Paying for expansion

Prices in Malta and Cyprus are likely to rise as a result of the two countries' adoption of the euro, say currency experts according to Charles Starmer-Smith writing in The Telegraph:

Last week the eurozone - the European countries that use the euro - increased to 15 members as the two Mediterranean islands, popular destinations for Telegraph readers, joined the common currency group. Costs for holidaymakers in Malta and Cyprus, which until now have been based respectively on the Maltese lira and Cypriot pound, have historically been lower than in eurozone countries such as France and Spain.

According to price comparisons researched by the Post Office, prior to entry into the eurozone both countries were cheaper for goods ranging from coffee and beer to stamps and evening meals. Only Portugal proved cheaper (see table). But the two islands could find themselves among Europe's most expensive destinations if the switch to the euro follows the pattern of 2002, when prices in most of the first 12 countries to form the eurozone shot up.

Research conducted by American Express between 2001 and 2002 (using data provided by national tourist offices) indicated that, before joining the EU, Spain and Greece were the cheapest of Europe's major holiday destinations, and Italy was the most expensive. Months after adoption of the euro, the research showed, costs of basic holiday items in Greece, Italy, France and Spain rose by an average of 36 per cent. Only in Portugal did euro prices stay more or less in line with the local currency...