A year of the euro
Not only did the euro cushion the effect of the global crisis on the country, it was also good for business in 2008. Banking and business heads look back on the euro's first year in Malta.
Tonio Depasquale - chief executive officer, Bank of Valletta
It seems much longer than a year has passed since we adopted the euro as our domestic currency - probably because it was a very eventful period.
As had been widely anticipated, there was much keener competition in the local banking sector. The lira had been a de facto barrier to foreign financial institutions which wanted to participate in the Maltese financial and economic sectors. Today, all European banks are on the same level playing field with the longer established banks in Malta, leading to tighter interest rate margins, both for deposits and lending.
Simultaneously, Malta is gaining recognition as an international financial jurisdiction and, as a result, a good number of sizable transactions are being concluded locally. This means that large institutional deposits are being channelled through Maltese banks. This is good business for us.
With the current international financial crisis, Malta gained a great deal by being part of the eurozone, including having the European Central Bank as our central bank. The ECB is always prepared to supply liquidity in these very difficult times. Countries which are not part of the eurozone are facing serious issues in relation to their currencies. It would have been a very difficult task for Malta's Central Bank to defend the lira in the midst of the current turmoil.
Joseph Said - chairman, Lombard Bank
Thankfully, staff both at Lombard Bank and its subsidiary Maltapost implemented a seamless changeover with virtually no hiccups.
We also started the year with a bang as we secured an export order for over 1.3 million sets of Malta euro coins weighing over 30 tons and which we dispatched on a specially chartered Airbus.
Maltapost was the first euro initial public offering on the Exchange, following its successful listing in January.
During the year we experienced greater interest in Malta from our international customers and this very often translated into new business opportunities.
All told, we coped very well with the changeover and are confident that shortfall from foreign exchange activity will be compensated by new business opportunities resulting from euro adoption.
Tancred Tabone - president, Chamber of Commerce
The business community is proud to have contributed to a smooth and seamless transition from the lira to the euro. Our contribution came through following all guidelines with respect to dual display of prices and dealing with customers and converting money during the first few days of January.
A more telling contribution came through avoiding any inflationary pressures which were solely caused by the changeover. This was achieved through the Fair Pricing Agreements in Retailing (Fair) scheme and the voluntary price stability agreements.
This meant that the business community enjoyed a net advantage position. The benefits we had been reading about could in fact materialise. For those of us who deal with eurozone countries, it has meant more transparency and no currency risk. Currency risks were reduced for others who deal outside the euro.
As things turned out internationally during the second half of the year, Malta's euro adoption meant more economic stability and an avoidance of undesirable financial consequences of the kind experienced in other countries, most notably Iceland.
Martin Galea, president, Malta Federation of Industry
International business is easier and the cost of doing it is down. Travel and the gradual integration of our economy with Europe is simplified as there are less barriers.
In these times of financial turmoil, which has had huge effects on the sterling and dollar, the implications of having a standalone currency would have carried many risks, the extent of which will now never be known.
There will be those companies which would have been affected through the strength of the euro against the dollar and sterling, especially companies, both exporting and importing, whose main markets or industries deal in those currencies. Those exporting in sterling are feeling the heat and have had an unprecedented devaluation of their selling price which they may find difficult to revise. All this affects their bottom line. However, as most business is done in the eurozone the exposure is reduced and maintaining the basket of currencies would still have produced a similar result.
Alan Camilleri - chairman, Malta Enterprise
The first signs that the euro was going to be good for business and investment were actually the improvement in the country's credit ratings by the international agencies. This was later actualised through the elimination of exchange rate risk and also the costs associated with trading in a different currency. A number of declarations were made to this effect by existing and new investors.
Over the past year, the euro provided shelter to our economy.
I wouldn't want to think about what could have happened to our banking and financial system had we not been active members and decision-makers at governing council level of the European Central Bank.
Some immediate positive effects are already evident. But we need more time to realise the benefits as more businesses and investment opportunities come our way through the strength and stability offered by the euro in the global investment scenario.
Mark Saliba, executive council member, GRTU
Efforts by retailers in time for the changeover started in 2007, especially from the date that the conversion rate was irrevocably fixed and it became mandatory to display dual prices. This meant a lot a work for retailers but it aimed to assure consumers that there were not going to be price hikes because of the changeover.
Come January, retailers again had to carry the load (literally) as many consumers decided to use their Lm10 and Lm20 notes to be given change in euro rather than wait in queues at the banks. The only shortcoming here was that the banks were not geared to cope with people converting their liri, even though the GRTU had asked to have an extension in banking hours.
After the initial three weeks, the euro and the implementation of the single euro payments area (Sepa) brought great advantages to the retailer.
Having an international currency as the national currency means that we pay for imports without having to pay the banks their exchange commission.
Michael Bonello - Governor, Central Bank of Malta
With the introduction of the euro as the national currency, the Central Bank of Malta became a member of the Eurosystem. Most importantly, this entailed assuming joint responsibility, through the Governor's participation in the work of the Governing Council of the European Central Bank (ECB), for setting interest rates for the 15 euro area countries.
The bank is also responsible for transmitting the ECB's monetary policy stance to the Maltese banking system. In addition, through the participation of its officials in the work of the ECB's committees and working groups, and through its daily operations, the bank contributes to the efficient functioning and further development of the monetary union.
The successful performance of these complex tasks is a major challenge for a small central bank and testifies to the professionalism and commitment of the bank's staff. Eurosystem membership has, therefore, also proved to be an opportunity to extend the bank's visibility and reputation beyond Malta's shores.
Thanks to the euro the Maltese economy is having to face the worst global downturn in living memory without the added challenge for the bank of having to defend a small, vulnerable national currency.
Prof. Joe Bannister - chairman, Malta Financial Services Authority
Companies were free to operate in any currency they preferred before the entry into the eurozone. Companies using any currency, including the euro when the lira was the official currency, were not only keeping their accounts in the same foreign currency but were also paying tax and receiving refunds in the foreign currency. Therefore the entry into the euro did not affect their operations.
The conversion was very smooth for companies operating with the lira. The Registry of Companies is a fully electronic system and it was programmed to carry out an automatic changeover of the share capital data.
Odette Vella, senior information officer, Consumer and Competition Division
Before the changeover, most consumers were very concerned that their purchasing power would decrease. A common fear was that retailers would round up prices to the detriment of consumers.
To prevent abuse, a number of monitoring activities were carried out jointly by the Enforcement Directorate within the Consumer and Competition Division and the National Euro Changeover Committee (NECC).
Consumers were further safeguarded by the Price Stability Agreement reached with a number of importers which covered 6,700 fast-moving consumer goods and services. Any infringements were immediately noted and acted upon.
The Enforcement Directorate observed that three supermarkets were showing higher recommended prices than those established in the agreement and, after representations with the owners, these were revised.
It seems much longer than a year has passed since we adopted the euro as our domestic currency - probably because it was a very eventful period.
As had been widely anticipated, there was much keener competition in the local banking sector. The lira had been a de facto barrier to foreign financial institutions which wanted to participate in the Maltese financial and economic sectors. Today, all European banks are on the same level playing field with the longer established banks in Malta, leading to tighter interest rate margins, both for deposits and lending.
Simultaneously, Malta is gaining recognition as an international financial jurisdiction and, as a result, a good number of sizable transactions are being concluded locally. This means that large institutional deposits are being channelled through Maltese banks. This is good business for us.
With the current international financial crisis, Malta gained a great deal by being part of the eurozone, including having the European Central Bank as our central bank. The ECB is always prepared to supply liquidity in these very difficult times. Countries which are not part of the eurozone are facing serious issues in relation to their currencies. It would have been a very difficult task for Malta's Central Bank to defend the lira in the midst of the current turmoil.
Joseph Said - chairman, Lombard Bank
Thankfully, staff both at Lombard Bank and its subsidiary Maltapost implemented a seamless changeover with virtually no hiccups.
We also started the year with a bang as we secured an export order for over 1.3 million sets of Malta euro coins weighing over 30 tons and which we dispatched on a specially chartered Airbus.
Maltapost was the first euro initial public offering on the Exchange, following its successful listing in January.
During the year we experienced greater interest in Malta from our international customers and this very often translated into new business opportunities.
All told, we coped very well with the changeover and are confident that shortfall from foreign exchange activity will be compensated by new business opportunities resulting from euro adoption.
Tancred Tabone - president, Chamber of Commerce
The business community is proud to have contributed to a smooth and seamless transition from the lira to the euro. Our contribution came through following all guidelines with respect to dual display of prices and dealing with customers and converting money during the first few days of January.
A more telling contribution came through avoiding any inflationary pressures which were solely caused by the changeover. This was achieved through the Fair Pricing Agreements in Retailing (Fair) scheme and the voluntary price stability agreements.
This meant that the business community enjoyed a net advantage position. The benefits we had been reading about could in fact materialise. For those of us who deal with eurozone countries, it has meant more transparency and no currency risk. Currency risks were reduced for others who deal outside the euro.
As things turned out internationally during the second half of the year, Malta's euro adoption meant more economic stability and an avoidance of undesirable financial consequences of the kind experienced in other countries, most notably Iceland.
Martin Galea, president, Malta Federation of Industry
International business is easier and the cost of doing it is down. Travel and the gradual integration of our economy with Europe is simplified as there are less barriers.
In these times of financial turmoil, which has had huge effects on the sterling and dollar, the implications of having a standalone currency would have carried many risks, the extent of which will now never be known.
There will be those companies which would have been affected through the strength of the euro against the dollar and sterling, especially companies, both exporting and importing, whose main markets or industries deal in those currencies. Those exporting in sterling are feeling the heat and have had an unprecedented devaluation of their selling price which they may find difficult to revise. All this affects their bottom line. However, as most business is done in the eurozone the exposure is reduced and maintaining the basket of currencies would still have produced a similar result.
Alan Camilleri - chairman, Malta Enterprise
The first signs that the euro was going to be good for business and investment were actually the improvement in the country's credit ratings by the international agencies. This was later actualised through the elimination of exchange rate risk and also the costs associated with trading in a different currency. A number of declarations were made to this effect by existing and new investors.
Over the past year, the euro provided shelter to our economy.
I wouldn't want to think about what could have happened to our banking and financial system had we not been active members and decision-makers at governing council level of the European Central Bank.
Some immediate positive effects are already evident. But we need more time to realise the benefits as more businesses and investment opportunities come our way through the strength and stability offered by the euro in the global investment scenario.
Mark Saliba, executive council member, GRTU
Efforts by retailers in time for the changeover started in 2007, especially from the date that the conversion rate was irrevocably fixed and it became mandatory to display dual prices. This meant a lot a work for retailers but it aimed to assure consumers that there were not going to be price hikes because of the changeover.
Come January, retailers again had to carry the load (literally) as many consumers decided to use their Lm10 and Lm20 notes to be given change in euro rather than wait in queues at the banks. The only shortcoming here was that the banks were not geared to cope with people converting their liri, even though the GRTU had asked to have an extension in banking hours.
After the initial three weeks, the euro and the implementation of the single euro payments area (Sepa) brought great advantages to the retailer.
Having an international currency as the national currency means that we pay for imports without having to pay the banks their exchange commission.
Michael Bonello - Governor, Central Bank of Malta
With the introduction of the euro as the national currency, the Central Bank of Malta became a member of the Eurosystem. Most importantly, this entailed assuming joint responsibility, through the Governor's participation in the work of the Governing Council of the European Central Bank (ECB), for setting interest rates for the 15 euro area countries.
The bank is also responsible for transmitting the ECB's monetary policy stance to the Maltese banking system. In addition, through the participation of its officials in the work of the ECB's committees and working groups, and through its daily operations, the bank contributes to the efficient functioning and further development of the monetary union.
The successful performance of these complex tasks is a major challenge for a small central bank and testifies to the professionalism and commitment of the bank's staff. Eurosystem membership has, therefore, also proved to be an opportunity to extend the bank's visibility and reputation beyond Malta's shores.
Thanks to the euro the Maltese economy is having to face the worst global downturn in living memory without the added challenge for the bank of having to defend a small, vulnerable national currency.
Prof. Joe Bannister - chairman, Malta Financial Services Authority
Companies were free to operate in any currency they preferred before the entry into the eurozone. Companies using any currency, including the euro when the lira was the official currency, were not only keeping their accounts in the same foreign currency but were also paying tax and receiving refunds in the foreign currency. Therefore the entry into the euro did not affect their operations.
The conversion was very smooth for companies operating with the lira. The Registry of Companies is a fully electronic system and it was programmed to carry out an automatic changeover of the share capital data.
Odette Vella, senior information officer, Consumer and Competition Division
Before the changeover, most consumers were very concerned that their purchasing power would decrease. A common fear was that retailers would round up prices to the detriment of consumers.
To prevent abuse, a number of monitoring activities were carried out jointly by the Enforcement Directorate within the Consumer and Competition Division and the National Euro Changeover Committee (NECC).
Consumers were further safeguarded by the Price Stability Agreement reached with a number of importers which covered 6,700 fast-moving consumer goods and services. Any infringements were immediately noted and acted upon.
The Enforcement Directorate observed that three supermarkets were showing higher recommended prices than those established in the agreement and, after representations with the owners, these were revised.