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Cyprus’s road to the euro

Cyprus’s road to the euro. Presentation to secondary school students. Contents. Money: functions and forms The Central Bank of Cyprus Cyprus’s road to the euro The withdrawal of the Cyprus pound and the adoption of the euro 5. Euro notes and coins. 1. MONEY: FUNCTIONS AND FORMS.

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Cyprus’s road to the euro

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  1. Cyprus’s road to the euro Presentation to secondary school students

  2. Contents • Money: functions and forms • The Central Bank of Cyprus • Cyprus’s road to the euro • The withdrawal of the Cyprus pound and the adoption of the euro • 5. Euro notes and coins

  3. 1. MONEY: FUNCTIONS AND FORMS

  4. Money: functions and forms What is money? • Notes • Coins • Deposits

  5. Money: functions and forms Forms of 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)

  6. 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 of • payments and prices

  7. 2. THE CENTRAL BANK OF CYPRUS

  8. Central Bank of Cyprus • TheCentral Bank of Cyprus (CBC)was established in 1963, shortly after Cyprus’s independence • It is the institution which issuesnotes and coins

  9. Central Bank of Cyprus The primary objective of the CBC To ensure price stability (low inflation) so that money maintains its value over time

  10. Central Bank of Cyprus How does the CBC ensure price stability? • It uses: • monetary policy • and • exchange rate policy

  11. Central Bank of Cyprus How does the CBC ensure price stability? Monetary policy: -excessive increase in supply of money leads to rise in prices, thus by setting the interest rate (price of money) the CBC 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)

  12. Central Bank of Cyprus Other main responsibilities of the CBC: • Management of the Republic’s currency reserves • Bank regulation and supervision • Banker to the government • Management of the issue and circulation of currency

  13. 3. CYPRUS’S ROAD TO THE EURO

  14. Cyprus’s road to the euro The euro area comprises 13 countries of the European Union which have adopted the euro: • Austria • Belgium • Finland • France • Germany • Greece • Ireland • Italy • Luxembourg • Netherlands, The • Portugal • Slovenia • Spain

  15. Cyprus’s road to the euro 1 May 2004: Accession of Cyprus to the European Union 1 January 2008: Cyprus adopts the euro!!!

  16. Cyprus’s road to the euro • TheEuropean Central Bank (ECB)is the central bank for the euro area • Thebasic taskof the ECB is the maintenance of price stability in the euro area

  17. Cyprus’s road to the euro The benefits of the euro for the citizens of Cyprus: • 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

  18. 4. THE WITHDRAWAL OF THE CYPRUS POUND AND THE ADOPTION OF THE EURO

  19. 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 1 September 2007 until 30 September 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.

  20. Payments by checks and cards, withdrawals from ATMs in euro The withdrawal of the Cyprus pound and the adoption of the euro Period of parallel circulation: January 2008 Cash in pounds will be an acceptable form of payment Change will only be given in euro

  21. The withdrawal of the Cyprus pound and the adoption of the euro On 1 January 2008, automatic conversion, free of charge, of: • Bank accounts • Loans • Wages and pensions • Subsidies and other payments No changes in value, just changes in numbers

  22. The withdrawal of the Cyprus pound and the adoption of the euro Preparation and distribution of starter packs: • For the public (to facilitate small transactions) small packages of 47 coins worth around £10. • For businesses (to facilitate the giving of change in euro) packages containing 615 coins worth around £100. As of 3 December 2007, these starter packs will be available for purchase from banks, cooperative credit institutions and the CBC.

  23. The withdrawal of the Cyprus pound and the adoption of the euro 1 February 2008 • Completion of the changeover to the euro • Circulation of euro banknotes and coins only • The Cyprus pound will not be accepted in transactions.

  24. How will the change be made from pounds to euro? • Banksand cooperative credit institutions will continue to convert Cyprus pound notes and coins into euro until 30 June 2008, free of charge: -up to £1.000 for notes per person per transaction -up to £50 for coins per person per transaction • CBCwill continue to exchange notes for euro until 2017 and coins until 2009

  25. Examples of conversion and rounding The conversion rate is €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

  26. 5. EURO NOTES AND COINS

  27. Euro notes Appearance of euro notes (front view)

  28. Euro notes Appearance ofeuro notes (reverse side)

  29. Euro coins Appearance of euro coins (common side) Irrespective of the national side design, euro coins (as well as euro notes) circulate in all euro area countries: their acceptance as a means of payment is compulsory

  30. Euro coins For Cyprus there are 3 designs for the national side of euro coins:-for large value denominations (€2, €1): the idol of Pomos-for middle value denominations (50,20,10 cent): the ship of Kyrenia-for small value denominations (5,2,1 cent): the moufflon

  31. Further information For any queries call the free line: 8000 2008

  32. Further information National web page for the euro www.euro.cy Central Bank of Cyprus www.centralbank.gov.cy European Central Bank http://www.ecb.eu/ http://www.ecb.eu/bc/html/index.el.html European Commission, Directorate General for Economic and Financial Affairs http://ec.europa.eu/economy_finance/index_en.htm European Commission http://ec.europa.eu/ The euro http://ec.europa.eu/euro/

  33. Thank you for attending today’s presentationA tour of the exhibition will followPlease remain in your seats and wait for further instructions

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