"Club Med" in vogue

Europe's common currency extends its Mediterranean reach when Cyprus and Malta surrender their currencies and adopt the euro but the increase in membership is making ripples rather than waves, writes Brian Love in Paris for Reuters:

What Germany's once mighty central bank feared 10 years ago -- that the euro would become a "Club Med" currency -- will be closer to the truth with their arrival in the group, but not in the ill-disciplined sense the Bundesbank so disdained. While the change will surely be significant for the peoples of two island economies that will switch overnight to euros from Cypriot pounds and Maltese lira, it makes little difference to the euro zone's weight in the world.

Malta's economic output is less than 0.1 percent of the euro zone overall and Cyprus's gross domestic product is less than 0.2 percent of the bloc's total GDP, according to GDP data published by Eurostat, the EU statistics office. "The increase from 13 to 15 will not make a big difference, especially given the nature of the newcomers." says Daniel Gros, an economist and director of the Centre for European Policy Studies, a think-tank in Brussels.

As for erstwhile Bundesbank warnings that the credibility of the euro would be at risk from slipshod public finances, notably in countries on Europe's Mediterranean rim, Gros sees no reason to fret over either of the newcomers even if the European Commission says Malta in particular needs to continue its efforts to reduce a still high deficit. "What fear? There's little danger for the euro zone," says Gros..

Now it's the turn of Nicosia, which is three times closer to Baghdad than to Brussels, and Malta capital Valletta, which is as close to Cairo as it is to Frankfurt. Insiders and observers are equally confident that life will be more or less as manageable institutionally as before, be it at the European Central Bank or the Eurogroup, the forum where finance ministers confer on economic strategy...