Inflation has always been a matter of concern for the man in the street, and has at times shifted the balance towards one party and against another in an election. Rightly so, people tend to give a lot of attention to the value of the money they earn, and give this a lot of weight when it comes to deciding what to do with their vote.

A classic example is the 1996 election, which was won by the Malta Labour Party on its promise to remove Value Added Tax, which had been introduced by the Nationalist government a year earlier. The MLP built its election campaign on the increase in the cost of living at the time because of VAT, and won the election handsomely, only to lose the people’s confidence weeks into the legislature when its intentions – to remove VAT, yes, but replace with another form of taxation – became clear.

But this is beside the point. Any increase in the cost of living, be it through a new tax or because of the way the economy works, is bound to have an effect on the people’s lifestyle. People tend to complain if today they buy something at a cost and, the next day, they have to pay more for it. It is natural that they expect the money that they earn to retain the same value.

It is therefore no surprise that the results of the last Eurobarometer survey put inflation as one of the major concerns among the Maltese people, and especially so now as the country gears up for a currency changeover. The euro will be replacing the Maltese lira as from 1 January, and the more the date approaches, the more the people are wondering whether the move will mean that the money that they have today is worth less next year when the change comes about.

The government, the Central Bank of Malta and the National Euro Changeover Committee are doing their best to assure the people that this will not be so. Initiatives have been launched to convince the people that what they are spending today will be the same amount that they will be spending in 2008, with the only difference being the currency. The dual pricing system that came into force last month is specifically targeted at making sure that the changeover will not mean added costs to the consumer.

But, in spite of this, there is a growing number of people who are concerned that their financial situation will get worse next year, and the introduction of the euro could be one of the possible causes of such concern.

The perception that a currency changeover could lead to inflation could well be a hot political issue in the months leading to an election. Although the Malta Labour Party has made it clear that it will go on with plans to adopt the euro if it is elected to government, it will no doubt give great importance to any rise in inflation – real or perceived – if the election is held next year.

Leader Alfred Sant has already mentioned that the negative effects of the euro changeover in Slovenia were felt months after the change in the currency, and it is to be expected that the MLP will not hold back from mentioning this point over and over again.

The euro issue could in fact be the only factor that pushes the government to hold an election this year – fearing that inflation concerns will be detrimental to its cause. Of course, there are many considerations that the Prime Minister has to make before announcing the date. But what is sure is that the changeover to the euro – and the inflation aspect of it – will be a top consideration.