Cyprus and Malta Adopt the Euro

Cyprus and Malta became the latest economies to embrace the Euro, increasing membership of the European common currency to 15 and giving the two island nations a say in shaping European Central Bank policy.

The two Mediterranean islands reduced budget deficits and borrowing costs to prepare for the Euro, attracting international investment and tourism that has spurred economic growth. Entry will also earn the countries seats on the ECB's governing council, which sets interest rates.

Both Cyprus and Malta are small, open and thriving economies for whom having a stable and widely used currency will provide a major advantage.

Cyprus and Malta are respectively the wealthiest and smallest of the 10 mostly eastern European nations that joined the European Union four years ago. They become the first to adopt the euro since Slovenia a year ago.

The currency today celebrates its ninth birthday, driving an economy with a gross domestic product of 8.8 trillion Euros, 2 trillion Euros more than at its inception and 440 times the combined economies of Cyprus and Malta.

While Cyprus's 15 billion-Euro and Malta's 5 billion-Euro economies will barely lift the region's output, membership in the single currency has financial and political ramifications.

The ECB's governing council grows to 21 from 19 with the arrival of Bank of Cyprus and the Maltese Central Bank.

Cyprus and Malta each strengthened their economies to prepare for the Euro and both cut interest rates last month to bring their benchmarks in line with the 4 percent of the ECB.

Growth in Cyprus averaged more than 3.5 percent a year for more than a decade, inflation slowed from 4 percent in 2003 and the government's now running a budget surplus after a deficit of 6.2 percent of GDP in 2003.

Malta's economy has grown every year since 2003 and had the EU's lowest inflation rate in 2007. The EU in 2007 removed Malta from surveillance it had been under for its budget deficit.