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Tiny Cyprus, Malta join euro, as tough expansion lies ahead

Tiny Cyprus, Malta join euro, as tough expansion lies ahead

EU newcomers Cyprus and Malta start using the euro at midnight Monday, tying two tiny countries on the edge of Europe to its core institutions _ but raising consumer fears of higher prices.
The Mediterranean islands, both former British colonies, scrap the Cyprus pound and Maltese lira to bring the number of countries using the shared currency to 15. Politicians will ceremonially withdraw euros from automatic teller machines after midnight.
Relatively prosperous Cyprus and Malta regard the arrival of the euro more as a political achievement linking them more closely to the EU than as an economic step forward.
Cyprus President Tassos Papadopoulos, facing a close election in February, said adopting the share currency could help break a 33-year-old stalemate over reuniting the island. Cyprus is divided into a Greek Cypriot-controlled south which joined the EU in 2004, and a Turkish-controlled north, which is not recognized internationally.
"For us who wanted and sought a settlement that truly reunifies Cyprus, its economy, territory, institutions and society, our entry into the eurozone fills us with optimism," Papadopoulos said Friday.
"After this happy development, any settlement must foresee a unified economy, financial institutions and systems."
Cyprus' euro coins will be inscribed in both Greek and Turkish, with designs that include the mouflon or wild sheep, a national symbol of the island which thrives in the United Nations-patrolled buffer zone. Malta's euro1 and euro2 coins will bear the Maltese cross.
Combined, the economies of Cyprus and Malta account for less than 0.3 percent of the euro zone's gross domestic product. Both easily met the requirements for limiting deficits and inflation, but euro adoption has also brought a measure of public skepticism.
A European Union poll found 74 percent of Cypriots and 65 percent of Maltese believe the euro will cause an increase in prices. The September survey also found 44 percent of people in Cyprus and 33 percent in Malta would be sorry to see their national currencies being replaced _ compared with 19 percent of respondents in Romania, which is still years away from joining.
"I'm afraid it will have a negative impact, especially in terms of prices. They're going to trick us. Everything is getting more expensive and salaries aren't keeping pace," said Charis Hadjoullis, a 37-year-old Greek Cypriot father of three.
"The Cypriot middle class was relatively well off, able to afford a couple of cars per family and some other amenities, but it's going to get tougher for them. Time will tell, I hope I'm wrong."
The 12 countries which have joined the EU since 2004 are obliged to eventually join the euro. Slovenia was the first to meet the targets and joined on Jan. 1, 2007. Of the nine remaining countries, only four have linked their currencies to the euro in an exchange rate trading band, a key step toward membership.
The new members have set targets to join between 2009 and 2014.
Current members of the euro zone are Austria, Belgium, The Netherlands, Finland, France, Germany, Ireland, Italy, Luxembourg, Portugal, Spain, Greece and Slovenia.
New EU members Slovakia, Estonia, Latvia and Lituania have joined the exchange rate mechanism; others with farther to go before adopting the euro are: Bulgaria, Hungary, the Czech Republic, Poland and Romania.