cyprus’s road to euro adoption presentations to secondary school students
TRANSCRIPT
Cyprus’s road to euro adoption
Presentations to secondary school students
Contents 1. Money: functions and forms
2. The Central Bank of Cyprus
3. Cyprus’s road to euro adoption
4. The withdrawal of the Cyprus pound and the adoption of the euro
5. Euro notes and coins
1. MONEY:
FUNCTIONS AND FORMS
• Notes
• Coins
• Deposits
Money: functions and forms
What is money?
• Before the appearance of money, people exchanged goods and services with other goods and services (barter)
• Significant transaction costs but also practical constraints (e.g. bread, shoes, haircut)
Forms of money
Money: functions and forms
Functions of money:
• Medium of exchange (i.e. means of payment)-enables convenient exchange of goods and services
• Store of value (or financial asset)-allows wealth to be accumulated and saved
• Unit of account (i.e. measure of value)-used for the calculation ofpayments and prices
Money: functions and forms
2. THE CENTRAL BANK OF CYPRUS
• The Central Bank of Cyprus (CBC) was established in 1963, shortly after Cyprus’s independence
The Central Bank of Cyprus
• It is the institution which issues notes and coins
To ensure price stability (low inflation) so that money maintains its value over time
The primary aim of the Central Bank of Cyprus
The Central Bank of Cyprus
It uses:
• monetary policy
and
• exchange rate policy
How does the CBC ensure price stability?
The Central Bank of Cyprus
Monetary policy:-excessive increase in supply of money leads to rise in prices, thus by setting the interest rate (price of money) the Bank attempts to affect the quantity of money (supply of money) and prices
Exchange rate policy: -maintains the value of the Cyprus pound against other currencies (exchange rate)
How does the CBC ensure price stability?
The Central Bank of Cyprus
• Management of the Republic’s currency reserves
• Bank regulation and supervision
• Banker to the government
• Management of the issue and circulation of currency
Other main responsibilities of the CBC:
The Central Bank of Cyprus
3. CYPRUS’S ROAD TO EURO ADOPTION
•Belgium
•Germany
•Greece
•Spain
•France
•Ireland
•Italy
•Luxembourg
•The Netherlands
•Austria
•Portugal
•Finland
The euro area comprises 13 countries of the European Union which have adopted the euro:
Cyprus’s road to euro adoption
•Slovenia
1 May 2004: Accession of Cyprus to theEuropean Union
1 January 2008: • Target date for the adoption of the euro• Provided we satisfy the necessary conditions, i.e. the convergence criteria (better known as the Maastricht criteria)
Cyprus’s road to euro adoption
• The European Central Bank (ECB) is the central bank for the euro area
• The basic task of the ECB is the maintenance of price stability in the euro area
Cyprus’s road to euro adoption
• Price stability
• Easier comparison of prices across euro area countries, since prices will be expressed in the same currency
• Elimination of exchange rate risks for businesses for transactions in euro
• No currency conversion costs (and no commissions)
• Travelling to euro area countries (and to countries outside the euro area) will be easier
The benefits of euro adoption for the citizens of Cyprus:
Cyprus’s road to euro adoption
4. THE WITHDRAWAL OF THE CYPRUS POUND AND THE ADOPTION OF THE
EURO
Dual display of prices:
What do we mean by this? The price of each product will be displayed simultaneously in Cyprus pounds and in euro.
For how long?From September 2007 until June 2008.
Will it be compulsory for businesses?Yes, the dual display of prices will be compulsory by law for the above period. Some shops may implement it voluntarily for a longer period.
The withdrawal of the Cyprus pound and the adoption of the euro
Period of parallel circulation: January 2008
Payments by checks and cards, withdrawals from
ATMs in euro
Change will only be given in
euro
Cash in pounds will be an
acceptable form of payment
The withdrawal of the Cyprus pound and the adoption of the euro
• Bank accounts• Loans• Wages and pensions• Subsidies and other payments
No changes in value, just changes in numbers
On 1 January 2008, automatic conversion, free of charge, of:
The withdrawal of the Cyprus pound and the adoption of the euro
• Completion of the changeover to the euro
• Circulation of the euro only
• The Cyprus pound will not be accepted in transactions.
1 February 2008
The withdrawal of the Cyprus pound and the adoption of the euro
How will the change be made from pounds to the euro?
• Banks and cooperative credit societies will continue to convert Cyprus pound notes and coins into euro until 30 June 2008, free of charge
• Central Bank will continue to exchange notes for euro until 2017 and coins until 2009
Examples of conversion and rounding
With a hypothetical conversion rate of €1 = £0,585274
• To convert Cyprus pounds into euro, we divide the amount in Cyprus pounds by the conversion rate using all six decimals:
e.g. £10/0,585274 = €17,086014 which is rounded to €17,09
• To convert euro into Cyprus pounds multiply the amount in euro with the conversion rate:
e.g. € 40 x 0,585274 = £23,410960 which is rounded to £23,41
5. EURO NOTES AND COINS
Euro notes
Appearance of euro notes (front view)
Appearance of euro notes (rear view)
Euro notes
Appearance of euro coins (common side)
Irrespective of the national side design, euro coins (as well as euro notes) circulate in all the euro area countries: their acceptance as a means of payment is compulsory
Euro coins
National side of euro coins (Cyprus): Chosen themes
Civilization (Idol from Pomos)
History (Ship of Kyrenia)
Nature (Mouflon)
Euro coins
Further informationNational web page for the eurowww.euro.cy
Central Bank of Cypruswww.centralbank.gov.cy
European Central Bankhttp://www.ecb.eu/http://www.ecb.eu/bc/html/index.el.html
European Commission, Directorate General for Economic and Financial Affairshttp://ec.europa.eu/economy_finance/index_en.htm
European Commissionhttp://ec.europa.eu/
The eurohttp://ec.europa.eu/euro/
Thank you for attending today’s presentation
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