27 June – 3 July 2001

Search all issues

powered by FreeFind

Send Your Feedback!

Euro-panic will benefit Malta

By a staff correspondent

The tax evading Belgian, Dutch German and French public are in a frenzy to transfer as many of their undeclared Belgian and French francs, Guilders and Deutsche Marks in cash to non-euro countries in the form of property investments.

The trend has arisen from the forthcoming change at the close of the year to the euro which will mark the end of many of their respective national currencies.

The change could lead to increased interest in exclusive apartments and properties in Malta and the golden kilometre at St Julian’s. But if the marketing executives have it right, they will also be promoting future accommodation at Tigne, Sliema and Manoel Island in an effort to attract future property investment.

The move to the euro has led economists to predict a pan-European spending boom on luxury items ranging from watches and jewellery to cars and swimming pools. The phenomena is being tagged the spending of "mattress money".

With the black economy now worth as much as £690 billion a year across the 12 eurozone countries, the end of the mark, franc and lira will present an acute dilemma to those with hoards of cash hidden away from the taxman.

With the two options being to change money at the bank, and risk being reported to the authorities, or go on a spending spree, many are expected to choose the latter.

The expected pattern was highlighted last week in a report by UBS Warburg, the merchant bankers, who predicted a sharp increase in spending.

"We could see more consumption of consumer durables, particularly luxury items that may have some investment cachet," wrote Edward Kerschner, the banker's chief global strategist.

In Spain, the black market spenders are snapping up half-finished houses and selling them after a few weeks.

Similar trends are being detected elsewhere. In Belgium, where high taxes have fuelled the black economy, luxury goods are top sellers.

In Germany, Europe's largest economy, the black economy accounts for 16% of the gross domestic product and is growing three times faster than the economy as a whole, generating the equivalent of about £30 billion in black-market cash.

Roadblocks have been set up in Germany near the border with Luxembourg to check on people crossing the frontier with large amounts of cash.

And the problem is not only confined to the eurozone: economists estimate that as many as a third of all the mark notes and coins in circulation are held outside Germany - largely in the former communist countries of central and eastern Europe where they are preferred to what are often shaky local currencies. All these must also be spent or converted into euros before shops stop accepting them at the end of February.

The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07
Tel: (356) 382741-3, 382745-6 | Fax: (356) 385075 | e-mail: editorial@networkpublications.com.mt