If the Prime Minister decides to go for an election early next year, immediately after the change of currency, he will have to live with an anxious electorate which associates the Euro with price increases.
Nearly half the respondents to MaltaToday’s survey – 47.3% – are afraid of price increases immediately after Euro adoption on January 1.
Significantly, 50% of the self employed are also convinced that prices will rise with Euro adoption.
If these expectations are matched by reality, the Euro could prove to be a big electoral liability for the Prime Minister. With the electorate expecting price increases, it will be also be more susceptible to the slightest price movements.
But if these fears do not materialise the Prime Minister will reap the electoral dividend of having piloted and anchored Malta in the world’s strongest currency while proving the soothsayers of doom wrong.
Yet even if the transition is smooth, Gonzi will still face two problems. First, to ensure that no abuses take place he will have to clamp down on those retailers who attempt to mark up their prices, thus alienating a very volatile category of voters, even though many retailers have already committed some of their prices in euro.
Secondly, even if prices remain stable, the Prime Minister may have to confront a growing fear that prices will go up after March when the price stability agreements with leading importers expire.