News | Sunday, 28 December 2008

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Euro Changeover: One year later

David Darmanin

Marking the start of 2008 was the Prime Minister’s faux pas at the Valletta Waterfront, as he was filmed trying to withdraw his first euro notes from a rebellious ATM which wouldn’t budge. But never mind, the public took that New Year moment with a pinch of salt, and parties carried on toasting to a new euro-denominated prosperous new year.
In spite of the world economic crisis now allowing too many people to prosper, it is also thanks to the strength of the Euro that Malta was not hit as hard as it would have been had it not decided to go for the common currency as early as last year.

Smooth running
Only a few weeks after the introduction of the new currency, MaltaToday had learnt that factions of the cabinet had deemed Gonzi’s choice of E-Day as “ambitious”, but in spite of such resistance, the Prime Minister steamed ahead and appointed none other than Alan Camilleri, the incumbent Malta Enterprise Chairman, to head the National Euro Changeover Committee (NECC). Gonzi was proved right.
From the start of the year, the NECC reported over 135,000 ATM transactions in which €15.5 million were withdrawn, while banks carried out 108,000 transactions from where €68.1 million were exchanged.
Three weeks after changeover, when he was still parliamentary secretary for Finance, Tonio Fenech had told MaltaToday that at a European Finance Ministers meeting, Malta had been praised for the way it handled the euro adoption process.
“There were positive commendations on the whole framework adopted, as well as provisions with which authorities can react to abuses. During this meeting, a publication on Euro changeover best practice was presented, which included the initiatives championed by Malta such as the Fair system and the price rounding procedures,” Fenech had said.
Radical changes are never easy, and in the midst of people’s fears and preoccupations, bank clerks last year had to keep up with both Christmas season rushes and the long queues lining up to exchange their currency.

Undeclared cash
Cash in hand was also a big issue. The amnesty introduced by government on LM to Euro exchange stirred underground controversies as the tax man was still chasing tax evaders for under declaring after depositing considerable sums of money that had been previously undeclared. Up until April 2007, an estimated Lm500 million was considered to be in circulation. It is believed that a large amount of LM still remains undeposited.
The upside to undeclared sums of old currency was that retail sales last Christmas proved to be positive. Electronic goods, jewellery and miscellaneous giftware items sold considerably fast last Christmas, and this must have made this year’s slump seem even worse.
Property too did very well in 2007, and this may have had bearing in the price slump of mid-range apartments this year.

Second changeover
It is difficult to suggest methods with which the NECC could have realistically overcome hurdles that inevitably present themselves with such a major change. In spite of its failure in negotiating with mobile phone service providers not to round up their SMS tariffs, the NECC has been generally perceived as doing a terrific job.
It must be said that although Camilleri is known for being unfriendly with the inquisitive press, he has managed to enact a public relations exercise that comforted a section of the population that was preoccupied with a second currency changeover after less than fifty years. That said, the fact that older generations have already been through currency changeover has certainly helped. Besides, changing from the imperial to the metric system with very little government effort to smoothen the ride back then was certainly a tougher task.

Essential preoccupations
Being culturally close to Italy and the UK, two countries where the idea of changing to Euro blatantly failed, Malta was naturally scared of the consequences brought about by the introduction of the new currency. This level of fear was essential. People expected prices to shoot up, as they have in fact incremented in some sectors. But because the expectation was worse, reasonable increments were generally welcomed after many commented with the classic phrase of: “I thought it would have been worse.”

Bearing on tourism
Ironically, it is partly because of the strength of the Euro that Malta saw the start of a steep decline in British tourism along with the per capita spend of English guests.
In April 2008, the travel sections of The Times of London and the Guardian had stamped Malta as an expensive destination following the conversion to the euro after the British pound slipped 13% to the euro.
The London Times had recommended British travellers concerned by the falling value of the pound to go to South Africa because the Sterling slipped by 13% against the euro over the past year – making destinations like Italy and Greece increasingly expensive. On the other hand, it rose against the South African rand by 11%.
“One destination to avoid is Malta,” ran The Times’ bold claim. “Prices rose by about 10% with its changeover to the euro, so, combined with the fall in sterling, Malta has effectively become 17% more expensive in the space of four months.”
Local authorities questioned the veracity of such reports, and these were dismissed as unfounded, and wrongly perceived. But reality bites, and Malta is still in the dark when it comes to the retention of its market share of British tourism.

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