We are soon coming to another key decision in connection with our membership of the European Union. This is the decision about the adoption of the euro as our currency. In effect it is not a decision as to whether to join or not, but rather a decision as to when to join.

We need to determine the year when the Malta lira will be replaced by the euro and adopt the same currency as that adopted by nearly all the old (15) member states of the EU and which will be adopted by the new (10) member states. The government has stated that it will need to arrive at a decision by the end of this month, after having heard the advice of the experts it has appointed.

It needs to be stated that adopting the euro is no walk over. Adoption of the euro would place on us a number of obligations mainly with regard to our fiscal deficit, the national debt and the rate of inflation. The fiscal deficit should not exceed three per cent of the gross domestic product and the national debt should not exceed 60 per cent of the gross domestic product.

The rate of inflation should be as much as possible around the average rate of all the countries that would have adopted the euro. These are all important economic objectives that Malta needs to achieve anyway, irrespective of whether it adopts the euro or not.

At a recent meeting of the EU finance ministers, agreement was reached that allows consideration of particularities of economic reforms a member state would be going through.

Countries like Germany had lobbied for leeway that is much wider than this if the three per cent rule in relation to the fiscal deficit is breached. However, there was an element of opposition to this stance as it is very evident that the EU Commission is keen to ensure that one does not fall into the temptation of adopting a loose fiscal policy in times of economic slowdown.

A loose fiscal policy would not only be undesirable but it would also fuel inflation, another aspect of the so-called Growth and Stability Pact that paved the way for the setting up of the euro as the EU's single currency. Admittedly, it will not become the single currency within the EU as long as countries like the United Kingdom opt not to adopt it.

But what about Malta? For practical purposes one may argue that we should adopt the euro as late as possible. One new member state (Hungary) is reported that it shall be adopting it in 2010. Such a late adoption would enable the country to implement the reforms it needs to meet the set criteria.

It would be expected that the changes required would be less painful if done gradually. However, the economic realities of Hungary are not the same as those of Malta and we need to take the decision that best suits us.

I feel that a late adoption of the euro by Malta may be seen to be more practical because the pace of certain reforms may be slowed down, but in effect the country needs to adopt the euro as soon as is possible.

It is a known fact that the fiscal deficit and an inflation rate that at times exceeds the euro-zone average are a drag on our economy.

We speak of the need to make structural reforms in our economy to maintain and strengthen the competitiveness of firms operating in Malta. If these are indeed of paramount importance, then the adoption of the euro cannot be delayed more than is necessary; it should definitely not be delayed to play a "wait and see game".

Moreover, the euro would mean that overnight we would making use of a currency that is traded freely internationally. We would be moving from a currency that is used only in this country, or at best at some open air markets abroad where Maltese go to shop, to a currency that is recognised everywhere and is traded everywhere. It would also help us to reduce extensively the currency risk that is inherent in trade that involves more than one currency.

The value of the Malta lira is already pegged to a significant extent to the euro (the other currencies in the basket are the pound sterling and the US dollar, but their weighting is very small when compared to the weighting of the euro). So the change will be neither so drastic nor so dramatic.

However, this overnight change would mean that we would need far less official reserves than we need now to support the Malta lira. Moreover, given the openness of our economy, this would be a step in the right direction. In fact what other countries (mainly Far Eastern countries and South American ones that are seeking to achieve export-led growth) have done is that they have pegged their currency against the US dollar to achieve stability in the value of their own currency.

The adoption of the euro may present a challenge that is indeed a difficult one and as such would cause some headaches. However, it would be wrong to say that we have no other option, because acceptance of the euro would only be a grudging one.

I believe the Malta's long-term interests require us to adopt the euro as our national currency; sooner rather than later.