THE INIMITABLE STYLE OF GLORIA MIZZI - MaltaRightNow.com

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WILL THE EURO
CAUSE PRICES
TO RISE
Much is being said about
the country’s prospects of
joining the euro zone in
January 2008. Concerns
have also been voiced
by the public regarding
the linkage between
the adoption of the euro
and an increase in the
inflation rate as a result of
increased prices during the
changeover.
Article written by
Claire Azzopardi,
Information Officer, NECC
The National Euro Changeover Committee
has been entrusted with the task of
managing the changeover. An inherent
aspect of its role is the dissemination
of information and education about the
practical changeover issues.
Eurostat statistics have shown clearly that
the adoption of the euro in 2002 resulted
in an increase of 0.1% to 0.3% in the
infl ation rate of the euro entrants at that
time. This minimal rise in infl ation as a direct
consequence of the change to the single
currency did not however match citizen’s
perceptions of infl ation.
Studies and research done by various
institutions show that immediately following
the introduction of the euro, consumers’
perception of the rate of infl ation was almost
double that of the actual rate. This is a rather
interesting but unfortunate discrepancy.
Research also shows that there were
extensive country differences with countries
adopting stricter price monitoring and
consumer confi dence mechanisms faring
much better than those opting for a more selfregulatory
approach.
However, the question remains as to why
there was such a difference between the
perceived and actual rate of infl ation. One of
the main reasons exposed by research was
that citizens experienced price increases
in certain goods and services that are
purchased on a daily basis, like, for example,
confectionery, bread, eggs, cigarettes and
newspapers and when eating out in cafes.
Since these items are bought regularly,
people believed there were widespread price
increases with the introduction of the euro.
The facts remain, however, that the
introduction of the euro did not affect greatly
the infl ation basket as it is measured by the
Housing Index of Consumer Prices, which is a
harmonised index of prices used consistently
across Europe. There is also no reason to
believe that a change in
currency should cause higher prices.
If a nation is committed to price transparency
and increasing competition, lower prices
should be sustained. The change is in the
currency to be used, and not in the prices of
goods and services.
The NECC intends to utilise a number of
tools that have been found to have worked
well in the previous changeovers, to ensure
that the introduction of the euro does not
cause prices to rise. The experience of the
fi rst wave member states during the transition
period has shown that, amongst others, the
mandatory dual display of prices is the most
effective and effi cient way of ensuring price
stability.
The NECC will also be managing the
voluntary dual display through the Fair-pricing
in Retailing Initiative (FAIR). This voluntary
scheme encourages entities to opt for dual
display during the fi rst six months of the
coming year to commit themselves to fair
pricing during the changeover period. FAIR is
therefore a perfect opportunity to demonstrate
a businesses’ commitment to transparent
pricing and will result in a boost to consumer
confi dence and increased competitiveness
during this voluntary phase.
The NECC is determined to ensure that all
sectors of society receive correct information
and to plan a smooth changeover for
all. Malta has the opportunity of learning
from the best practices of those who have
already undergone the changeover. Further
assistance and information can be obtained
through our Linja Ewro 154, or by visiting our
website on www.euro.gov.mt .
14 L&S | SEPTEMBER ’06