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EDITORIAL | Wednesday, 12 December 2007

The Euro and the cost of living

With the introduction of the euro the question uppermost peoples minds is: what effect will the new national currency have on the cost of living in Malta?
People’s fear of the unknown and the daily bombardment from a section of the media that the euro will put prices up is creating a certain sense of unease and preoccupation. There can be little doubt that the cost of living always configures as a burning issue amongst people. It so happens that with the euro, this preoccupation has increased.
This newspaper believes that this issue, particularly at this given moment in time, should be handled with extreme caution, with all the interested parties showing a maximum sense of responsibility. One should also take care to distinguish between perception and reality.
We must first of all recognise the sterling work carried out by the committee handling the change-over regime. They have explained the change simply and coherently in a language understandable by the man in the street. They have spared no time or effort in penetrating all the relevant key places of interest, including businesses, places of work schools and various organisations.
But there are certain undeniable facts which must be emphasised.
No discussion on the cost of living can ignore the phenomenon of imported inflation. Our country with few resources has always been subject to the increase of prices on imported goods arising from raw materials being increased abroad. This year in particular, the increase in the price of oil and cereals has had a clear detrimental effect on the price of imported goods. This is undeniable.
Having said this it remains questionable how best to keep the cost of living under control. The regime of a price and wage freeze, used so extensively in the 1980s, has proved extremely detrimental as it simply killed the concept of free trade. Worse still. It has lead to many a case of corruption, when good products were sold on the black market at exorbitant prices, while the general population had to put up inferior quality products instead.
It is therefore encouraging to note that all political parties are excluding the introduction of price orders.
One way of combating this phenomenon is the European culture of shopping around. It is acceptable that products cannot be sold at the same price from all outlets, and hence the culture of shopping around arises. Foodstuffs are not sold at the same price at all outlets abroad, and people willingly accept that the price of food is going to be higher when shopping in a superior market than from modest areas. It is taking time for the shopping-around culture to take root in Malta, simply the idea that all prices of all objects should be controlled, and that prices should be identical throughout the island, had been inculcated for too many years. This is the very culture that runs counter to the free market economy, which – despite all its inefficiencies, especially in a small market like ours – still remains the best system, ensuring a higher standard of living for all, and not just a part of society.
The Opposition party, while excluding a price freeze, claims that prices need to be monitored. We understand this to mean that the laws relative to fair trading need to be applied and vigorously observed. If our interpretation is incorrect, it is crucial that this monitoring process is explained in detail.
In our opinion, monitoring should go no further than ensuring that cartels and monopolies are not taking advantage of their position in the market place. The office of fair trading already exists to ensure that this does not happen, and such control is one of the prime reasons for its existence. Enforcement should first and foremost take place at this level. If further beefing up of the office is required, let this be done. As for the rest we believe that market forces should dictate their pricing levels. Any entrepreneur worth his salt knows that if he over-prices his product he will lose out on custom. Accordingly, and in a similar vein, if the price to eat at a certain restaurant is high, yet his business is thriving, there seems no justifiable reason why he should be forced by the State to lower his prices. The market has accepted his price and he is correct to take advantage of such a situation.
We fully acknowledge that cost of living is a major source of concern especially at this sensitive moment. This problem should be tackled responsibly by all interested parties: government, business and the social parties, to ensure that the consumer gets a fair deal. This is of particular importance whenever the consumer comes into contact with organisations operating under monopolistic conditions, or from a dominant position in the market place.


12 December 2007
ISSUE NO. 515


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