Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee, the Committee of the Regions and the European Central Bank - The introduction of the euro in Cyprus and Malta
Date: 2008-04-18
Institutions: European Commission
Subjects: Cyprus, European Monetary System, Malta, euro, participating country (euro area)

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 18.4.2008 
COM (2008) 204 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE 
EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN 
CENTRAL BANK 

The introduction of the euro in Cyprus and Malta 

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COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE 
EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN 
CENTRAL BANK 

The introduction of the euro in Cyprus and Malta 

1. 

INTRODUCTION 

The  Council  decided  on  10  July  2007  to  abrogate  Cyprus'  and  Malta's  derogation  for  the 
adoption of the single currency with effect from 1 January 2008. 

The successful changeover of both countries confirmed that, if meticulously prepared, a four-
week dual circulation period can be sufficient, even for countries with a very high amount of 
cash  in  circulation1.  A  large  majority  of  Cypriots  (95%)  and  Maltese  (90%)  perceived  the 
changeover in their countries as smooth or rather smooth and efficient.  

This  Communication  covers  the  most  important  aspects  of  the  changeover  process,  in 
particular the cash changeover, the conversion of the administrative and financial systems, the 
real and perceived impact of the euro's introduction on prices, and the citizens' opinion on the 
information and communication campaigns; additionally, some conclusions are drawn which 
may be of value for future changeovers. 

2. 

THE CASH CHANGEOVER 

The  cash  changeover  constitutes  the  most  visible  element  of  the  changeover  process  since 
virtually  all  financial  institutions,  businesses  and  citizens  are  involved.  The  success  of  this 
operation  depends  on  timely  supply  of  the  euro  cash  to  all  parties  involved  and  thorough 
preparation for the recovery of legacy currencies.  

2.1.  Frontloading and sub-frontloading operations before €-day 

A) 

Cyprus 

The  Central  Bank  of  Cyprus  (CBC)  started  the  frontloading  of  commercial  banks  on  22 
October 2007 for euro coins and on 19 November 2007 for euro banknotes. Some 80% of the 
value of euro banknotes (worth €950 million) and 64% of the value of euro coins (worth €64 
million) were supplied to  the banking sector before €-day. All the bank branches in Cyprus 
(approximately 900) were involved in the frontloading operations.  

Sub-frontloading  of  the  euro  cash  to  retailers  was  initiated  at  the  same  time.  Although  the 
CBC was active in explaining the need for sub-frontloading to enterprises dealing with cash, 
the euro-cash orders were well below expectations. Many small entrepreneurs claimed that it 
was difficult and costly to fulfil all sub-frontloading requirements. To overcome this problem, 
banks, in agreement with the CBC, allowed enterprises to be sub-frontloaded on 31 December 
using a simplified procedure. Almost 58% of enterprises out of a total of 1 377 which were 

1 

Cyprus'  and  Malta's  changeover  plan  specified  that  the  so-called  "big  bang"  scenario  and  a  dual 
circulation period of one month should be applicable. The first wave euro-area countries introduced the 
euro in accordance with the "Madrid" scenario, which involved a transitional period of three years (one 
year for Greece). Slovenia was the first country to use the "big bang" scenario, whereby euro banknotes 
and coins were introduced on the same day as the euro became legal tender (1 January 2007). 

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sub-frontloaded used this simplified procedure and were supplied with a total of €3.3 million 
(compared with €11.1 million under the standard procedure).  

In  addition,  some  banks  started  to  exchange  Cyprus  pounds  for  euro  banknotes  for  their 
customers  at  the  conversion  rate  and  without  charges  as  of  1  November,  allowing  the 
businesses  which  could  not  take  on  the  burden  of  sub-frontloading  to  buy  euro  cash  in 
advance. 

Some  40  000  pre-packed  coin  kits  (starter  kits),  worth  €172  each,  were  also  available  for 
businesses,  but  only  22  000  were  sold.  Since  these  starter  kits  contained  rolled  coins,  the 
remaining kits could easily be used by the banks after €-day.  

Another 250 000 mini-kits, worth CYP 10 (€17.09) each, were available for the general public 
as  from  3  December  2007.  Some  189  000  mini-kits  were  sold.  According  to  the 
Eurobarometer survey2, more than 70% of the citizens who had bought a mini-kit opened it 
and used the coins after the changeover while some 20% kept it untouched.  

As  from  the  changeover,  the  unsold  mini-kits  have  been  exported  to  satisfy  the  demand  of 
coin collectors abroad. Cypriot euro coins worth €3.5 million were exported in the first three 
weeks of January. 

B)  Malta 

The frontloading of euro cash to commercial banks started on 15 September 2007. Some 107 
bank  branches  received  euro  banknotes  worth  €540  million  and  euro  coins  worth  €27.81 
million before €-day. 

During the sub-frontloading phase (which started on 1 December 2007), 134 businesses were 
supplied with euro notes worth €3.9 million and coins worth €1.9 million. The very limited 
number  of  businesses  participating  in  the  sub-frontloading  operation  is  probably  due  to  the 
rather strict conditions imposed.  

Considering  the  particularly  high  amount  of  cash  in  circulation,  the  Central  Bank  of  Malta 
encouraged  the  public  to  deposit  excess  cash  at  the  banks  as  from  1  December. 
Simultaneously, the banks undertook to exchange Maltese lira banknotes and coins into euro 
free of charge to enable small businesses to acquire euro cash ahead of the changeover. 

Many businesses preferred to buy starter kits to supply themselves with sufficient volume of 
euro  coins.  All  33  000  starter  kits  for  businesses  (worth  €131  each)  were  sold.  The  banks 
registered some demand for starter kits containing both coins and notes and some demand for 
coin starter kits of different composition than the standard ones offered.  

Malta has also recorded big orders for Maltese coins from collectors abroad. Some 1 200 000 
pieces  of  each  denomination  had  been  exported  by  private  banks  between  €-day  and  25 
January.  By  the  same  time,  the  Central  Bank  of  Malta  had  sold  abroad  some  32  000  euro 
presentation  sets  and  had  exchanged  some  10  000  pieces  of  each  coin  denomination  with 
other euro-area Central Banks. 

The fact that businesses showed little interest in sub-frontloading confirms the negative 
impact  of  the  strict  security  and  information  requirements,  particularly  for  small 
companies. The ECB is therefore currently investigating the possibility of simplifying its 
guidelines  on  sub-frontloading  for  future  changeovers,  having  regard  in  particular  to 
the simplified procedure used at the end of December in Cyprus. 

2 

Flash Eurobarometer 223 (February 2008) 

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The mismatch between the demand for and supply of coin kits highlights the importance 
of careful planning of the volume to be produced. Producing one coin kit per household 
seems to be a reasonable benchmark. 

The  relatively  high  volumes  of  exported  coins  suggest  that  collector  market  demand 
should be taken into consideration, especially for small countries. Orders from collectors 
may significantly alter the volume of coins available during the changeover. 

2.2.  The period of dual circulation 

Cyprus and Malta opted for a dual circulation period of one month. The smooth changeover in 
these two countries confirmed that four weeks are sufficient for introducing the new currency 
and for recovering a substantial volume of legacy currencies. 3 

2.2.1. Distribution of euro notes and coins after €-day 

Automated teller machines (ATMs) and bank counters were the chief ways of acquiring euro 
cash  used  by  the  public  and  businesses  in  the  first  days  after  the  changeover.  But  in  both 
countries people were also using retail outlets massively to dispose of their legacy currencies 
and obtain euro. 

A) 

Cyprus 

To facilitate the exchange of Cyprus pounds into euro, a number of bank branches were open 
on 1 January 2008, which is normally a bank holiday.  

Cypriots  paid  around  336  000  visits  to  their  banks  during  the  first  10  days  of  this  year  and 
withdrew or exchanged more than €578 million (averaging €1 177 per operation). 

All  550  ATMs  were  converted  to  dispensing  only  euro  banknotes  by  0.30h  on  1  January. 
During the first weeks after the changeover, ATMs were only dispensing small-denomination 
banknotes, with a view to reducing the amount of change which retailers had to give in cash 
transactions. Cypriots withdrew more than €32 million in some 251 000 operations during the 
first ten days after the changeover. On average, €127 was withdrawn per operation.  

As  in  Slovenia  and  in  some  countries  which  adopted  the  euro  in  2002  (e.g.  Germany  and 
Spain), a great many citizens went to bank counters rather than to ATMs in the days following 
the changeover to acquire new currency. Comparing the figures for the whole dual circulation 
period  (January  2008)  to  those  of  January  2007,  there  was  a  55%  rise  in  the  value  of 
withdrawals and exchanges with a corresponding 61% increase in the volume of transactions 
made over-the-counter, while the volume of ATM transactions rose by only 23%4. 

3 

4 

The dual circulation period is the period starting on €-day during which both euro and legacy currency 
(i.e. old national currency) are legal tender. It may last six months at most, while Member States may 
shorten this period. Under the first-wave changeover, most countries opted for a dual circulation period 
of two months. Slovenia chose only a 14-day dual circulation period.  
The value of ATM  transactions  increased by  only  15%, mainly  because  low-denomination  banknotes 
exclusively were dispensed by ATMs in January 2008. 

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The relatively high average value of exchanges or withdrawals per bank operation in Cyprus 
(€1 177) suggests that people were keeping high amounts of hoarded cash, causing queues in 
banks  in  the  first  days  after  the  changeover  despite  the  bank  counters  being  open 
exceptionally on 1 January. The situation in banks did, however, quickly return to normal. 

B)  Malta 

Almost 230 000 over-the-counter exchanges took place between 1 and 10 January, for a total 
amount of around €165 million. The average exchange was worth some €720. In Malta there 
were more withdrawal operations from ATMs than over bank counters, but the total value of 
euro acquired at bank counters was more than four times higher.  

Around  90%  of  all  ATMs  (154  in  total)  in  Malta  were  issuing  only  euro  banknotes  by 
midnight  on  1  January;  the  rest  were  adapted  in  the  following  hours.  Some  316  000 
withdrawals for a total amount of around €40 million were made up to and including January 
10. Like in Cyprus, about €126 were withdrawn per operation. 

As  people  appeared  to  be  eager  to  exchange  their  national  cash  holdings  into  euro  and  to 
withdraw  euro  cash,  sizeable  queues  occurred  at  some  bank  branches.  Several  banks  had 
opened  special  counters  for  businesses  to  reduce  waiting  times.  However,  the  long  queues 
observed  even  a  week  after  the  changeover  demonstrated  that  the  measures  taken  were  not 
always sufficient. The banks were not fully prepared to handle such a large extra workload, 
despite the deployment of 600 cashiers.  

2.2.2.  Development of cash payments 

The  figures  on  cash  payments  in  euro  show  that  the  euro  has  quickly  become  Malta's  and 
Cyprus' currency. Its use in the first three days progressed much quicker than in the first wave 
(see Graph 1). In both countries the share of euro cash payments in shops reached 70% of all 
cash payments on 4 January, whereas in the 2002 changeover the share of cash payments in 
euro  did  not  go  over  70%  until  6  January.  More  than  90%  of  retailers  were  giving  change 
exclusively in euro as from 2 January 2008. 

Graph 1 

Cash payments in shops in euro only 

Cyprus 

Malta

Slovenia 2007

Average 2002

s
r
e
p
p
o
h
s
g
n
o
m
a
%

80

70

60

50

40

30

20

10

0

2/01/2008

3/01/2008

Date

4/01/2008

5/01/2008

Source: Commission services 

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As  a  consequence,  payments  in  the  legacy  currencies  dropped  swiftly  from  100%  on  29 
December 2007 to only 7-10% of all cash payments on 12 January 2008. On 20 January 2008 
(i.e. ten days before the end of the dual circulation period) only 3% of payments in shops were 
being made in the legacy currencies (see Graph 2). 

Graph 2 

Cash payments in shops in euro and legacy currencies

Malta € only

Cyprus € only

Maltese lira only

Cypriot pounds only

s
r
e
p
p
o
h
s
g
n
o
m
a
%

100

90

80

70

60

50

40

30

20

10

0

1/01/2008

3/01/2008

5/01/2008

7/01/2008

9/01/2008

11/01/2008

13/01/2008

15/01/2008

17/01/2008

19/01/2008

21/01/2008

23/01/2008

25/01/2008

Date

Source: Commission services 

Some  retailers  experienced  cash  shortages  during  the  first  few  days  as  many  citizens, 
discouraged  by  the  long  queues  in  the  banks,  used  the  shops  to  get  rid  of  the  legacy 
currencies.  As  a  result,  cashiers  needed  more  high-denomination  euro  coins  and  low-
denomination euro notes than originally planned.  

Some retailers and service providers in Malta (e.g. bus drivers) ran out of 1 and 2 euro cents, 
which were needed to give exact change. As the rounding up of prices was prohibited by law, 
unexpected  amounts  of  some  denominations  were  required  and  additional  orders  had  to  be 
placed by the Central Bank of Malta. 

The results of the Commission survey depicted in Graph 3 show that already 12 days after the 
changeover, more than 90% of both Maltese and Cypriots had only or mostly euro coins and 
banknotes in their wallets. The changeover was surprisingly fast considering that, compared 
to Slovenia, fewer people had acquired some euro cash before €-day. On 29 December 2007, 
7% of Cypriots had mostly euro notes while 8% had mostly euro coins. The respective figures 
for Malta are 4% and 12%. In Slovenia, the proportion reached 20% for euro notes and 27% 
for euro coins in the comparable period. 

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Graph 3 

Citizens with only and mostly euro notes/coins

Cyprus € notes

Malta € notes

Cyprus € coins

Malta € coins

l

n
o
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t
a
u
p
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p
+
5
1
e
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t
g
n
o
m
a
%

100

90

80
70

60

50

40

30
20

10

0

29/12/2007

2/01/2008

3/01/2008

4/01/2008

5/01/2008

9/01/2008

Date

12/01/2008

19/01/2008

26/01/2008

Source: Commission services 

Citizens very quickly became familiar with their new currency. By the beginning of February 
2008,  almost  90%  of  Maltese  and  95%  of  Cypriots  found  it  very  easy  or  quite  easy  to 
distinguish  the  euro  banknotes.  More  than  half  of  Maltese  citizens  (53%)  calculated  prices 
most often in euro when doing day-to-day shopping and some 40% did so even when making 
exceptional  purchases.  Cypriots  were  still  counting  most  often  in  pounds  when  purchasing 
goods  of  greater  value,  but  they  were  thinking  mostly  in  euro  when  doing  their  day-to-day 
shopping. 5 

2.2.3.  Recovery of legacy currencies 

The  legacy  currencies  started  to  return  during  the  last  months  of  2007.  On  1  January  2008, 
some 40% of the value of notes in circulation had already been recovered in Malta and some 
10% in Cyprus. The process accelerated in the first days of January, with a daily withdrawal 
of 5-6% of the volume of outstanding legacy banknotes in Cyprus and around 3% in Malta. 

Some 50% of the value of Cypriot pound banknotes and Maltese lira remaining in circulation 
on 1 January was recovered by 15 January and 17 January respectively6. In both countries the 
pace of the recovery was faster than in 2002, where the 50% mark was not exceeded until 21 
January. Some 25% of the Cypriot and 35% of the Maltese legacy cash was still in circulation 
by the end of January, a result quite similar to the one observed in 2002. 7 

Overall,  no  problems  were  reported  by  cash-transport  companies  or  by  banks  regarding  the 
collection and storage of the legacy currency.  

5 
6 

7 

Flash Eurobarometer 222 for Cyprus and Flash Eurobarometer 223 for Malta, both February 2008 
The  total  value  of  Cypriot  pound  banknotes  and  coins  in  circulation  on  1  January  2008  amounted  to 
€994  million  and  €66  million  respectively.  The  corresponding  figures  for  Maltese  lira  were  €635 
million and €44 million. 
The Central Bank of Cyprus will continue to exchange legacy banknotes until ten years after €-day, and 
coins  until  two  years  after  this  date,  free  of  charge.  The  Central  Bank  of  Malta  will  continue  to 
exchange Maltese lira coins and notes until 2 February 2010 and 1 February 2018 respectively. 

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Graph 4 

Evolution of legacy currency banknotes in circulation 
(as a % of amount outstanding on 1 January 2008)

Malta

Cyprus

n

i
s
e
t
o
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y
c
n
e
r
r
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y
c
a
g
e
l

f
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%

n
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a
l
u
c
r
i
c

100
90
80
70
60
50
40
30
20
10
0

1/01/2008

3/01/2008

5/01/2008

7/01/2008

9/01/2008

11/01/2008

13/01/2008

15/01/2008

17/01/2008

19/01/2008

21/01/2008

23/01/2008

25/01/2008

27/01/2008

29/01/2008

31/01/2008

Date

Source: ECB 

The cash changeover in Cyprus and Malta confirms that a short dual circulation period 
is technically feasible, even for countries with a very high amount of cash in circulation.  

Although the banks took specific measures to cope with the large extra workload, it was 
not  always  sufficient  to  avoid  queues  during  the  first  weeks  after  the  changeover.  The 
return of hoarded legacy currencies prior  to €-day, extensive sub-frontloading and the 
use  of  non-cash  means  of  payment  should  also  be  heavily  promoted  before  each 
changeover to alleviate the transition. 

3. 

THE CONVERSION OF FINANCIAL AND ADMINISTRATIVE SYSTEMS 

In  line  with  the  big-bang  changeover  scenario  chosen  by  both  Cyprus  and  Malta,  all 
administrative  and  financial  systems  were  running  exclusively  in  their  respective  national 
currencies up to 31 December 2007 and switched over to the euro on 1 January 2008. 

According  to  all  available  data,  the  Cypriot  and  Maltese  public  administrations  and 
enterprises  managed  to  prepare  themselves  adequately  and  in  good  time.  Experts  from  both 
the 
Member  States  participated 
Commission/OLAF,  ECB  and  Europol  with  a  view  to  making  them  familiar  with  the 
procedures and methods designed to protect euro against counterfeiting. 
Nearly all the enterprises surveyed in both countries in September 20078 had been informed 
about the changeover and had begun preparations.  

training  actions  organised  by 

information  and 

in 

8 

Flash Eurobarometer 218 (September 2007) for Cyprus, NECC Business Survey (September 2007) for 
Malta 

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No major technical problems were reported by the banks or retailers during the changeover. 
The changeover of ATMs, card payment systems and bank accounts went equally smoothly.  

4. 

PRICE DEVELOPMENTS 

4.1.  Price monitoring during the changeover 

The  results  of  the  Eurobarometer  survey  on  public  perception  of  the  euro  conducted  in 
September 2007 showed that more than three quarters of citizens in both Cyprus and Malta 
were afraid of abuses and cheating on prices during the changeover. To address these fears, 
both countries put in place a comprehensive set of measures. 
In  Cyprus,  the  correct  dual  display  of  prices9  was  closely  monitored  by  five  Euro 
Observatories and the prices of frequently purchased goods were monitored by the Ministry of 
Finance and consumer associations. The Fair Pricing Code, subscribed by 7 579 businesses, 
was apparently successful in limiting price increases as most cases of abusive practices were 
detected among the businesses which had not signed it. The Euro Observatories contacted the 
retailers and service providers whose prices had increased abnormally (mainly barber shops, 
hairdressers,  kebab  shops,  private  car  parks,  doctors,  cafes  and  cinemas)  to  investigate  the 
reasons, and published on the internet the names of those who had abused the changeover.  

In  Malta,  the  price  situation  is  monitored  by  the  National  Euro  Changeover  Committee 
(NECC)10, which has also concluded a FAIR initiative with more than 7 900 businesses. 

Malta is the first country where smoothing up of prices upon conversion to the euro has been 
prohibited by law11. Each report of rounding of prices lodged on the euro line or sent by email 
from citizens is immediately investigated. During the first seven weeks of the year, some 107 
shop owners and other operators (including many doctors and some car park owners) revised 
prices downwards following a NECC warning that they had unfairly hiked up fees or prices 
because  of  the  euro.  Fines  for  unjustified  price  increases  were  imposed  on  three  businesses 
while some 96 complaints proved to be unjustified. 

4.2.  Price trends 

Inflationary  developments  in  Cyprus  and  Malta  in  2007  were  largely  influenced  by  global 
factors.  Relatively  low  inflation  in  the  first  part  of  the  year  was  to  a  large  extent  due  to 
favourable base effects from energy prices, which have been reversed as of August-September 
2007. Thus, in the second part of 2007, unfavourable base effects from energy prices coupled 
with rising commodities prices have contributed to the upward trend in inflation. 

Annual inflation in Cyprus averaged 2.2% in 2007, with values being low in the first half of 
the year and high in the second half. The ascendant trend of HICP inflation in 2007 continued 

9 

10 
11 

The dual display of prices in Cyprus pounds and in euro became mandatory on 1 September 2007 and 
will continue to be mandatory until 30 September 2008. In Malta the dual display of prices in Maltese 
lira and in euro became mandatory on 11 July 2007 and is obligatory until 30 June 2008.  
The price monitoring will continue until June 2008 
According to the Maltese Euro Adoption Act (CAP.485), the smoothing of monetary amounts is only 
permitted  when  it  results  in  a  monetary  amount  in  euro  which  is  less  than  the  equivalent  monetary 
amount  in  Maltese  lira  prior  to  conversion.  In  the  case  of  monetary  amounts  forming  part  of  a 
continuum for the purpose of establishing threshold values, the conversion of such amounts into euro 
may,  provided  this  is  necessary,  be  smoothened  to  ensure  continuity  in  the  threshold  values  of 
neighbouring brackets to distinctly delimit the bracket in a threshold. Where exceptional circumstances 
motivated by technical constraints so dictate, and after an application is made to the Euro Observatory, 
a  concession  may  be  granted  by  the  Euro  Observatory  allowing  smoothing  to  take  place  in  other 
manner, under such terms and conditions as the Euro Observatory may determine.  

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in  the  first  month  of  2008.  Thus,  annual  inflation  stood  at  4.7%  in  February  2008,  up  from 
4.1% in January 2008. Annual inflation in Malta averaged 0.7% in 2007, while inflation was 
very  volatile:  a  deceleration  in  the  first  part  of  the  year  was  followed  by  an  acceleration  of 
inflation in the second half of the year. In February, the year-on-year figure stood at 4.0 %, up 
from 3.8% in January 2008. 

Eurostat's provisional assessment (Euro Changeover and Inflation in Cyprus and Malta, April 
2008)  is  that  in  both  Cyprus  and  Malta  the  total  (one-off)  impact  of  the  changeover  on 
headline  inflation,  during  and  immediately  after  the  changeover,  was  probably  between  0.2 
and  0.3  percentage  points.  These  estimates  for  Cyprus  and  Malta  are  in  line  with  the 
experience of the first-wave changeover in 2002 and of Slovenia in 2007. Eurostat considers 
therefore  that  the  euro  changeover  effects  in  both  Cyprus  and  Malta  seem  to  have  been 
noticeable but were not of a magnitude that could drive headline inflation in either country. 
Eurostat will update its conclusions concerning the impact of the changeover in Cyprus and 
Malta if necessary when further information becomes available. 

4.3.  Price perceptions 

Data from the Commission Services show that perceived inflation has generally followed the 
trend  in  HICP  inflation  in  Cyprus  and  Malta  in  the  last  few  years.  In  Cyprus,  perceived 
inflation has followed closely the path of headline inflation, as both have had an upward trend 
since early 2007. In Malta, inflation perceptions have also tracked HICP inflation though less 
closely, as the sharp fall in HICP inflation in April was not matched by a corresponding fall in 
perceived inflation. 

Data  available  since  the  euro  changeover  show  that  inflation  perceptions  have  not  been 
initially  affected.  Notwithstanding  increasing  HICP  inflation,  perceived  inflation  in  Cyprus 
decreased  to  42.3  pp  in  January  2008,  from  45.7  pp  in  December  last  year,  and  perceived 
inflation in Malta stood at 40.5 pp in January 2008, down from 51.0 pp in the previous month. 
It  thus  seems  that  neither  the  acceleration  in  HICP  inflation  nor  the  possible  impact  of  the 
euro's  introduction  on  prices  have  affected  consumers'  perceptions  about  inflation.  Other 
factors, such as the information campaigns, might have helped to reduce inflation perceptions 
in the two newest euro-area Member States. For Malta, it is also very likely that this is linked 
to the prohibition on smoothing up of prices and rigorous enforcement thereof.  

Perceived inflation Cyprus
HICP inflation Cyprus

60

50

40

30

20

10

0

Graph 5 

4.5

4

3.5

3

2.5

2

1.5

1

0.5

0

80

70

60

50

40

30

20

10

0

Perceived inflation Malta
HICP inflation Malta

5

4

3

2

1

0

-1

-2

Jan-06 Apr-06

Jul-06 Oct-06 Jan-07 Apr-07

Jul-07 Oct-07 Jan-08

Jan-06 Apr-06

Jul-06 Oct-06 Jan-07 Apr-07

Jul-07 Oct-07 Jan-08

However,  the  picture  has  changed  partially  in  February  2008.  While  in  Malta  inflation 
perceptions  have  continued  to  decrease  and  are  down  to  34.0  pp  from  40.5  pp  in  January 
2008, in Cyprus perceived inflation has gone up to 48.2 pp from 42.3 pp in January 2008. It 
would,  however,  be  premature  to  draw  conclusions  on  further  developments  in  inflation 
perceptions in Cyprus or Malta.  

Source: Commission services 

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Cyprus and Malta have been experiencing inflationary pressures since mid-2007, mainly 
on  account  of  global  inflation  acceleration  in  the  subcategories  of  energy  and  food.  At 
the same time, inflation perceptions have generally followed the trend in HICP inflation. 
In  the  first  month  after  the  euro  changeover,  inflation  perceptions  were  kept  in  check 
although  measured  inflation  accelerated.  In  February,  perceived  inflation  in  Cyprus 
picked up while in Malta it went down further. 

5. 

COMMUNICATION CAMPAIGN ON THE CHANGEOVER AND PUBLIC PERCEPTION 

The  Cypriot  euro  campaign  and  the  national  euro  website  (www.euro.cy)  were  officially 
launched on 31 May 2006. The mass media campaign did not start until spring 2007, partly 
owing to the tendering problems for the selection of a public relations agency. The campaign 
focused  on  SMEs,  rural  areas  and  vulnerable  groups.  The  main  messages  dealt  with  the 
timeline for the changeover, the benefits of the euro, the exchange rate and fears of unjustified 
price  increases.  The  main  channels  used  were  radio  (10 225  spots),  television  (3 260  spots) 
and  printed  advertising  (206  magazine  and  241  newspaper  adverts).  'Eurobusses'  travelled 
around the island to inform people in remote areas. Mindful of the continuing low support for 
the  euro,  the  Cypriot  authorities  increased  their  communication  efforts  in  the  last  months, 
mainly  targeting  the  vulnerable  groups.  The  European  Commission  supported  a  number  of 
activities  including  the  display  of  the  newly  developed  euro  exhibition,  a  model  conference 
and a seminar for journalists, a national school competition and the production of promotional 
material.  

The  information  campaign  appears  to  have  yielded  very  good  results.  According  to  the 
February  2008  Eurobarometer,  9  out  of  10  Cypriots  felt  very  well  or  quite  well  informed 
about  the  changeover.  The  media  were  the  principal  information  source  for  most  citizens 
(61%), followed by commercial banks (16%) and the Central Bank of Cyprus (10%). People 
were also very satisfied (49%) or quite satisfied (44%) with the information provided by the 
national  authorities  regarding  the  euro.  Eight  out  of  ten  Cypriots  received  a  euro  calculator 
and  found  it  very  useful.  In  February  2008  some  80%  of  the  people  surveyed  by  the 
Eurobarometer still wished to have more information on fair rounding and correct pricing, on 
the social, economic and political implications of the euro and on the security features of the 
euro.  

The initially low support for the euro in Malta was reversed by a comprehensive multiphase 
campaign, first focusing on awareness and on the benefits of the euro, then on the practical 
aspects of the changeover. It provided a mix of mass media activities (4 750 TV spots, 20 125 
radio spots and 1 465 newspaper and magazine adverts) and person-to-person communication 
activities (a euro telephone line, contacts with the press, NGOs, local councils and parishes, 
consumer and business organisations, schools and vulnerable groups). People's fear of unfair 
practices  was  regularly  tackled  during  the  information  campaign.  A  dedicated  website 
(www.euro.gov.mt) supported all actions and methodically listed all euro-related information.  

The  European  Commission  supported,  under  the  umbrella  of  a  Partnership  Agreement,  two 
euro exhibitions and a euro conference, a general public and a dual circulation survey, and a 
national school competition.  

The  long  and  intensive  information  campaign  appears  to  have  yielded  very  good  results. 
According to  the February 2008 Eurobarometer, 9 out  of  10  Maltese  felt  very  well  or  quite 
well  informed  about  the  changeover.  Media  were  the  prime  source  of  information  for  the 

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majority of people (68%), with television being regarded as the most efficient source. The TV 
spots  were  seen  by  87%,  of  which  more  than  90%  found  them  quite  or  very  useful.  In 
February 2008 56% of the people surveyed by the Eurobarometer still wished to have more 
information on fair rounding and correct pricing, and on the security features of the euro. 

The changeover and related information campaign were perceived in both countries as 
smooth  and  efficient.  This  shows 
that  a  well-managed  and  comprehensive 
communication  campaign  can  boost  public  support  for  the  euro.  Furthermore,  the 
Maltese  campaign  has  shown  that  fears  as  regards  changeover-related  price  increases 
can be successfully addressed through well-targeted and intense information activities. 

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