Editorial

Malta's preparations for the currency changeover to the euro - planned for January 1, 2008 - have been praised in a new report by the European Commission, published on Friday. The technical preparations have been described as the most advanced compared to those of other new member states, including Cyprus, which is also planning to adopt the euro in 2008.

This positive assessment of Malta's preparedness comes a few days after an endorsement by the European Commissioner for Monetary Affairs, Joaquin Almunia, who on Monday hailed Malta's progress towards achieving the economic criteria for adopting the single European currency.

An important development in this respect was the statement by Opposition Leader Alfred Sant who, dropping his earlier reservations about whether Malta should adopt the euro by January 1, 2008, said that if elected to power before then, Labour would strive to ensure that Malta met its deadline, thus accepting, by implication, that any further delay in the adoption of the euro would be detrimental to the economy.

Despite the EU's endorsement, however, it seems that many Maltese remain sceptical of the euro's advantages, with only 31 per cent saying they are expecting it to have positive consequences. However, support for the euro has grown from 41 per cent in 2004 to 48 per cent now.

Support should continue to grow as more Maltese come in contact with the European currency, which has become increasingly familiar here, and also since many of us travel to the 12 countries of the Eurozone where the advantages of the single currency become immediately obvious. Indeed, the euro is probably the most powerful expression of European integration since it has meant that certain barriers to trade, tourism, and movements of labour and capital have been removed. And in the meantime, the euro has become a strong international currency, used in an estimated 33 per cent of world trade.

For Malta too, the advantages of the euro are considerable as it would definitely facilitate and stimulate our exports and render us more competitive, once the hurdle of foreign currency exchange is removed, seeing that most of our trade is carried out with Eurozone countries.

The one major reservation which most people have is the euro's possible inflationary effect - a fear expressed, though on a minor scale, when the Maltese lira went decimal in 1972. For some traders the "rounding" of the euro equivalent of the price in Maltese currency tends to be a "rounding up" rather than a "rounding down". Already, complaints have been expressed that some shops are quoting the equivalent of Lm1 as €2.50 rather than €2.33, as per the exchange rate fixed when Malta joined the ERM II.

Also, some look at what happened in Italy, where - although the actual inflationary effect of the euro changeover in 2002 was not high, the perceived effect was that in certain instances prices had doubled. Often quoted is the price of a cappuccino, which from 2,000 lire doubled to two euros (4,000 lire).

In our case, however, since one Maltese lira is equivalent to €0.4293, i.e. less than half a euro, the psychological 'doubling' effect is already built-in, as it were, so the risks of further 'doubling' are minimised.

Yet consumers should be on their guard, and inform themselves adequately, to prepare themselves for any unjustified "rounding up" on the excuse of the euro changeover. Informing and preparing the consumer to cope with the changeover is the task of the National Euro Changeover Committee, whose strategy was welcomed by the European Commission report last Friday.

However, the Commission said that some of Malta's preparations for the euro changeover required fine-tuning. One of these concerned the replacing of Maltese lira notes with euro notes, since it noted that the amount of cash held by the Maltese - an average of €2,789 (Lm1,197) per capita - was more than twice the European average of €1,374 (Lm590). This meant that the "dehoarding" campaign is likely to be more difficult in Malta than elsewhere.

It is indeed amazing that, despite the growing use of credit cards and the spread of ATMs, many people in Malta - especially the older generation - still prefer to handle cash and keep cash at home. This accounts, for example, for the inordinately long lines of pensioners cashing their cheques at banks. Perhaps the euro changeover campaign should also try to change this while we're at it.