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Karl Schembri
It may be clumsy to rename Tal-Lira shops as Tat-2.33 Euro but customers would do well to remember the new number; they might find it handy in a year’s time.
By July next year, when they look at shop windows, supposedly they will be seeing the items’ price in both Maltese lira and in euros, converted exactly to the nearest euro cent to get them used to the new prices, and after 1 July it will be illegal to pay a price in euro which is not the exact conversion from the lira.
That’s basically the plan on paper. As government struggles with the rising cost of living for Malta to become eligible for the new European currency, shop owners and service providers taking advantage of the changeover to raise their prices further would just doom the whole euro project to widespread unpopularity and downright chaos.
The people in charge of the switch to the new currency are aware of the existing fears of new price hikes – already some shop owners are displaying euro prices that are much higher than the equivalent in Maltese liri.
“One of the greatest problems we are facing that is also a consequence of what happened in the other 12 member states is that people associate the euro with an increase in prices,” says the National Euro Changeover Committee’s (NECC) Executive Director, Alan Camilleri. “We have a helpline here and people are already calling to report abuses, and we are already writing to certain retailers who are charging different rates, especially food and beverage outlets. Some are more prominent than others. Like I was in a restaurant in which they were charging at an exchange rate of 2.5, which is quite a high rate and obviously not acceptable because it’s not even to cover bank charges, which are much less than that. But at this point in time they are perfectly legal, so we are just informing them that there are guidelines which they are not following, and that they will soon be transferred to a legal notice and be part of the law.”
In a bid to stop this, the NECC has just launched a new voluntary scheme for which shop owners can sign up to voluntarily display prices in both currencies, before the mandatory dual pricing period starts in July 2007.
“What we are calling the fair pricing agreements in retailing (FAIR) is a scheme through which retailers of any kind can actually undertake a commitment which would send out a message to the end consumer that that particular retailer is fully committed towards the changeover and is also fully committed not to increase prices for the sole reason that the currency changeover is taking place,” Camilleri said.
“What we are doing is providing the retailers with an opportunity to subscribe to this initiative which would basically result in a Euro mark, an approval sticker given by us, which would tell customers this particular shop is subscribed to FAIR and they can be confident that this retailer won’t increase prices and is implementing the changeover in the right manner. It’s a consumer confidence-building mechanism and at the same time it provides the retailers themselves with a better reputation during the changeover and also additional benefits from our end because we will be providing the training, dual display price guns, and other equipment to help them with the changeover.”
Shop owners subscribing to the scheme that will start off in January will also be given dual display calculators – extremely useful during the changeover period – and eventually currency converters will be given to the public at large.
In the meantime, the NECC will be sending over an army of some 70 Euro assistants to meet retailers face to face at their shops and explain to them what the scheme is about. In return for signing up, they will get free publicity together as part of the campaign.
The NECC will also be setting up a Euro observatory made up of economists and public administration experts to check retailers are keeping their commitment.
“If we see there have been unjustified price hikes which do not relate to a specific issue, we will withdraw their Euro mark,” Camilleri said, warning that no bank charges can be added on to the converted price.
“There shouldn’t be those kind of considerations. First of all dual display does not entail anyone having to pay in Euros, it depends on whether the retailer wants to accept Euros or not. But when you display the price you have to display the exact conversion of that price, you cannot put additional costs on that price, because the value in Euro is just for information purposes. It doesn’t mean you have to pay that price. In tourist areas you might have cases where tourists might want to pay in Euros. In that case the retailer would have to inform them there are bank charges that apply or administrative cash handling charges that would have to be displayed at point of sale, not on the item price. Having said that, from 1 July next year all the bank charges will be removed completely. The banks and the Central Bank have agreed to waive them all, so there is no logical reason why anyone should increase the price in Euro because there will be no charges involved.”
Camilleri believes the dual display of prices may also help in stabilising prices, as at the current rate Malta will not be able to join the Euro zone.
“Our major concern is the need for the euro not to increase prices; we already are worried about the inflation rate. If we keep on going like this we’ll surely not adopt the euro, so it’s a question of, in a sense, managing inflation. Dual display is a way to attenuate and moderate inflation because at the end of the day people are very sensitive to inflation. You can’t wake up on 1 January 2008 and see a totally new price in Euro that is dissimilar to what it was prior to that date. Dual display provides certain stability to pricing and makes the customer more sensitive.”
Inflation can be easily the reason why Malta will be kept out of the euro zone.
“It’s not the remit of the changeover committee to manage inflation,” Camilleri says. “Government has to manage inflation, where it can, but obviously we sound the alarm bells whenever we have to. If I may borrow a little bit from the experience of Estonia and Latvia, which we have a close contact with, postponing E-day when a lot of effort had already been put into the planning, would result in three main problems: One is that it will totally demoralise the project managers – it’s not just we but all those working with us, we have around 70 organisations who we consult regularly and have their own changeover teams working. In Estonia for example the government has already postponed it twice – and the whole changeover board resigned en masse. Finding new people, building up new teams and starting from scratch will be a big issue.”
Camilleri does not commit himself on whether he would resign if Malta ends up postponing the switch to the euro, but the effect would clearly be chaos.
“We’ll cross the bridge when we come to it,” Camilleri says about his resignation. “So far I have no intention of resigning. But it is an issue not because people will resign, but because it will become more difficult to reach the next target, because you have to start afresh, and people become more cynical. In fact in Estonia the people told the government ‘don’t give us a date, just be sure when you’re going to introduce it and then tell us’. They are fed up of government changing the adoption date all the time. Now Estonia’s problem is a very decent problem, in the sense that they are experiencing a 4 per cent inflation and a growth rate of 9 per cent, which economically makes most sense. In our case we’re not experiencing those kind of things; our inflation is bigger than our growth rate, which is more of a problem.”
Camilleri believes the inflation problem can be managed “if there is a focused effort”, but the private sector has a very important role to play.
“This is the second major issue that will crop up if we postpone E-day. Businesses would have already planned their changes, some would have engaged themselves in certain costs. It will start sending a lot of ripples in the market with respect to lack of confidence. We know how our economy works, a tot of confusion in the market will basically lead to an economic slump. We can’t keep affording this.
“The third problem is on the consumer side. We would have wasted a lot of money in preparation in terms of education, public awareness and things like that, and timing is very essential. I think it is extremely important for us to keep focused on 1 January 2008, for government to keep an extremely close eye on inflation, and to focus very very hard – both government and private operators because at the end of the day inflation is not fuelled by government induced costs only. If you see the latest statistics it is not government induced costs which are leading to inflation, it is business induced costs of private operators. Whether they are justified or not is not for me to say but everyone has to share the burden, or rather feel that the changeover is everyone’s priority and work towards it.”
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