The decision came during near the beginning of a two-day EU summit to hammer out a new treaty on the 27-member bloc's institutional structure.
"Following Slovenia in January this year, it will be the turn of Cyprus and Malta to adopt the euro in 2008 and to benefit from the same macro-economic stability and protection brought about by the single currency," EU Economic and Monetary Commissioner Joaquin Almunia said. "It is important that they make careful use of the next six months to ensure a smooth transition."
Once the two Mediterranean islands have made the changeover, the single European currency will be in use in 15 EU member countries with a total population of around 320 million.
EU finance ministers agreed to admit Cyprus and Malta at their meeting in Luxembourg on June 5 on the basis that the two had met the necessary criteria. The finance ministers are to set the final exchange rates of the Cypriot pound and Maltese lira to the euro on July 10.
The two island states were among the 10 countries that joined the bloc in May 2004.
The tiny ex-Yugoslav republic of Slovenia became the 13th member of the euro-zone in January, making it the first to adopt the euro of the 10 mostly ex-communist countries that joined the EU in May 2004. Lithuania narrowly missed being included on the grounds that its inflation rate was too high.
Britain, Sweden and Denmark are among the EU countries which have opted to remain outside the euro-zone thus far.
"An important landmark"
Cyprus President Tassos Papadopoulos said Wednesday that his country's entry into the euro-zone on Jan. 1, 2008 was very significant as it would confirm the success of his government fiscal policy and the local economy in meeting European Union criteria.
"This is an important landmark for Cyprus and I believe that once we adopt the euro, prices will be rounded downwards as opposed to upwards," he said prior to his departure for the European Council meeting which will deal with the Cypriot and Maltese accession to the euro currency zone.
Papadopoulos was quoted by Cyprus' state news agency as saying that government services would monitor the change of currency to ensure that there was no exploitation of prices, adding that the Cypriot pound will be locked to the euro in early July.
At present the exchange rate has been steady in the range of 1.708 to 1.718 euros to the Cypriot pound.
At current exchange rates one Cypriot pound is worth about 1.71 euros, while the Maltese lira is worth 2.33 euros.
After Cyprus and Malta join, Slovakia is the next in line for euro-zone membership in 2009.
The Baltic trio of Estonia, Latvia and Lithuania all harbor plans to join the euro-zone quickly, but they have had to scale back their ambitions because inflation in their booming economies has been running too high.