The adoption of the euro as the national currency, if handled well, should not affect inflation as was the case with other European countries, Parliament-ary Secretary Tonio Fenech assured his listeners yesterday.

Speaking at a press conference at which the setting up of two committees responsible for the transition was announced, Mr Fenech said that the experiences of other countries was a bonus for Malta.

Central Bank governor Michael Bonello amplified this point, emphasising the importance of the information campaigns preceding the changeover. Despite widespread belief, of the 12 member states who adopted the euro in 2002, Italy was the country that experienced the least real inflation but, at the same time, it was the country in which the perception of inflation was most felt.

The things which were most affected by the euro changeover were cheap items which are consumed in large amounts such as, say, a cappuccino. However, this hike in prices was applied to other items, he added, rendering the inflation rate unrealistic.

Asked whether commercial outlets will be policed with regard to the rate of exchange at which they price their goods and services, Mr Fenech said that this will be the case, adding that this would be one of the matters that would be dealt with by one of the committees.

At the moment there are no regulations covering this practice, and therefore one of the changes that will have to come into force would be the introduction of guidelines allowing a maximum margin of profit in the rate of exchange charged by commercial outlets. Anything charged above that could then be dealt with as an infringement, he added.

Asked by The Malta Independent to react to comments made by the opposition leader on Sunday, with reference to the lira’s loss of value in tandem with that of the euro – to which the lira is now pegged – Mr Fenech called for a stop to what he described as the “damaging” discussion on devaluation.

However, in reply to Dr Sant, he pointed out that the value of the euro, and consequently the lira, had fallen because the dollar had strengthened. The lira always floated on the exchange markets, he added, and could have shifted before it was pegged to the euro. The fact of the matter is that the loss of reserves experienced in the aftermath of Dr Sant’s speculation on devaluation has been countered by the favourable rating Malta received from a host of reliable credit-rating agencies after joining the ERM II, Mr Fenech pointed out.

Two committees will be set up: the Steering Committee for the Euro Adoption and the National Euro Changeover Committee. The former will report to Cabinet directly and will monitor the progress and preparation of the government sector and the economy during this time. Further-more, it will provide strategic direction.

The NECC, on the other hand, will report to the steering committee and will be chaired by former BOV chairman Joseph Zahra. The steering committee will be chaired by Mr Fenech, with Mr Michael Bonello, Civil Service head J.R. Grima and Mr Zahra as members.

The NECC’s job will be to set up and coordinate all national initiatives required for the changeover. In Mr Zahra’s own words, the NECC will be working on two aspects, logistics and information. As highlighted by the Central Bank governor, the information campaign is fundamental to ensuring a smooth transition.

There will also be a secretariat to back up the NECC. In addition, ad hoc sub-committees will focus on specific aspects that are deemed critical. The members of the NECC will be appointed after consultation with those involved.

Mr Fenech emphasised that the NECC will not focus merely on the financial side of the transition but will deal with all aspects, including the educational one. Speaking of the imposition of dual pricing, he said that Malta is obliged to ask commercial outlets to enforce dual pricing (euro/lira) up to six months before the change. However, he did not exclude the possibility that this could become a requirement earlier.

From Mr Bonello’s comments, it emerged that the sooner dual pricing is introduced, the better.