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Eurozone expands into 2008 - 2 January 2008

The arrival of 2008 has also heralded a new era in Cyprus and Malta, as both countries have now joined the Eurozone as the newest member countries. This change should have an impact not only for people who already own a property there, but also for people buying in the next few months.

Joining the single European currency has proved to be a boon for many of the other countries who have recently become members, and in general these countries have seen an upwards adjustment in property prices to account for the change in exchange rates.

This is something of a mysterious rise in property values, and some suspect that it is manufactured to a degree by developers and agents, as the outgoing currency is ‘pegged’ to Euro values for at least 12 months prior to joining fully. Pegging is a means of bringing the economy of a member state into line with the Euro system, but fixing the exchange rate, interest rates and other variables to those used in the Eurozone. This is a form of partial conversion to the Euro.

That is not to say that the property markets are the only ones making the most of the change, as most retailers of goods from cans of beans to cars make the most of the change in currency to ‘maximise’ prices charged across the board.

More significantly for buyers of property in both Cyprus and Malta in the next few months is the increased stability that the Euro can bring to economies, as well as the political clout that comes with gaining a voice on the board of the European Central Bank.

Another important factor to consider is that many of the new member states of the EU have pegged their own currencies to the rates of the Euro, but none have yet announced themselves ready or in an economic state to join the Euro fully. Some commentators believe that these countries could be better off ditching the peg to allow their economies to grow and develop as they need to in order to allow them to join the Eurozone.

The significance of this is that it may be some time before we see any other countries adopting the Euro.

 

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