Why Malta cruised through euro conversion
Entrusting one entity to champion the euro changeover was key to the success of the mammoth task to introduce a new currency, former National Euro Changeover Committee chairman Joseph F.X. Zahra tells The Times Business. This time last year, Malta and...
Entrusting one entity to champion the euro changeover was key to the success of the mammoth task to introduce a new currency, former National Euro Changeover Committee chairman Joseph F.X. Zahra tells The Times Business.
This time last year, Malta and Cyprus added 1.2 million people to the eurozone by bringing member countries to 15. Slovakia joins today to make them 16, taking a few tips from Malta along the way.
Mr Zahra explains that the ultimate, seeming ease with which the Maltese changed the contents of their wallets was the result of 30 months of careful planning. The NECC's final project has been praised across the European Union and aspiring eurozone members have been advised to use Malta's experience as a case study.
Locally, two factors stamped a final seal of approval on the project - last March, the Nationalist Administration was the only government in a new eurozone member state to be re-elected. And, Mr Zahra adds, the new currency was never an issue on the political parties' campaign trail.
Steering away from the course taken by other countries, where there often seemed to be tension between the finance ministry and the central bank, the NECC was set up to independently spearhead "a seamless transition" to the new currency.
Mr Zahra heaps praise on the "lean, focused and business-like" executive, led by CEO Alan Camilleri, which supported the NECC, significantly housed in premises in Birkirkara away from ministries and government departments. Most of the professionals on the team were engaged on limited contracts and embraced a "results-oriented work ethic". The majority have since returned to the private sector.
"We knew from the very start that this changeover was not to be purely technical," Mr Zahra recalls. "We had to make sure that the banking system was well prepared, we had to get the volume of coins and notes right, the IT systems and the Legal Notices had to be in place, the accounting community had to be prepared too.
"But our major emphasis needed to be on the psychology. We needed a very strong, sharp communications strategy. If the technical side was to work, society had to be ready in its mindset."
Mr Zahra says the NECC was mindful that it was critical its message reached every corner of society - the approach could not be elitist or popular. Hence the government's heavy investment in the communications campaign.
Constantly supported by the Central Bank, which had by then accumulated a wealth of information on eurozone members' experiences, the NECC met religiously every fortnight to fine-tune the management of the transition.
"Representatives of all the stakeholders sat around that table," Mr Zahra says. "The private and public sectors, the legal and educational sectors, consumers and the various consumer groups... the NECC's leadership was not authoritative or high-handed. There was two-way communication as the NECC took on the concerns and views aired around that table. In turn, the committee, through those stakeholders, was informing all communities of the strategy that it was pursuing as information was cascaded to their sub-groups and sub-committees."
A twinning agreement with Ireland proved particularly useful as the Republic's conversion model was brimming with ideas on communication strategies.
Dual display of prices was a third critical element in the changeover - a government decision Mr Zahra describes as "brave".
"Government decided that dual display would start on a voluntary basis as early as possible in 2007," he says. "It was brave because between January and July there could have been changes in the central irrevocably fixed conversion rate set by the European Finance Council in conjunction with the European Central Bank. There was an element of risk. If the rate changed, that could have had repercussions."
In the end, the rate did not change. From January 2007, retailers went about the painstaking task of converting prices on all stock, and dual display began to spread across the country in a bid to help customers become accustomed to the new currency before actually handling it. Seemingly keen to buoy customer confidence, retailers heeded the advice of an army of part-timers doing the rounds of the enterprising community and signed up to the FAIR initiative.
According to Mr Zahra, the Fair Pricing Agreement in Retailing was such a huge success because "it was a guarantee that retailers and importers would not in any way raise prices for reasons connected to the conversion". The keenness to provide the "guarantee" seems to have been extended and might be one of the reasons why pricing is still not being rounded up.
Austrian officials provided the NECC with assistance and advice on methods to mitigate price increases. The Central Bank also acknowledged that prices did not surge because of the euro's introduction; commodity prices rose in the first six months of the year which contributed to inflation.
Looking back at the euro's critical first year in operation, Mr Zahra says the change took place unobstructed particularly because there was convergence on a social and political level. And while the public sector responded well, winning the private sector over was more challenging - the implications for large and small businesses were diverse and had to be addressed.
Meanwhile, the economic and social stability that has ensued since changeover inspires investor confidence. And, Mr Zahra says, besides being evidence of how the Maltese rise to the occasion when a national challenge is posed to them, the fact that Malta cruised through the conversion proves that trust was the crucial element in the scheme of things.
"If there is trust in the way things are done, the Maltese will subscribe to a project," he points out. "The NECC was determined to engage people in the process because all of us were fully conscious that a new currency affects every single person. Our smaller scale was an added advantage and compared to larger countries it was easier to reach our audience. It was a very challenging project and the result has brought us great satisfaction."
This time last year, Malta and Cyprus added 1.2 million people to the eurozone by bringing member countries to 15. Slovakia joins today to make them 16, taking a few tips from Malta along the way.
Mr Zahra explains that the ultimate, seeming ease with which the Maltese changed the contents of their wallets was the result of 30 months of careful planning. The NECC's final project has been praised across the European Union and aspiring eurozone members have been advised to use Malta's experience as a case study.
Locally, two factors stamped a final seal of approval on the project - last March, the Nationalist Administration was the only government in a new eurozone member state to be re-elected. And, Mr Zahra adds, the new currency was never an issue on the political parties' campaign trail.
Steering away from the course taken by other countries, where there often seemed to be tension between the finance ministry and the central bank, the NECC was set up to independently spearhead "a seamless transition" to the new currency.
Mr Zahra heaps praise on the "lean, focused and business-like" executive, led by CEO Alan Camilleri, which supported the NECC, significantly housed in premises in Birkirkara away from ministries and government departments. Most of the professionals on the team were engaged on limited contracts and embraced a "results-oriented work ethic". The majority have since returned to the private sector.
"We knew from the very start that this changeover was not to be purely technical," Mr Zahra recalls. "We had to make sure that the banking system was well prepared, we had to get the volume of coins and notes right, the IT systems and the Legal Notices had to be in place, the accounting community had to be prepared too.
"But our major emphasis needed to be on the psychology. We needed a very strong, sharp communications strategy. If the technical side was to work, society had to be ready in its mindset."
Mr Zahra says the NECC was mindful that it was critical its message reached every corner of society - the approach could not be elitist or popular. Hence the government's heavy investment in the communications campaign.
Constantly supported by the Central Bank, which had by then accumulated a wealth of information on eurozone members' experiences, the NECC met religiously every fortnight to fine-tune the management of the transition.
"Representatives of all the stakeholders sat around that table," Mr Zahra says. "The private and public sectors, the legal and educational sectors, consumers and the various consumer groups... the NECC's leadership was not authoritative or high-handed. There was two-way communication as the NECC took on the concerns and views aired around that table. In turn, the committee, through those stakeholders, was informing all communities of the strategy that it was pursuing as information was cascaded to their sub-groups and sub-committees."
A twinning agreement with Ireland proved particularly useful as the Republic's conversion model was brimming with ideas on communication strategies.
Dual display of prices was a third critical element in the changeover - a government decision Mr Zahra describes as "brave".
"Government decided that dual display would start on a voluntary basis as early as possible in 2007," he says. "It was brave because between January and July there could have been changes in the central irrevocably fixed conversion rate set by the European Finance Council in conjunction with the European Central Bank. There was an element of risk. If the rate changed, that could have had repercussions."
In the end, the rate did not change. From January 2007, retailers went about the painstaking task of converting prices on all stock, and dual display began to spread across the country in a bid to help customers become accustomed to the new currency before actually handling it. Seemingly keen to buoy customer confidence, retailers heeded the advice of an army of part-timers doing the rounds of the enterprising community and signed up to the FAIR initiative.
According to Mr Zahra, the Fair Pricing Agreement in Retailing was such a huge success because "it was a guarantee that retailers and importers would not in any way raise prices for reasons connected to the conversion". The keenness to provide the "guarantee" seems to have been extended and might be one of the reasons why pricing is still not being rounded up.
Austrian officials provided the NECC with assistance and advice on methods to mitigate price increases. The Central Bank also acknowledged that prices did not surge because of the euro's introduction; commodity prices rose in the first six months of the year which contributed to inflation.
Looking back at the euro's critical first year in operation, Mr Zahra says the change took place unobstructed particularly because there was convergence on a social and political level. And while the public sector responded well, winning the private sector over was more challenging - the implications for large and small businesses were diverse and had to be addressed.
Meanwhile, the economic and social stability that has ensued since changeover inspires investor confidence. And, Mr Zahra says, besides being evidence of how the Maltese rise to the occasion when a national challenge is posed to them, the fact that Malta cruised through the conversion proves that trust was the crucial element in the scheme of things.
"If there is trust in the way things are done, the Maltese will subscribe to a project," he points out. "The NECC was determined to engage people in the process because all of us were fully conscious that a new currency affects every single person. Our smaller scale was an added advantage and compared to larger countries it was easier to reach our audience. It was a very challenging project and the result has brought us great satisfaction."