The government’s main challenge in the changeover to the European currency remains the battle against negative perceptions, finance parliamentary secretary Tonio Fenech told a meeting of Directors of Communications, held at St Julians yesterday by the EU Commission.

“Our proximity to Italy and our exposure to the Italian media has, to a certain extent, accentuated the preconceived notion that the euro caused prices to rise. Though statistically, this has consistently been proven otherwise, even in the case of Italy, the stark reality on the ground dictates otherwise – citizens are still not convinced that the changeover to the euro was only responsible for 0.2-0.4 per cent of the inflation over the changeover period,” Mr Fenech said.

Ironically, what was frequently overlooked was the simple fact that the euro has delivered price stability over the longer period of time, that is, euro-area member states have experienced a low degree of inflation since the introduction of the euro, save for the initial jolt accompanying the introduction of the new currency.

In Malta positive expectations are sometimes intertwined with apprehension, especially since money has such an important social dimension which affects people’s lives in an intimate manner.

Malta is by and large still a cash-based society, meaning that cash-based transactions are still preferred over electronic or internet banking. Moreover, cash hoarding at home is also a preferred option for some, particularly within the elderly bracket, who may still not sufficiently trust banks, and those others who seem to believe that they can escape the shadow of the revenue authorities by not depositing their cash at banks.

“This accounts for Malta’s record levels of money in circulation when compared to the European average. The policy and communication initiatives which we have embarked upon in conjunction with the Central Bank of Malta over the past year, are yielding positive results. Money in circulation has dropped by almost a quarter over the past year, partly through the subscription to the currency dehoarding scheme which we launched earlier on this year.”

The government’s communications campaign has been addressing inflation perceptions for the past 12 months, and there has been a significant drop in citizens’ perception of abuse by retailers over the changeover period. However, the government has also felt that it was very important to establish a hermetically sealed consumer protection framework.

“We are well aware that a rigorous consumer protection framework might be perceived sceptically by the market liberals, but truth be told, the absence of a strong consumer protection lobby in Malta requires a compensatory mechanism for this period of transition. Unless consumers feel confident in the changeover, the benefits of the euro cannot be fully realised!,” Mr Fenech said.

“Indeed, the oil and food price increases experienced globally are a serious cause of concern to all of us. I am sure that our Cypriot counterparts are as worried as we are, since the spate of price increases in food items across Europe can be easily misinterpreted to be related to the changeover to the new currency. Such has been the recent experience in Slovenia, where the spike in inflation coincided with the termination of the dual display period leading most to believe that the two elements are directly related.”

Over the past few months they had closely monitored the market and the internal mechanisms. “We have investigated complaints against unjustified price increases, and we have also been monitoring prices of essential commodity items and frequently purchased products. It transpires that none of the price increases registered over the past few months have been related to the euro, and that increases investigated fairly reflected external inflation realities such as higher prices for energy and raw materials. Notwithstanding these facts, we remain firm in our resolve to ensure that changing currency does not mean changing prices and that our citizens will ultimately become convinced that this is the case.”