Champagne and fireworks greet euro in Cyprus

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In the first major currency shift since the introduction of the Cyprus pound by former British colonial rulers in 1878, Cyprus joined the euro zone an hour before Malta, the other Mediterranean island which joined the European Union in 2004.

Officials hope admission to the euro zone can help bring together the economies of the divided island, split along ethnic lines since a Turkish invasion in 1974 triggered by a brief Greek-inspired coup.

"The foundation is laid for a unified economy with a common currency," President Tassos Papadopoulos said in a state address.

Use of the euro applies only to the southern part of Cyprus controlled by the island's internationally recognised Greek Cypriot government. The north, a breakaway Turkish Cypriot state recognised only by Ankara, will continue to use Turkish lira.

The island of just under one million inhabitants represents 0.2 percent of the euro zone's GDP. To qualify for euro zone admission, Papadopoulos's administration successfully wrestled down budget deficits and tackled burgeoning public debt.

The island is slated to return a surplus - the first time since 1971 - of 1.5 percent of GDP in 2007 and a debt of 60 percent of GDP. In 2008, the surplus is expected to be 0.5 percent and public debt is forecast to fall to 48 percent.

"This is the dawn of a new era and a change to our way of life," said Papadopoulos.

The pound will cease to be legal tender in cash transactions at the end of January. From midnight Monday, businesses are obliged to use euros.

Authorities hope that within the first 15 days of January most Cyprus notes will be withdrawn from circulation. About 50 percent of coins will also be returned.

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