provisions of the draft law (Sections 21 and 22). 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
                                                      
1.2  The  ECB  welcomes 

the  Cypriot  Government’s 

initiative 

to  prepare  for  adoption  and 

implementation of the measures necessary and appropriate 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 made 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 denominated 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 Regulation (EC) No 1103/97. The ECB appreciates the 

usefulness  of  this  provision  as  a  public  information  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 provisions should be avoided. The consulting authority 

may wish to consider whether a more general reference 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 Article 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  legal  certainty,  it  is  suggested  that  the  consulting 

authority should provide for conversions from euro 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 provision has denominated in Cyprus pounds, the 

original reference in euro in the Community legal act in question must be reintroduced as from the 

euro adoption date, ‘by deleting the amount denominated in pounds and replacing it by the amount 

2  

3  

4  

OJ L 162, 19.6.1997, p. 1. Regulation as amended by Council Regulation (EC) No 2595/2000 (OJ L 300, 29.11.2000, 
p. 1). 
OJ L 139, 11.5.1998, p. 1. Regulation as last amended by Council Regulation (EC) No 1647/2006 (OJ L 309, 9.11.2006, 
p. 2). 
OJ L 359, 31.12.1998, p. 1. Regulation as last amended by Council Regulation (EC) No 1086/2006 (OJ L 195, 15.7.2006, 
p. 1). 

2 

 
 
                                                      
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  amounts  that  are  denominated  in  Cyprus  pounds  in 

national legislation which implements Community legal acts should automatically be understood to 

refer  to  the  amounts  in  euro  specified  in  the  Community  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  affected  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  accept  the  deposit  of  banknotes  and  coins  in  Cyprus 

pounds,  subject  to  no  quantitative  restrictions  (sub-paragraph  (a)),  and  must  exchange  banknotes 

and  coins  in  Cyprus  pounds  for  banknotes  and  coins  in  euro  subject  to  certain  quantitative 

restrictions  (sub-paragraph  (b)).  The  ECB  understands  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)  and  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 banknotes 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 adoption 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 appreciating 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 valid means of payment by five months beyond the 

one month dual circulation period stipulated in Section 4 of the draft law. Moreover, since the draft 

law is not consistent with the existence of a phasing-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 
final  of  10.11.2006 
(< http://ec.europa.eu/economy_finance/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 currency only, for a transitional period prior to the 
actual cash changeover. 

the  euro  area’  COM(2006)  671 

future  enlargement  of 

the 

for 

3 

 
                                                      
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 the 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 the 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  accompanied  by  a  clear  indication  of  the  event  on  which 

their entry into force is conditional (the day following the publication of the decision to abrogate 

the  derogation  that  Cyprus  currently  enjoys)  and  (ii)  if  that  date  precedes  the  date  of  the  actual 

adoption of the euro/cash changeover by sufficient time 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  and  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  Regulation  (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 single currency that the legislator can legitimately 

use in Cyprus, other than ‘λεπτό/ά’, is ‘cents’ in Latin characters.  

6  
7  

See Section 7 of the Interpretation Law (Cap.1), as amended by Law 11/1989. 
The consistent reference in Community legal acts to ‘differences in alphabet’ suggests that the original intention was not 
merely to prevent Member States from unilaterally adopting divergent 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. 

4 

 
 
 
                                                      
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 

5