Slovenia survives euro changeover
Slovenia registered deflation of 0.7 per cent in January, the first month since its entry into the eurozone but a leading newspaper there was less than convinced. It ran its own survey of 30 products and 30 services and concluded that prices had gone...
Slovenia registered deflation of 0.7 per cent in January, the first month since its entry into the eurozone but a leading newspaper there was less than convinced. It ran its own survey of 30 products and 30 services and concluded that prices had gone up considerably.
The report was the first sour note after the smooth changeover, during which consumer prices had been carefully monitored and controlled through a "name and shame" campaign run by the leading consumer association in that country.
The head of the government PR and media office in Slovenia, Nada Serajnik Sraka said during a recent euro-related event in Brussels that it was not clear what methodology the newspaper had used, especially as the official statistics are based on a comprehensive basket of products and services, with appropriate weighting.
"This was just a publicity exercise and it did not do us any favours," she said.
The report will almost certainly raise fears of perceived inflation, something that the European Commission has been trying to fight since the first wave of countries joined the euro. Then perceived inflation ran much higher than real inflation for years, mainly because the cost of items bought on a day to day basis changed, with people registering any price increases more than they did the price decreases.
Another reason for some of the increases was the fact that prices had been more or less frozen during the run up to the changeover, other economists speaking in Brussels explained.
In Slovenia, mandatory dual display was introduced in March 2006, four months before the irrevocable fixed rate was set.
"We were criticised for that as being too early as we did not know what the rate would be, and whether we would be given the green light to carry on.
"But there were three goals: to get people to accept that the euro was really coming; to get them familiar with the notion that the values will change, as 1,000 Slovenian tolars became €1; and to help people follow whether the conversion was correct with regards to the rate and rounding up," she explained.
Many prices were surreptitiously raised before dual display, causing an immediate outcry, Serajnik Sraka said.
"The most disputed increase was in the banking sector. The banks raised their fees quite substantially and the consumers association criticised them bitterly - but their argument was that they knew what lay ahead and knew that there would be no possibility to raise prices for a long time. They also knew that they would be losing revenue from various services. It also happened in cafés and bars. The media reported on these and there was a lot of publicity about it," she said.
The consumers assocation, which was also an adviser on the national changeover board, led an aggressive name and shame campaign. It ran a price watch and in the last few months of the changeover period, it developed an open telephone line and a special website where people could send comments or copies of bills showing abuses or of unfair rounding. The campaign was not welcomed by all, she explained.
"The association created a black list of all those who raised prices and in the retail sector, there was great debate as to whether they were entitled to do that as Slovenia is a market economy, and companies felt they were entitled to raise prices, arguing that their suppliers had raised prices, for example. They complained bitterly that the reasons for the price increases were not being given.
"Some observers felt that the association was too strict and that there should have been a white list too, where organisations were named who decreased their prices due to the media or consumer pressure, or of those who did not increase their prices.
"But the name and shame campaign, and reporting in the media did have a certain positive effect especially in the critical period of the changeover. We will see what will happen in a few months," she said.
While Malta has discouraged payments in euro but accepted that this was a practice even before the changeover started, Slovenia was very strict. Tourists were only allowed to pay in euro in some places like the airport, taxis, certain shops, hotels and so on. But otherwise, euro was not considered to be an official currency until the end of December 2006.
With regards to the cost to business, the representative of the Slovenian Chamber of Commerce and Industry Nina Presern said the reality was often lower than the estimated cost, although the actual amounts varied from business to business.
"It is not possible to find one number but based on our surveys and discussions with the companies and our experiences, we estimate that the expenses ranged from €15,000 to €1,000,000, depending on the size of the company and on what they had to do to prepare for the euro. If they were involved in just business to business transactions, of course, the costs were lower than for retailers.
"But all in all, the feeling was that the advantages of the euro were worth the effort and they saw the euro changeover as they would just any other national change like a change in the taxes, for example. We did not receive any complaints."
One aspect of the changeover that Malta will definitely not have is the huge change in amounts. A euro has taken over the value of over 239 tolar.
"With the tolar people valued notes and coins were not considered to have much value. Now, coins are worth much more! Waiters complain that they are left just yellow coins (euro cents)...
"Old people found it very hard to hard to handle them and work out their worth and until they do they are worried about using coins. So the consumers association is now running a campaign to get two messages across: Beware of the new values; and do not spend too much as the prices will seem very low. And please be aware of small coins!"
The report was the first sour note after the smooth changeover, during which consumer prices had been carefully monitored and controlled through a "name and shame" campaign run by the leading consumer association in that country.
The head of the government PR and media office in Slovenia, Nada Serajnik Sraka said during a recent euro-related event in Brussels that it was not clear what methodology the newspaper had used, especially as the official statistics are based on a comprehensive basket of products and services, with appropriate weighting.
"This was just a publicity exercise and it did not do us any favours," she said.
The report will almost certainly raise fears of perceived inflation, something that the European Commission has been trying to fight since the first wave of countries joined the euro. Then perceived inflation ran much higher than real inflation for years, mainly because the cost of items bought on a day to day basis changed, with people registering any price increases more than they did the price decreases.
Another reason for some of the increases was the fact that prices had been more or less frozen during the run up to the changeover, other economists speaking in Brussels explained.
In Slovenia, mandatory dual display was introduced in March 2006, four months before the irrevocable fixed rate was set.
"We were criticised for that as being too early as we did not know what the rate would be, and whether we would be given the green light to carry on.
"But there were three goals: to get people to accept that the euro was really coming; to get them familiar with the notion that the values will change, as 1,000 Slovenian tolars became €1; and to help people follow whether the conversion was correct with regards to the rate and rounding up," she explained.
Many prices were surreptitiously raised before dual display, causing an immediate outcry, Serajnik Sraka said.
"The most disputed increase was in the banking sector. The banks raised their fees quite substantially and the consumers association criticised them bitterly - but their argument was that they knew what lay ahead and knew that there would be no possibility to raise prices for a long time. They also knew that they would be losing revenue from various services. It also happened in cafés and bars. The media reported on these and there was a lot of publicity about it," she said.
The consumers assocation, which was also an adviser on the national changeover board, led an aggressive name and shame campaign. It ran a price watch and in the last few months of the changeover period, it developed an open telephone line and a special website where people could send comments or copies of bills showing abuses or of unfair rounding. The campaign was not welcomed by all, she explained.
"The association created a black list of all those who raised prices and in the retail sector, there was great debate as to whether they were entitled to do that as Slovenia is a market economy, and companies felt they were entitled to raise prices, arguing that their suppliers had raised prices, for example. They complained bitterly that the reasons for the price increases were not being given.
"Some observers felt that the association was too strict and that there should have been a white list too, where organisations were named who decreased their prices due to the media or consumer pressure, or of those who did not increase their prices.
"But the name and shame campaign, and reporting in the media did have a certain positive effect especially in the critical period of the changeover. We will see what will happen in a few months," she said.
While Malta has discouraged payments in euro but accepted that this was a practice even before the changeover started, Slovenia was very strict. Tourists were only allowed to pay in euro in some places like the airport, taxis, certain shops, hotels and so on. But otherwise, euro was not considered to be an official currency until the end of December 2006.
With regards to the cost to business, the representative of the Slovenian Chamber of Commerce and Industry Nina Presern said the reality was often lower than the estimated cost, although the actual amounts varied from business to business.
"It is not possible to find one number but based on our surveys and discussions with the companies and our experiences, we estimate that the expenses ranged from €15,000 to €1,000,000, depending on the size of the company and on what they had to do to prepare for the euro. If they were involved in just business to business transactions, of course, the costs were lower than for retailers.
"But all in all, the feeling was that the advantages of the euro were worth the effort and they saw the euro changeover as they would just any other national change like a change in the taxes, for example. We did not receive any complaints."
One aspect of the changeover that Malta will definitely not have is the huge change in amounts. A euro has taken over the value of over 239 tolar.
"With the tolar people valued notes and coins were not considered to have much value. Now, coins are worth much more! Waiters complain that they are left just yellow coins (euro cents)...
"Old people found it very hard to hard to handle them and work out their worth and until they do they are worried about using coins. So the consumers association is now running a campaign to get two messages across: Beware of the new values; and do not spend too much as the prices will seem very low. And please be aware of small coins!"