Brussels views Malta as model for changeover

The European Commission has praised Malta for its smooth introduction of the euro and the intense information campaign organised by the National Euro Changeover Committee (NECC).

A final report on the changeover in Malta and Cyprus, submitted to the EU Finance Ministers and the European Parliament, delves into all the technical aspects including the effect on inflation. The two islands joined the eurozone at the same time, on January 1.

Brussels estimates that inflation as a result of the euro was negligible.

The report highlights in particular the successful Maltese information campaign, which, according to the Commission, should be emulated in future euro introductions.

"The Maltese campaign has shown that fears as regards changeover-related price increases can be successfully addressed through well-targeted and intense information activities," the report states.

According to the Commission, the initially low support for the euro in Malta was reversed by a comprehensive multiphase campaign, first focusing on awareness and on the benefits of the euro, then on the practical aspects of the changeover.

The long and intensive information campaign appears to have yielded very good results so much so that according to the February 2008 Eurobarometer, nine out of 10 Maltese felt very well or quite well informed about the changeover.

The report states that the successful Maltese information campaign might have also influenced the perception of people on inflation, even if reality showed a different picture.

"Notwithstanding increasing the Harmonised Index of Consumer Prices inflation, perceived inflation in Malta stood at 40.5 percentage points (according to an internal calculation based on surveys done by the Commission) in January 2008, down from 51 percentage points in the previous month. It, thus, seems that neither the acceleration in HICP inflation nor the possible impact of the euro's introduction on prices has affected consumers' perceptions about inflation.

"Another factor is the information campaign, which in Malta might have helped to reduce inflation perceptions. For Malta, it is also very likely that this is linked to the prohibition on smoothing up of prices and rigorous enforcement thereof."

The only criticism to be found in the 13-page report relates to the Maltese banks, which the EU executive described as not being sufficiently prepared.

"As people appeared to be eager to exchange their national cash holdings into euro and to withdraw euro cash, sizeable queues occurred at some bank branches. Several banks had opened special counters for businesses to reduce waiting times. However, the long queues observed even a week after the changeover demonstrated that the measures taken were not always sufficient. The banks were not fully prepared to handle such a large extra workload, despite the deployment of 600 cashiers." The report also notes the high demand for Maltese coins by overseas collectors.

According to the Commission, some 1.2 million pieces of each denomination were exported by private banks between €-day and January 25. By the same time, the Central Bank of Malta had sold abroad some 32,000 euro presentation sets and had exchanged some 10,000 pieces of each coin denomination with other euro-area Central Banks. This development prompted the Commission to recommend that in future changeovers, the collector market demand should be taken into consideration, especially for small countries.

"Orders from collectors may significantly alter the volume of coins available during the changeover," the Commission concluded.