Benefits for Malta also political

Apart from many economic benefits, joining the euro area also offers significant political benefits for Malta, European Monetary Affairs Commissioner Joaquín Almunia said.

"Joining the euro will give Malta a greater say in international financial institutions and fora and greater sway within the European Union. Malta will also gain membership of the Eurogroup at a time when this group of euro area finance ministers is exerting a growing influence over the direction of EU economic policy," Mr Almunia said.

"Just four years ago, Malta was preparing for EU accession and the possibility of euro adoption seemed only a distant goal. However in July, your commitment to sound economic policies and bold reforms were rewarded with a green light to join the euro area."

Congratulating those who have helped bring Malta to this point, Mr Almunia said preparations towards currency changeover were remarkably advanced.

"The National Euro Changeover Committee can only be praised for their excellent work, preparing the ground for what we all hope will be a smooth and successful changeover. This does not mean that the hard work stops now. There is still plenty to do before January 1 as well as after," he said.

Mr Almunia recalled that Spain, his home country, was part of the first wave of European member states to adopt the euro nearly a decade ago. "This was a memorable moment for me and a proud and positive step for Spain, so I can well imagine how the people of Malta must feel as you draw close to currency changeover."

The arrival of the euro marked a new chapter of Maltese history: "This momentous step will bring Malta to the very heart of the European Union. It means that Malta joins a world class currency and a powerful economic area of 320 million citizens with an almost 15 per cent share of world's GDP.

"For Malta, the economic benefits of the euro will be substantial. Not only is this the smallest of the EU member states, it also has one of the most open economies, with average import and export to GDP ratios of over 80 per cent. In the past, this has made Malta vulnerable to external shocks and volatility. Membership of Economic and Monetary Union will provide a shield against such shocks, and an anchor for macro-economic stability," he said.

The credibility brought by the euro should give a boost to foreign direct investment while the disappearance of exchange rate risks and transaction costs can be very beneficial for business.

Mr Almunia said over the next three months important efforts were needed to ensure the logistics are in place for an efficient changeover.

"I urge all actors to ensure that they are fully prepared for the arrival of the euro and to make certain that consumers are well informed and ready to handle their new currency. I know there is still widespread apprehension concerning the impact of the euro on prices. This is not helped by the fact that the euro has been mistakenly blamed for this summer's high food prices. In fact, rising costs are the result of low harvests in many regions of the world, bad weather in Europe and growing demand from East Asia."

Mr Almunia said that since the introduction of the euro, price rises in the euro area have been marginal compared with previous years, with inflation remaining around two per cent on average for the last decade. The communication campaign must continue to dispel myths over price increases, as well as ensure that effective price monitoring mechanisms are in place when the euro arrives.

"But currency changeover does not mark the end of the story for Malta. On the contrary, January 1, 2008 represents a new beginning as your country embarks on life in the euro area and contends with new challenges brought by membership of monetary union. Today, after nearly a decade since EMU was launched, we are developing a good understanding of how to tackle these challenges," he said.

Malta had to make sure public finances were sound and sustainable. "Given that the sustainability of Malta's public finances are put at risk by population ageing, fiscal discipline cannot be stressed enough," he said.

Structural reform held the key to smooth adjustment and competitiveness in the euro area. Though Malta had already implemented a series of important measures that appear to be paying off, it had to quicken the pace of structural reform if it wanted to secure competitiveness.

"Over the last few years, some countries that joined the euro area have seen their competitiveness decline against other euro zone Member States, precisely due to a slow adjustment capacity. Structural reforms that increase the flexibility of product, labour and service markets will prevent a similar fate happening to Malta," he said.

Mr Almunia said the need to consolidate budgets, implement structural reforms and improve adjustment capacity applied to every country of the euro area, not just Malta.

"Alongside the economic benefits, membership of EMU also brings the added responsibility of implementing sound economic policies that will ensure the good functioning of monetary union as a whole. This is why it is so essential that EMU has a strong and effective system of economic governance."

"As one of the newest members of the euro area, your country will be at the heart of progress. Not only will you benefit from a euro area ideally placed to take advantage of the growing benefits of globalisation, your membership will also serve to boost the dynamism of the European economy still further. I am confident that, together with Cyprus, your addition will be another great chapter in the success story of European economic integration and I look forward to welcoming you to EMU in January," Mr Almunia said.