As 1 January 2008, the date on which the euro will be introduced in Malta, draws closer, parliament yesterday began discussing the Euro Adoption Bill, which will provide a legal basis to regulate the changeover from the lira to the euro, including the conversion from one currency to the other, in order to reduce abuse.

Speaking in parliament, parliamentary secretary Tonio Fenech explained, in great detail, the various advantages and how beneficial it would be for Malta to introduce the euro as soon as possible.

The bill empowers the Finance Minister to make regulations for facilitating the adoption of the euro, including the period during which it will be mandatory to display prices both in euro and in Maltese lira, and also the power to regulate the conversion of amounts appearing in invoices, receipts and statements into euro before it becomes the currency in Malta.

The bill lays down the imposition of fines, including daily fines for as long as the act or omission persists, in cases of infringement of the provisions of the bill. The fines which will be imposed vary between Lm300 and Lm1,500 and a daily fine of between Lm35 and Lm200. The trading or any other licence may be suspended if the infringement persists for a period of more than 15 days.

The bill also gives the Finance Minister the power to appoint one or more authorities in Malta to ensure compliance with the Euro Adoption Act. This entity or entities will be expected to investigate any infringement.

Mr Fenech said the euro is the second most used currency in the world and that once it is introduced, there will be less risk on the conversion rate. As an example, he said that if someone has to purchase raw material from a country in the European Union, the buyer will either have to buy the currency in advance or else you can also hedge to pay with that rate. This involves expenses.

He said 70 per cent of Malta’s business is with EU countries or with countries that have already introduced the euro. Moreover, consumers will be in a position to compare prices in various countries.

Another advantage, he said, is the inflation rate. “People are worried that the actual change will raise the inflation rate but this is absolutely not true. The European Central Bank is there to ensure stability and keep the inflation rate as low as possible in the euro zone. There are other advantages such as giving people more access to financial markets,” he said.

Mr Fenech said credit rating organisations such as Standard and Poors have already said they will be increasing Malta’s credit rating, while Moody’s is already stating that Malta is a good country for people to invest in. This is a good advert for Malta, he said.

Turning to criticism, Mr Fenech referred to the Malta Labour Party’s opposition to the introduction of the euro on 1 January 2008. He said the party does not say that the euro would not be beneficial to Malta but says that the inflation rate will rise, once the euro is introduced. Whether on 1 January 2008 or 1 January 2010, this risk is always there and the date will not have any effect on it, he said.

Moreover, the MLP is also saying that the country’s economy has to grow by four per cent before the currency is introduced. “The euro is a tool that will lead to economy growth so it must be introduced as soon as possible in order to help the country’s economy to grow and improve rather than wait for it to grow before introducing it.”

Estonia and Lithuania decided to join ERMII earlier and were supposed to adopt the euro on 1 January 2007 but they did not manage to reach their economic targets. Slovenia did the same, managed to reach its targets and will introduce the currency on the stipulated date, he said.

The European Central Bank had carried out an assessment to determine whether the Maltese economy was prepared for the introduction of the euro. It found that Malta was prepared to introduce the currency. “There will be serious repercussions if we decided not to introduce the euro, especially with regard to the message Malta will be sending to potential investors. Moreover, Malta will also lose out on competitiveness because tourists will decide to opt for other destinations that have already introduced the euro.”

The parliamentary secretary said the Euro Adoption Bill does not have any deadlines, such as when the currency will be adopted or when dual pricing will start. This, he said, is still the preparation stage because the European Commission still has to assess Malta and whether it is prepared for the introduction of the euro.

For his part, MLP deputy leader Charles Mangion said the adoption of the euro is not a political issue and the MLP will not reverse any decision that has been taken on the euro since, upon accession, Malta already knew that it had to introduce the currency. But he said the Euro Adoption Bill had been presented in parliament prematurely.

“The bill is an enabling bill. Most of the changes empower the Finance Minister to take action when there is abuse. The important thing is that these are implemented and that this abuse is really tackled,” he said.

Mr Mangion said that the adoption of the euro would not solve the problems in the tourism industry. He said most of the tourists who come to Malta come from the United Kingdom and they will still have to change sterling into the euro.

Neither will the introduction of the euro solve Malta’s problems with regard to competitiveness, said Mr Mangion. Moreover, he said, Enemalta will still be purchasing oil using dollars.

The discussion on the bill continues today.