Three weeks after the changeover from the lira to the euro, Bernard Busuttil talks to National Euro Changeover Committee executive director ALAN CAMILLERI about the transition period and what one will expect now that the Maltese have got used to the new currency

How is the euro changeover process developing?

During the first two weeks of January around e250 million were withdrawn. This does not take into consideration the Malta lira deposits made during the same period.

As has been the experience of a number of other member countries, 15 per cent of currency in circulation never came back, either through loss or for other reasons.

I think that irrespective of how much money has been exchanged you need to have a measure of what people are using.

Interestingly enough, a recent survey carried out by the European Commission shows that a fortnight after the euro was adopted, 92 per cent of all payments are being carried out in euros while 96 per cent of the Maltese have only euros in their wallets.

This is quite remarkable in the sense that even though people had another two weeks to go, they still decided to carry out their transactions only in euros long before the deadline expired. This shows a certain enthusiasm and also means that almost the right amount of money for the economy to function properly in terms of cash flow has already been transacted. So the remaining amounts are still hoarded money.

Naturally it also shows that the Maltese were quite eager to start using the currency because if they weren’t they would have lingered on using the Maltese currency, which shows that the Maltese have ridden the wave.

Besides, I do think that the financial sector, retailers and banks have done a marvellous job. To have scooped e250 million out of the economy in 13 days is a remarkable feat.

What is the general feeling about price issues?

Malta has succeeded in learning from the mistakes made by the countries that have adopted the currency before us.

Naturally, there are always complaints regarding price movements during a currency changeover. I would say ‘price movements’ rather than ‘price increases’ because so many psychological factors are at play that a price change is not necessarily a price rise. There have been price changes which have not been rises at all but have been actually a reduction in prices. Research shows that people are much more sensitive to price rises than to discounts even if they are the same amount.

There have been two campaigns going on, one of which we call unjustified price increases – price increases which do not seem to have any kind of economic motivation. Those are being investigated. We do not just sit pretty and let the people complain. Our 70 euro assistants actually do go round to try to locate any abuse. Obviously we have not scoured the whole market. It’s impossible to do that in 15 days; however we had several cases which have been resolved, with prices being reverted and in some cases, clients went back and were given the difference in change.

There are other cases for which we have issued a warning. In this, we demand that prices are put back at their original level within 15 days. Our euro assistants have been double checking whether changes have been made or whether there have been justifications. If no changes have been carried out and there were no justifications, we would then proceed to the next direction, which is the last stage before a fine.

What were the most common queries received on Linja ewro 154?

At first people called most for reassurance, to check with us on whether their way of handling the currency was the right way of handling it. Most of the calls at the beginning were on how to get hold of a converter or a conversion chart, and we directed them to our euro centres in our towns and villages. These centres were very useful to provide information at grassroots level and I think they are serving their purpose very well.

But I could feel the need for reassuring people when I spent two hours a day answering phone calls. We handled over 700 calls a day during the first days of the changeover while the average used to be 1,400 a month. Now (last week) they have gone down to 400 a day and they are still on the way down. The less people need us, the more they are handling the currency.

Initially during the first three to four days, there was some confusion at retail level regarding giving change. This was mainly due to lack of familiarity with the new coins and when we spoke to the retailers, they immediately realised that it was their mistake, a genuine mistake, and they immediately started giving the right change to their clients.

Although we ran a significant campaign about the subject, we also had quite a number of queries on how to write a cheque.

Another question put to us was whether we need the one and two cents coins. We keep on insisting that it is very important that we keep those coins as they are our mechanism against inflation because it means being more precise in terms of pricing. That makes consumers more sensitive to price movements and if there is a price change, it would only be in the order of what we know as four mils, which is minimal and it would not affect consumer purchasing power.

The same happened in Germany and Austria in 2002 and they still have such coins running around in their economy.

We had a significant number of hoax complaints about price rises which were placed under anonymity. We can verify such claims as we have records of prices as they were before the changeover. I’m not aware of any reasons for such action, but these waste a lot of valuable time and resources which we would rather spend on informing the public, which is our mission.

Are there any anecdotes you want to tell us about?

There is quite a number, which were after all genuine concerns coming from the people.

A lady was concerned because she could not find the signature of Michael Bonello (CBM Governor) on the euro notes.

Another person suggested that we should write the equivalent of the euro in Lm on the notes and coins. That was a very valid suggestion, which would have made life easier.

We still have people asking us whether the euro is made up of 100 cents. A person also expected prices to be marked in three decimal places, which cannot be put into practice as the euro does not have mils.

We also do have people just asking us for a conversion of a particular price, to which we oblige and remind them to grab a calculator and do it themselves.

What about the stories of an old lady trying to cash thousands of liri at the bank?

Most of these tales are urban legends which have been extended and manipulated by word of mouth over and over again.

There have been cases which have reached us, like the story of a lady who turned up at the bank with Lm26,000 in cash.

This is the process of a currency changeover and yes, we do have a problem of hoarded cash. We knew about this, so much so, that the government had launched the Currency and Bank Deposits Registration Scheme which was not taken up as much as expected.

Now the new currency is there and at some point the money has to come out. Our advice is that there needs to be no panic at all. People still have till the end of March to exchange their liri and the Central Bank of Malta (CBM) will still change the money for free for the next 10 years.

And the other story regarding notes bearing the image of the late President Agatha Barbara?

This is not the first time that this happened, even when notes were demonetised previously, that people have discovered they have money which they would have forgotten about or been careless about and turn up at the CBM to exchange demonetised money.

The information about all this is for everyone to note. I think it is very difficult for anyone to claim ignorance of the facts unless no care was taken whatsoever of looking for the information.

What feedback have you received from the financial services sector?

When it comes to insurance, financial services and exchange bureaux things were planned beforehand. We worked very closely with the insurance sector and saw all their laid out plans. I think the only issue was the banks. At the very beginning, we were liasing all the time, the CBM, commercial banks and ourselves. We have a reporting procedure every day. We handle bottlenecks in the system so we had a hands-on and command and control structure. I used to intervene personally whenever I felt or had feedback that there was a problem and from the highest levels we would ensure that the problems were resolved.

We did experience some queues at the bank. This was inevitable because even before the changeover, there was a queue at every branch on Saturday mornings.

Obviously, after the changeover the pressure on the banks increased. Besides, not all bank branches had the same level of preparedness; therefore, some branches adjusted themselves better than others to the influx of people.

The high amount of money in circulation in Malta obviously did not help as we are very much a cash-based society and the use of cards is still not as widespread as in other countries.

And the retailers?

Again the secret of success here was to work closely with all stakeholders. The Chamber for Small and Medium Enterprises (GRTU), despite the initial difficulties, cooperated in full. Here again we had a command and control situation. So whenever there was a hiccup at retail level, we would immediately be notified and assist them accordingly.

I think that the retailers rose to the situation beautifully. Retailers within the FAIR system were confident enough not only to give change but to explain what change has been given and to provide the reassurance to their customers about the changeover. I think this was crucial. The time spent in training retailers has paid off as they have become important multipliers at grassroots level.

Of course there were also instances where my own euro assistants on 1 January had to go to help retailers selling products, ending up as sales people.

Our Austrian twinning experts, who were following us for the past year and a half and whose country experienced minimal price crises during the changeover, told us that the rate of complaints in Malta is a drop compared to that of Austria.

Obviously complaints would be there and will remain there as it is natural that there are some who seek to take advantage, but as a proportion of the whole population, I think that all in all, retailers really proved that they wanted this change without creating problems to anyone.

How did IT systems perform during the changeover?

Thankfully we haven’t experienced any difficulties whatsoever with regard to IT systems.

Conversion systems at banks took less than expected. It was expected to take four days and in reality it took two days. And the same goes for the government IT system, the tax and revenue system and the social security system. We thought that it would take about 48 hours for the systems to carry out the conversion and in fact, most of them carried it out before midnight on 31 December.

I give my thanks to all the IT people at the banks and MITTS who worked very hard and for such a long period and efficiently tested their systems.

Our role was one of nudging and prodding, where we checked the IT plans and checked whether the dress rehearsals were being made.

Things went well also from a legal and educational perspective too.

Are you dreading the next payday?

No. On the contrary, it is very important for people to have their next pay in euros as they feel that their wallets are fuller but finish up quickly. This is a reaction because they have not received their first pay, so they cannot compare what they are spending with what they are earning, because their last pay was in December and in the Maltese currency. Citizens should feel now that what they are spending is more in proportion to what they are earning.

How will the NECC become a consumer-monitoring agency?

The Prime Minister had indicated that the transformation will start in February and end in June, but this is still at the political level.

At the moment we still have a lot of work to do, checking out 32,000 prices to see whether there have been any price movements during January and making sure that the dual circulation period is a success and monitor the dual display regulations which will be in place till June.

Besides, people’s contracts here are all till June or September and our master plan spells clearly that we need to continue communicating post changeover.

It is important to remain sensitive and inquisitive, but now that the confusion element is over, we will start understanding the benefits of the euro. We slowly would start travelling and experiencing what price transparency means.

Our markets would be in a much more competitive environment as price transparency will further show the areas where we are highly overpriced and expose our competitive areas.

Do you envisage a renewal of the price stability agreements?

No, not from our side. It is a voluntary agreement and it could not be renewed unless the importers themselves volunteered to renew it.

The agreement is a psychological tool during the changeover in order to help people establish a scale reference of values as it cannot be established while prices change all the time. The January sales did not help a lot in this regard.

We resist very strongly that they are an economic tool to manage inflation. They were not intended to be so, and it would be wrong if they were. I would totally oppose it if the agreements were used as a tool for the economic management of the country.

What other work will the NECC be carrying out?

We have to bear in mind that the changeover is not ready yet. It will take some time to adjust psychologically to the currency. We have to get used to building up a scale of reference values, getting used to what income and expenditure and what is affordable and setting up a budget in euro. Thinking in euro, especially in large amount takes more time, own currency then convert.

We need to be careful not to pass rash judgements as it has been proven that people’s memory of prices is not as correct as we think it is. In 2007, Italians were asked what the price of a cinema ticket was in 2001 and the price given was that of 1992.

Do you think in euro?

It takes me some time. I got used to converting from Lm to euro because of the campaign. I have made an effort to start to think in euro as from 1 January, and I removed all my Lm from my wallet on 31 December.

I have purposely decided not to use a converter as it may make you lazy. It is a very useful tool, but it can make you rely heavily on it

Is the NECC helping out other countries?

We’ve helped Slovakia and are helping out the Czech Republic as well. The commission has also asked us to gather all our communications materials and strategy and crystallise them into a report, share copyrights with it and have them published as best practice toolkit to member states which have not adopted the euro yet. This includes artwork, TV programmes ...

You mean the TV bulletin?

Yes. We tried to create a continuation with the news so that people associate our newscast with news. The choice of the newscaster was based on a choice of familiar faces with which you immediately associate news, as people were becoming a bit immune to the message. People were hearing but not listening.

The newscast helped us in creating a sense of imminence to the changeover. The countdown clocks served us well in this regard.

What will happen to the countdown clocks?

These are clocks now, and our feedback is that people are finding them very convenient.

The Valletta one will probably be kept by the local council and will be turned into a permanent feature. We are still discussing the fate of the other two.