Malta is expected to reach the financial targets required to enable the country to adopt the euro in 2008 as projected, Prime Minister Lawrence Gonzi said.

Speaking to journalists in Helsinki, where he was attending the informal meeting of EU finance ministers, which came to end yesterday, Dr Gonzi said independent projections by the government as well as those being made by the European Union showed that Malta was on the right track to keep the deficit under control and introduce the euro in 2008.

Dr Gonzi said the informal Ecofin meetings, held under each EU Presidency twice a year, enable EU finance ministers to speak more informally about certain issues.

The prime minister said he had always made it a point to have a meeting with Joaquin Almunia, the EU Commissioner for Economic and Monetary Affairs, at Ecofin meetings. At his meeting with Commissioner Almunia yesterday, Dr Gonzi said he had discussed the government's pre-budget document and informed him that last year's budget targets would be met.

On his part, Commissioner Almunia informed him that the Commission's forecasts were very similar to those of the government, Dr Gonzi said.

"The Commission is confirming what we are saying and I am confident that Malta would satisfy the criteria to enable it to adopt the euro in 2008," Dr Gonzi said.

Dr Gonzi said the Ecofin meeting, which ended yesterday, had discussed the German financial deficit. Germany was facing excessive deficit procedures because its deficit was over the 3% threshold, but following corrective measures, including the increase of 3% in the VAT rate, the deficit was now around 2.8% of GDP, and these procedures would be waived once the Commission confirmed that the deficit was under control.

Higher energy prices were also discussed by the EU finance ministers, since they would probably cause EU inflation to rise.

Malta was no exception but this was no consolation for the government, which was doing its utmost to ensure that the impact of higher oil prices is minimised and to stimulate economic growth and attract foreign direct investment, the prime minister said.

Dr Gonzi said all economic indicators showed that the country was on the right track, but there were still challenges, such as in the tourism sector, where the government was taking the decisions that needed to be taken.

One issue that had to be tackled was the control of prices, especially of medicinal products, and the government would be announcing its position on this issue very shortly, Dr Gonzi said.

Asked about what type of tax relief one could expect in the Budget, Dr Gonzi said that, unlike the Opposition, the government's position was very clear.

"The pre-budget document speaks of strategic choices. We can choose between reducing the surcharge on water and electricity, which would affect people across the board, including the self-employed, we could adjust the income tax bands, or alter the departure tax.

"We have made it clear that there are some Lm8 million the government can dedicate to this reform, and we intend taking the best decisions to further stimulate economic growth, as that is our main aim," Dr Gonzi said.

Tonio Fenech, Parliamentary Secretary in the Finance Ministry, also attended the Ecofin meeting, as did Central Bank Governor Michael C. Bonello. Though Ecofin meetings are held each month, the governors of European Central Banks attend only the informal meetings that are held under each Presidency.

Malta's permanent representative to the European Union, Richard Cachia Caruana accompanied the prime minister in the meeting with Commissioner Almunia and will also accompany him in the EU-ASEAN summit which starts today in Helsinki.

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