The European Commission is recommending that member states adopting the euro do not use dual display before the offical conversion rate has been set.
Malta had introduced voluntary dual display of prices in January 2007, but the official rate was not adopted until July 2007. Charts and conversion tables were also printed ahead of the establishment of the irrevocable exchange rate.
The head of the euro adoption unit in the Directorate General for Economy and Finance, Benjamin Angel, said that even if it were 99.9 per cent certain that the rate used during the two years of ERMII would be the official rate, there was still a chance it might change.
"It would be very confusing if the conversion rate were to change," he said at a briefing on the euro in Brussels for Euro Team members, a team of experts of the euro set up by the European Commission to provide independent input on the changeovers. The recommendation was one of a list adopted by the European Commission which will update four previous ones, taking into account the experience of the 2002 changeovers, Slovenia in 2007 and Malta and Cyprus in 2008.
The next country to adopt the euro is expected to be Slovakia in 2009.
The Commission has retained a number of elements from previous recommendations but introduced new ones, which will be non-binding on member states.
Another important lesson was learned from businesses who accepted payments in euro between the adoption of the official rate and the actual adoption, something that the 2002 countries did not have to worry about as the euro was not yet in circulation.
The Commission is now recommending that there should be compulsory separate display of the possible charges imposed by businesses accepting payments in euro.
"The fees should not be integrated into the conversion rate as this could seriously confuse citizens," Mr Angel explained.
In Malta, businesses had to display the euro amounts at the conversion rate without any fees and NECC had arranged for the banks, eventually, to waive their own fees so that businesses would not have to absorb the transaction charges.
The Commission is also advising that the dual display should last from six months to a year after €-day but that it should cease at the end of the period. It said that this cut-off date should be announced well in advance. Removing the legacy currency from the display helps consumers to start using the euro as their reference value.
Banks and shops were also targetted for more frontloading and sub-frontloading respectively (stocking up with euro prior to €-day). The Commission said that attractive deferred debiting conditions would help. The frontloading and sub-frontloading options are laid down by the European Central Bank which is now considering simplifying the rules.
The banks were also encouraged to open during the first days of the changeover and to offer extended working hours during the changeover period.
Among other new recommendations was a package of measures aimed at fighting perceived inflation, many of which were introduced by the NECC with notable success, such as Fair agreements, close monitoring of the commitments along with a name and shame campaign against defaulters (Malta did not go this far), as well as a quick statistical follow-up of the evolution of prices.
Malta's experience during the changeover was explained by the outgoing executive head of the NECC, Alan Camilleri, who confirmed that most things had gone well - even better - than expected. He lamented that there were long queues at banks in the first days of the changeover, noting that not all banks adequately extended their opening hours.
This in turn meant that shopkeepers who needed to exchange lira to euro were deterred by the queues and ran out of euro to give as change. He noted that few SMEs were able to provide the collateral needed in order to access sub-frontloading stocks.
"Retailers simply did not have enough notes or cash at the beginning of the dual circulation period. They were having trouble exchanging the lira currency for euro but their customers were also deterred by the long bank queues so they were using retailers as their cash exchangers and paying with large denominations. We could have done with more assistance from the banking sector, out of a sense of social responsibility," he said. The amount of money that went through the banking system was impressive with €420 million banked in January alone, he said.
Dual display proved to be very useful by 95 per cent of those recently surveyed, he said, although consumers said that they did not actually take much note of the euro amounts until after the changeover. "Dual display, introduced on a voluntary basis in January 2007, as well as the Fair scheme, helped retailers and businesses to think about the euro earlier rather than later," he pointed out.
There is no doubt that the freephone number, Linja 154, played an important role in helping citizens as well as in monitoring prices. It received 7,000 calls in January alone, nearly four times the average rate.
Speaking during a discussion on ways to control perceived inflation, Mr Angel queried the effectiveness of price freezes.
"All that happens is that you get all the increases in one shot rather than gradually over the period of the price freeze. It might actually have a worse impact in perceptions," he warned.
Malta had rejected the idea of a mandatory price freeze but a number of importers and service providers had voluntarily decided to freeze their prices from last October to next month.
Stefan Appel from DG Ecfin, said that Malta's campaign had been very effective and fear of price rises in Malta was lower than in other countries.
Malta had introduced voluntary dual display of prices in January 2007, but the official rate was not adopted until July 2007. Charts and conversion tables were also printed ahead of the establishment of the irrevocable exchange rate.
The head of the euro adoption unit in the Directorate General for Economy and Finance, Benjamin Angel, said that even if it were 99.9 per cent certain that the rate used during the two years of ERMII would be the official rate, there was still a chance it might change.
"It would be very confusing if the conversion rate were to change," he said at a briefing on the euro in Brussels for Euro Team members, a team of experts of the euro set up by the European Commission to provide independent input on the changeovers. The recommendation was one of a list adopted by the European Commission which will update four previous ones, taking into account the experience of the 2002 changeovers, Slovenia in 2007 and Malta and Cyprus in 2008.
The next country to adopt the euro is expected to be Slovakia in 2009.
The Commission has retained a number of elements from previous recommendations but introduced new ones, which will be non-binding on member states.
Another important lesson was learned from businesses who accepted payments in euro between the adoption of the official rate and the actual adoption, something that the 2002 countries did not have to worry about as the euro was not yet in circulation.
The Commission is now recommending that there should be compulsory separate display of the possible charges imposed by businesses accepting payments in euro.
"The fees should not be integrated into the conversion rate as this could seriously confuse citizens," Mr Angel explained.
In Malta, businesses had to display the euro amounts at the conversion rate without any fees and NECC had arranged for the banks, eventually, to waive their own fees so that businesses would not have to absorb the transaction charges.
The Commission is also advising that the dual display should last from six months to a year after €-day but that it should cease at the end of the period. It said that this cut-off date should be announced well in advance. Removing the legacy currency from the display helps consumers to start using the euro as their reference value.
Banks and shops were also targetted for more frontloading and sub-frontloading respectively (stocking up with euro prior to €-day). The Commission said that attractive deferred debiting conditions would help. The frontloading and sub-frontloading options are laid down by the European Central Bank which is now considering simplifying the rules.
The banks were also encouraged to open during the first days of the changeover and to offer extended working hours during the changeover period.
Among other new recommendations was a package of measures aimed at fighting perceived inflation, many of which were introduced by the NECC with notable success, such as Fair agreements, close monitoring of the commitments along with a name and shame campaign against defaulters (Malta did not go this far), as well as a quick statistical follow-up of the evolution of prices.
Malta's experience during the changeover was explained by the outgoing executive head of the NECC, Alan Camilleri, who confirmed that most things had gone well - even better - than expected. He lamented that there were long queues at banks in the first days of the changeover, noting that not all banks adequately extended their opening hours.
This in turn meant that shopkeepers who needed to exchange lira to euro were deterred by the queues and ran out of euro to give as change. He noted that few SMEs were able to provide the collateral needed in order to access sub-frontloading stocks.
"Retailers simply did not have enough notes or cash at the beginning of the dual circulation period. They were having trouble exchanging the lira currency for euro but their customers were also deterred by the long bank queues so they were using retailers as their cash exchangers and paying with large denominations. We could have done with more assistance from the banking sector, out of a sense of social responsibility," he said. The amount of money that went through the banking system was impressive with €420 million banked in January alone, he said.
Dual display proved to be very useful by 95 per cent of those recently surveyed, he said, although consumers said that they did not actually take much note of the euro amounts until after the changeover. "Dual display, introduced on a voluntary basis in January 2007, as well as the Fair scheme, helped retailers and businesses to think about the euro earlier rather than later," he pointed out.
There is no doubt that the freephone number, Linja 154, played an important role in helping citizens as well as in monitoring prices. It received 7,000 calls in January alone, nearly four times the average rate.
Speaking during a discussion on ways to control perceived inflation, Mr Angel queried the effectiveness of price freezes.
"All that happens is that you get all the increases in one shot rather than gradually over the period of the price freeze. It might actually have a worse impact in perceptions," he warned.
Malta had rejected the idea of a mandatory price freeze but a number of importers and service providers had voluntarily decided to freeze their prices from last October to next month.
Stefan Appel from DG Ecfin, said that Malta's campaign had been very effective and fear of price rises in Malta was lower than in other countries.