The changeover to (or the adoption of, whichever way one likes to put it) the euro as our national currency is becoming a hot issue, even if the debate has a feeling of déjà vu. It will fill the pages of our newspapers for months to come, even if at times the debate will ignore the economic issues and will focus on irrelevant political red herrings.

From what has been said so far, there does not seem to be any outright opposition in principle to the adoption of the euro, even if a great deal of scepticism has been expressed. The main issue seems to be rather the date when the euro is to be adopted as our national currency.

The government is keen to change over by January 1, 2008. Most have expressed themselves in favour of this date. Some have said that we should adopt the euro earlier, while some have said that we should do it later. I am one who strongly believes that Malta should adopt the euro at the earliest possible date as I cannot agree with the scepticism that is being demonstrated.

There is a feeling of déjà vu on the euro issue because we had a similar situation on the issue of the country's EU membership. Although the scepticism on EU membership remains, it does not seem that at present there is any strong lobby in favour of exiting the EU.

Seeking to assess the scepticism expressed, the main argument that has been put forward is that the economy is not yet well prepared for the adoption of the euro. One needs to understand what the adoption of the euro really entails.

The most tangible aspect is the change of the currency and, therefore, we will have new coins and notes in our purses and bank accounts. We will sell and buy our products in this new currency. As such we need to remind ourselves of the functions of money and assess whether the euro meets these criteria fully and even to a better extent than our Maltese lira.

Any student of economics would tell you that money has four functions - it is a medium of exchange, it is a store of value, it is a measure of value and it is a standard for deferred payments.

Let us start with the fourth criterion - a standard for deferred payments. Borrowing and lending would be difficult to organise without money. Money is a convenient way of measuring debt and repaying debt. The Maltese lira meets this criterion fully when we speak of local debt.

However, our economy is becoming increasingly internationalised. We have Maltese companies who may need to borrow from, say, a French bank to conduct business in, say, Germany. Equally, we have foreign companies who want to invest in Malta utilising funds available in a third country. The adoption of the euro as our national currency facilitates such cross-border financing to a much greater extent than if we were dealing in Maltese liri.

Money is a store of value because we need to save our wealth for future spending. Within a confined economy, having a currency that is not accepted internationally may suffice.

In Malta we have, however, felt this limitation for a long time. This explains the amount of monies that were placed with foreign financial institutions, officially and unofficially, in the last decades. Banks then started to offer customers foreign currency accounts. The adoption of the euro would enable us to save money in an internationally accepted currency to use it wherever we wish, avoiding all bureaucratic hassles.

Money is also a measure of value. The international acceptance of the euro as a leading world currency explains in no uncertain manner that it is indeed a very good measure of value. The Maltese lira is also a very good measure of value, but only in Malta. Outside of Malta, with very few exceptions, the Maltese lira is not recognised as a store of value.

One very typical example says it all. I was passing through Bangkok in March. The goods at the duty free shops were priced in dollars while I paid the cashier in euros.

The final criterion is the medium of exchange. Any Maltese traveller will tell you how easier he or she would find it if the national currency was the euro. The argument gets even stronger for a Maltese exporter or importer. His work would be made that much easier if we had the euro instead of the Malta lira.

What is therefore emerging very clearly is that the euro meets the generally recognised criteria as to what should be the functions of a currency to a better extent than the Maltese lira does, primarily because the euro is an internationally accepted currency while the Maltese lira is not.

However, it needs to be stated there is more to the adoption of the euro than just changing our currency. We need to meet certain economic criteria like the level of fiscal deficit and the rate of inflation. It will also mean that the main instrument of monetary policy - interest rates - will be determined by the European Central Bank.

There is the administrative cost of changing to a new currency. These are also aspects that have caused scepticism about the adoption of the euro, and will be tackled in future contributions.

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