EUROZONE : MALTA AND CYPRUS: SYMBOLIC ANDaPROBLEMATIC ENLARGEMENT.

The latest enlargement of the eurozone to include Malta and Cyprus, on 1 January 2008, has just reminded the birds of ill omen that the euro, on the dawn of its tenth anniversary, is not only bent on enduring but has, as its final goal, the integration of all the enlargement countries. The integration of the two Mediterranean island states, however, will only have a marginal impact on the eurozone's economy. At the domestic level, the advantages linked to the scrapping of the Cypriot pound and the Maltese lire will be more noticeable. The euro will favour not only monetary stability but will further anchor the two islands' economies to the European Union. Cyprus will perhaps gain more on a diplomatic level. The single currency will certainly widen the divide that has separated the Greek part from the Turkish-speaking region for 34 years. But it is also a new beginning for attempts to reconcile the two communities.

The EU's Monetary and Economic Affairs Commissioner Joaquin Almunia indicated that the two countries' entrance into the eurozone should not be considered as an end in itself. He (again) warned the two islands against any relaxation in their economic policies. In addition to the risk of runaway inflation - which will be monitored closely in the coming weeks following Slovenia's "bad example" - the sustainability of public finances considering the ageing population remains the number one challenge for Cyprus (high risk) and Malta (medium...