EU President Jose Manuel Barroso yesterday urged Cypriots to remain vigilant against unjustified price hikes in the changeover to the euro.
During his visit to the island to mark the adoption of the euro and to take part in a series of celebratory events with other top ranking EU officials, Barroso said: “Consumers must get their full share of the benefits the euro brings – they must not be hit in the pocket.”
Barroso said the euro would bring significant and concrete advantages to Cyprus’ citizens.
He said it had already delivered low and stable inflation, a pre-condition for sustained and job-creating growth.
In the early 1990s, he said, some euro area countries were still suffering from double-digit inflation. Cyprus was burdened by a yo-yoing inflation rate throughout the 1980s and 1990s, Barroso said.
“Thanks to the credible and effective policy carried out by the European Central Bank, those levels of inflation no longer exist, despite justified current concerns over rising oil and commodity prices,” he said.
For consumers, the euro had increased price transparency, which meant lower prices, and had made travelling within the euro area much easier. “This advantage is slowly extending to the whole world: it is now as simple and convenient to travel around the world with euros in your pocket as it is with US dollars,” he said.
European Central Bank president Jean-Claude Trichet also said the conversion of prices into euros “should not be taken as an opportunity to make unjustified price rises”.
“This is especially important considering that food and energy prices are already exerting upward pressure on inflation in the euro area as a whole. Against this background, measures taken by the Cypriot government together with retailers, importers and manufacturers in order to avoid such adjustments are commendable,” said Trichet during an event at the Central Bank.
He also touted outlined the benefits the euro would bring to Cyprus.
“The euro offers a credible framework for price stability in an environment characterised by the absence of exchange rate uncertainty within the euro area. Cyprus will benefit from the stability-oriented policy of the ECB, which will help anchor inflation expectations,” Trichet said.
“Furthermore, for a small open economy such as Cyprus, the euro adoption provides protection against international financial turmoil, which often has a disproportionate effect on smaller economies.”
Both Barroso and Trichet commended Cyprus for qualifying for entry to the eurozone only less than four years after accession.
“Such a feat didn’t happen by itself, of course. The adoption of the euro is a historic step crowning years of hard work, a firm commitment to sound economic policies and bold reform,” Barroso said. “In recommending Cyprus’ acceptance, the Commission was absolutely confident that Cyprus had done so. I congratulate Cyprus. Cyprus fully deserves membership. And I am confident that your efforts will be fully rewarded economically.”
Trichet said Cyprus had made significant progress in both nominal and real convergence, owing to successful policies such as well-managed monetary and exchange rate policies combined with a range of structural reforms.
“Today’s euro celebrations are the result of the successful macroeconomic policies that the Cypriot authorities have pursued in recent years,” he added.
In his address, President Tassos Papadopoulos said that for the Cypriot citizen, the beginning of the New Year signalled the beginning of a new, promising era.
“The introduction of the euro as our new official currency has brought about many well-founded hopes for a better way of life, a better society, a better future,” he said
“Our people believe in the vindication of these hopes because they trust the euro, they trust the binding character and the significance of the messages associated with the introduction of the euro in an EU member state.”
