Euro-campaign runs into trouble

Cyprus’ euro-awareness campaign has run into trouble due to the inability of the Finance Ministry to overturn a wave of skepticism ahead of euro adoption on January 1, 2008 with Finance Minister Michalis Sarris refusing to accept responsibility if the bloated campaign does not start producing results soon.

Pressed by the Financial Mirror to explain the message of the campaign, which at the current rate will turn into a fiasco since it does not have the ability to convey the simple advantages of euro adoption, even Sarris was short of explanations, calling on journalists to give him ideas.

Apart from a number of seminars for specialized groups, the campaign lacks the zeal to press home the many advantages that euro adoption will bring to the country and is nowhere close to over-turning the growing negative mood among the public against the euro.

A poll released last week showed that for the first time 51% of all Cypriots oppose euro adoption with a crushing majority believing that euro-zone entry will negatively affect unemployment, inflation, competitiveness and lead to rampant price overcharging.

And what does Sarris do? He hopes that the mood will change for the better. How? Based on the ‘good will’ of the people of Cyprus.

When asked if the government will be able to protect consumers from overcharging, Sarris kept referring to “voluntary self-regulation” and was short on actual facts as to how the Ministry will ensure that businesses do not round-up prices higher.

The Finance Ministry hopes to announce deals with companies on ‘fair invoicing’, whereby companies commit themselves to converting prices into euro at the official conversion rate, but no safeguards are in place on how overcharging will be avoided.

The Ministry’s plans to send in euro-observers is also likely to be a total waste of time, money and resources since they will not have the legal support to impose fines as it is next to impossible for the state to dictate company pricing in a free economy such as Cyprus.

Many companies may also feel justified to hike prices ahead of a barrage of cost increases planned by the government, which has deliberately delayed increases in taxes, social security contributions and VAT to the second half of 2008.

“We plan to give some benefits in 2007 to the lower-income groups, but the bulk of benefits will be included in the 2008 budget,” promised Sarris, insisting that the government will not proceed with rampant “gifts” ahead of the Presidential elections in February 2008.

The government is likely to proceed with a major tax overhaul, hike the social insurance contributions of business and increase the VAT rate on a number of essential goods, all after the second half of 2008.