PM issues warning to businesses

Prime Minister Lawrence Gonzi made it clear yesterday that his government would come down hard on those businesses planning to take advantage of the euro changeover.

Opposition leader Alfred Sant, however, complained that there exists little to no effective lobbying power for consumer interests within the National Euro Changeover Committee.

There might now be consensus between the government and the opposition on the introduction of the euro, but it was hardly reflected in the speeches given by the two leaders at the end of a national conference on the euro yesterday.

Concerns over price rises are symptomatic of any new currency, Dr Gonzi said. Yet, in a free market economy, it would not be in the interest of any business or retailer to hike prices.

"It is also in their own long-term interest to ensure that consumers feel comfortable buying from them. We shall be supporting these people. We will not allow the few to give a bad name to the entire business community," he told the large turnout for the conference.

Dr Gonzi said the government had managed to achieve what some might have deemed unachievable. The deficit was down to below three per cent of GDP and public debt was down though it was no foregone conclusion that the euro will be introduced in January 2008.

Thanks to a great extent to the NECC, the latest Eurobarometer poll had shown that for the first time the majority of the Maltese are now in favour of the introduction of the euro.

The Prime Minister said it would have been much better if the political consensus had been achieved at least as from the day when Malta's convergence programme had been presented to the Malta Council for Economic and Social Development. Had this happened, the country could have possibly had consensus on the tough and sometimes unpopular decisions that had to be taken.

He said the government viewed the early introduction of the euro as a critical success factor for the country's future development, with the trade-dependent economy standing to gain from operating with the single currency.

Dr Sant explained that his party would rather have opted for euro membership once the economy was growing at around four per cent. However, since the government persisted with its 2008 target date, Labour felt it would create too much upheaval and would not be in the national interest if the process were reversed.

He said the biggest challenge facing the euro conversion remained consumer protection in light of the threat of rising prices.

He warned there is a danger that new pressures will pile up over and above the initial uncertainties created by the changeover to euro, and that prices will rise six to nine months before and following the introduction of the euro. The Labour leader cast doubt on the several studies which have shown there was little or no upward trend in prices when the euro changeover took place.

"Unfortunately most of these studies were conducted in the interests of the government and financial systems that were responsible for the euro changeover. There was little to no involvement by consumer organisations in their running," he said.

Speaking earlier, Parliamentary Secretary Tonio Fenech said the authorities must do everything to combat the false perception that the euro means higher prices. It is a battle for the hearts and minds of consumers, and losing it will mean "very serious consequences" in terms of consumers' attitude to the euro.

NECC chairman Joseph F.X. Zahra said the committee was working on its final guidelines to address pricing strategies for inflation-sensitive, low-value, high-volume products and services.

Such a guide will not be incorporated into legislation but will provide options and recommendations to companies so that they can remain as revenue neutral as possible during the changeover.

He referred to the so-called Fair Initiative, which is aimed at softening the citizens' worries with regard to the euro changeover. Fair is a commitment whereby the retailer promises the consumer not to increase prices purely as a result of the changeover while he receives the necessary training. The latest Eurobarometer indicates that 90 per cent of Maltese citizens fear price rises as a result of the euro changeover.

Union Haddiema Maghqudin general secretary Gejtu Vella revealed that his union would be conducting a price-monitoring exercise that will enable it to monitor movement in the prices of specific and pre-identified items, both before and after the euro changeover.

The union will identify a typical basket of goods, which will consist of a number of items that are bought on a regularly basis by Maltese households.

Karl Kollmann, advisor to the Vienna Chamber for Workers and Employees said consumer organisations in his country had actually adopted a name and shame policy in a bid to control abusive price increases.

Luc Hendricks, director of enterprise policy at the European Association of the Small and Medium Enterprises, however, disagreed and said it should be public administrations that should adopt such a policy - consumer organisations aren't representative enough and they are susceptible to making mistakes, he added.

Mr Hendricks also warned that the media is often bent on expounding the problems of the euro changeover when in most instances there are no such problems.

French Ombudsman in the Finance Ministry Emanuel Constans warned that the perceived increase in prices brought about by the euro could last for years, saying it had even contributed to France's "no" vote to the European Constitution.