Wednesday, November 14, 2007

The Switch to the Euro

One subsidiary reason I wanted to go to Malta was because it will switch its currency from Malta Liri to the Euro effective Jan. 1, 2008. My Liri account will automatically become a Euro account overnight. It will be possible to convert cash at the official price for quite some time. There are signs everywhere. All prices are put up in Liri and Euros, the final rate having been set some weeks ago. I think many Maltese are tired of hearing about it, even as they are nervous about inflation after the change and just how smoothly it will go.

I've been quite interested in how they are giving the information as the final run up to the change happens. They have in place hotlines to call if prices for products suddenly rise in advance of the change. They just passed a law limiting "rounding up" prices under certain circumstances. You can get little cards wtih equivalencies. This weekend a local market in a town is going to let people practice by only accepting and using Euros. The Bank of Valletta sent everyone a little calculator set for the conversion. You select whether you want to convert from Euros or Liri or vice versa, then you input the amount and hit the calculate. Bingo, the other currency number shows up.

Yesterday I got mail, all in Maltese, from the Central Bank of Malta. It was easy to see what they were explaining. They showed pictures of the new currency, both the folding kind and the coins. As you may know, the coin currency has one side that is all Europe and one side with scenes related to a particular country. But, in addition to that bit of information, they sent plastic cards that have holograms--on one side you shift the card back and forth and can see key prices change between Liri and Euros. On the other they illustrate how to check that the currency is real, by illustrating the security thread in the bill and the watermark. Cool. I plan to keep some of these examples to show my students back at Tech and as mementos of my stay.

I've rather lost track of the discussion, but Malta also has an opportunity to reduce its national debt and thus be able to use the saved interest for other purposes. The Euro zone Central Bank does not require the various country banks to keep as high a level of reserves as the Central Bank of Malta has. Apparently, however, some people still think they should keep the reserves anyway. Seems like a curious discussion to me. They could use a few more millions in their national budget it seems to me.

Anyway, the change is even more interesting than I thought it would be. It has even affected the decision by the governing party on when to hold elections. Everyone things they will call the election in the first quarter of the new year. The logic--in other places, the inflation that attends the switch takes a few months to appear. But, all the planning will certainly pay off for the government/ the governing party would benefit from that bit of good government. But they have to hedge their bets about the inflation and get the election done before any inflation gets going. [Note: unlike the endless campaigns in the US, elections happen quickly in most European nations. Voters are supposed to pay attention to what the party in power really has done (the Responsible Party Govt concept, unlike the American "responsive" government) and what the opposition parties say they will do if elected.]

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