Dual pricing date still undecided

Dual pricing may not be introduced at the beginning of next year after all but in July 2007, after the "final and irrevocable" exchange rate between the lira and the euro has been established.

"It will become clearer which date would be more appropriate as we get closer to the end of the year," Tonio Fenech, Parliamentary Secretary within the Ministry of Finance, told The Times.

Early last month, the Cabinet announced that retailers and the service industry must start displaying prices in both euro and lira from January 1, 2007 so that the public may get used to the value of the new currency. That would be some six months earlier than what would be required by the EU if Malta gets the go-ahead to adopt the euro on January 1, 2008.

Yet, during a radio programme last Saturday, Mr Fenech said the Cabinet's decision had been that dual pricing would "ideally" start in January 2007 "but not later than July 2007".

Questioned yesterday whether the government was backtracking from its decision, Mr Fenech said this was not the case as the Cabinet's decision had not been categorical and had allowed for some leeway.

"The Cabinet's preferred date is still January 1, 2007 since the people will in this way have adequate time to get used to the euro and to stabilise prices," he explained.

The decision to introduce dual pricing earlier than planned was heavily criticised by the Chamber of Small and Medium Enterprise (GRTU), which claimed that the Cabinet had disregarded advice given by experts on the National Euro Changeover Committee (NECC) - where there was a general disagreement with earlier dual pricing.

The GRTU also warned the government it would be clashing with retailers unless it reversed its decision.

But the government also received a warning note from Brussels at just about the same time, with the European Commissioner for Economic and Monetary Affairs, Joaquin Almunia, calling for caution on the way in which the Maltese government was to introduce dual pricing.

Arguing that the dual display of prices was a very useful tool to inform public opinion, Mr Almunia pointed out that "if Malta will join the eurozone on January 1, 2008, the final and irrevocable exchange rate between the Maltese currency and the euro will be established at the end of June or the beginning of July 2007. So this is a reason to be prudent."

The main argument against introducing dual pricing before the final exchange rate is fixed is that if the public gets used to the present exchange rate, any changes would lead to confusion.

But according to Mr Fenech, it is unlikely that the present central parity rate - fixed when Malta joined the European exchange rate mechanism (ERM II) - will change.

"The circumstances under which the rate may change are so extraordinary that if they do occur, the January 1, 2008 date for adopting the euro would, in all probability, also be put into question," Mr Fenech said.

"I agree with Mr Almunia's argument, but we should not give the impression that the rate will change. Otherwise there will be a lack of confidence in the euro project," he said, arguing that the Maltese lira had a history of stability.

An issue brought up by the GRTU was that while retailers would be accepting euros at a fixed equivalent of what consumers could also pay in Maltese liri, commercial banks would still impose their own charges to exchange the currency into Maltese liri. Banks, in fact, have still not committed themselves to lift charges by mid-2007.

Mr Fenech said discussions with the banks are still going on, possibly for the banks to even waive their charges from January.

"Of course, foregoing charges would mean that banks would lose profits. Their argument that they do not wish to lift charges until the exchange rate is confirmed 100 per cent is a valid one," he said.

He declined further comments so as not to prejudice the talks.

Mr Fenech said it should be made clear that when dual display of prices is introduced, the currency in circulation would still be the Maltese lira and that the euro prices were for display purposes only.