Euro switch committee set up

The government yesterday launched the National Euro Changeover Committee (NECC), amid pledges to police the switch from the Maltese lira to the euro in order to prevent abuse.

Malta joined the Exchange Rate Mechanism II last month and Parliamentary Secretary Tonio Fenech yesterday reiterated the government's intention to join the euro as soon as possible - the earliest being 2008.

Former Bank of Valletta chairman and one of the country's most respected economists, Joseph F. X. Zahra was presented to the media yesterday as the person who will be steering the changeover committee in the coming years.

The committee will be required to formulate and implement a specific plan to handle all aspects pertaining to the final adoption of the euro.

It is responsible for coordinating all matters related to the changeover, including the information campaign, private and public sector technical readiness, cash handling machines, pricing, and currency replacement.

The NECC will embark on a nationwide consultation process with all stakeholders both within the public and private sectors.

Apart from the changeover committee, the government is also setting up a steering committee, whose terms of reference are to report to Cabinet, provide strategic direction and monitor the level of progress.

Mr Fenech will chair the committee, which will also include the Central Bank Governor, the Head of the Civil Service and the NECC chairman.

Mr Fenech admitted the adoption of the euro was no easy task, especially since numerous stakeholders had to come into play to ensure a smooth transition with the least impact on the economy.

A timely and appropriate information campaign, focusing on both business and the public, was critical to the success of Malta's euro changeover, he said.

It was, however, encouraging to note that a recent Eurobarometer survey showed that 70 per cent of the Maltese had already come into contact with the euro currency, he added.

A twinning programme for the preparation of a communication strategy on the euro changeover has already been agreed between Ireland, Malta and Cyprus. Special emphasis will be placed on the vulnerable groups, old people and students.

Mr Fenech recalled that the government's decision to join the euro was commended by the European Commission and credit rating agencies, among others.

"The government is determined to ensure that Malta joins the euro area without the unnecessary delay, but ensuring that the process is not detrimental to our economy. We recognise the benefits of using one of the world's major currencies and of anchoring to the policies of a stable economic area," he said.

Mr Fenech said the government intended to act like a watchdog to ensure retailers did not fleece consumers.

"Yes, we need a system of people going around the shops to ensure there is no abuse. But ultimately, operators have to be aware that they are operating in a competitive economy and cannot afford to increase their prices," he said.

Mr Zahra underlined the need for the authorities to communicate in a language everyone understands. Communication, transparency and education were pivotal to ensure a smooth process.

It was important to introduce a system of dual pricing at least six months before the euro comes into effect, to familiarise consumers with the price structures, he said.

While not excluding that certain operators in the 12 other euro countries took advantage of the switch, there was a big difference between perception and the actual inflation rate, the speakers underlined.

Central Bank Governor Michael Bonello argued that - contrary to public opinion - this was the case with Italy.

He said that when the switch was made from the lira to the euro, the inflation rate in January 2002 was just 0.1 per cent.

Mr Fenech appealed to the Labour Party to refrain from politicising the euro issue, as this would be detrimental to the economy in general.

On Sunday, Labour leader Alfred Sant warned that the lira could be devalued by 10 per cent in three months, because of Malta's accession to the ERM mechanism.

"The Maltese lira has always fluctuated so what we are experiencing now is simply the strengthening of the US dollar against the euro. This is no devaluation," Mr Fenech replied.