Malta is to apply formally to adopt the euro within the coming weeks, finance ministry parliamentary secretary Tonio Fenech told a National Euro Changeover Committee plenary session, convened yesterday to launch a third consultative update of the euro changeover master plan.

Wrapping up yesterday’s session, Mr Fenech said that in view of the “budgetary consolidation and economic progress which our country is registering, I am quite optimistic that Malta will make it to join the eurozone on 1 January 2008.

“As a matter of fact, it is the government’s intention to ask the European Commission for a convergence report early in March.”

At the beginning of this year, Slovenia became the first of the latest member states to adopt the single currency, while Cyprus submitted its formal application just recently.

Also speaking yesterday, Central Bank of Malta Governor Michael C. Bonello commented how the “dehoarding” process of the Maltese lira has already begun, perhaps somewhat prematurely.

In fact, since the end of 2005, or in just under 14 months, some Lm35 to Lm38 million, mostly in Lm20 notes, have come out of circulation as those hoarding what will soon become Malta’s legacy currency begin thinking about the changeover.

There has also been a surprising amount of Lm20 notes, as well as a considerable amount of Lm10 notes, making their way back to the central bank, while in some cases, individuals have turned up at banks with sacks with Lm10,000 worth of Maltese banknotes to be exchanged for euros.

Mr Bonello, however, sounded a note of warning over the practice, explaining that people do not need to rush to begin exchanging their Maltese liri since commercial banks at present levy a charge on such transactions.

Mr Bonello described as even more “worrying” the fact that a good deal of such exchanges were being done “on the street” – transactions for which people were paying dearly in terms of stiff commission charges on the illegal activity, which also exposed them to the risk of being given counterfeit notes.

Such practices, he stressed, were premature and wholly unnecessary.

Once the dual circulation period began, commercial banks would exchange Maltese liri for euros at no charge. Furthermore, the Central Bank itself would exchange leftover Maltese liri notes for euros for 10 years after the changeover, while it would also exchange Maltese coins for two years.

Another emerging trend to be wary of, explained NECC chairman Joseph FX Zahra, was that of “early euroisation”, where people would use the euro as a currency before it became Malta’s official tender. As such, he pointed out that the euro was strictly still a foreign currency until 1 January.

Malta has also changed its changeover approach from the “big bang plus phasing out” to simply a big bang approach following clarifications and advice from the European Commission. Malta’s changeover plan had previously envisaged a big bang approach with a one-month dual circulation period, coupled with a phasing-out period, mainly to allow business to report their financials for an initial period of eurozone membership in Maltese liri as opposed to the euro.

The EC, however, recently suggested there did not appear to be any particular economic sectors unable to cope with a big bang approach, and proposed that a phasing-out period “would not serve a clear purpose and therefore appears redundant.”

Mr Zahra commented that following feedback from the EC, it transpired that the way in which Malta had envisaged the changeover process had essentially been a big bang approach. As such, the phasing-out period had been dropped, but was still available as an option should the need to implement it arise.

The third draft master plan presented yesterday is the penultimate such draft. After suggestions are taken on board following a consultation period running to 15 April, the fourth and final master plan will be published in July for the six-month lead-up to e-Day.

A full training programme for the public service is to begin on 23 February, which will see some 100 NECC trainers working with some 2,500 cash managers and customer-facing staff, public service head Godwin Grima explained. He said the public sector had achieved its targets ahead of schedule and was now moving toward dual display in all government documents. Yesterday’s Government Gazette, for example, was the first to employ dual pricing.

Maltese have been taking a keen interest in the changeover and have come forward with their queries and concerns, so much so that the 154 Linja Euro had received just under 2,000 calls, 25 per cent of which were from commercial establishments requesting to join the FAIR voluntary dual pricing initiative, in January alone.

Nina Presern from the Slovenian Chamber of Commerce, who was also present for yesterday’s plenary to share elements of the Slovenian changeover experience, noted how inflation had actually dropped since Slovenia signed on to the common currency some seven weeks ago.

Malta’s changeover preparations were well in hand, so much so that the NECC executive team had been asked to share its experience with Cyprus, the UK, the Czech Republic and Hungary.

The government was also expected shortly to announce a number of schemes to help businesses with the changeover. One such scheme would take the form of a tax credit scheme for the replacement of cash registers although, strictly speaking, there was no real need for any cash registers to be altered as a result of the changeover.