EU Commissioner urges caution in adopting the euro

The EU Commissioner for the Internal Market, Frits Bolkestein yesterday cautioned Malta against a hasty introduction of the euro.

Speaking during a news conference after a meeting with Finance Minister John Dalli, Mr Bolkestein heaped praise on Malta's state of preparedness and said he believed that all pending issues would be ironed out by the date of accession.

Mr Bolkestein, who is on a tour of the 10 acceding states, is responsible for the internal market, taxation and customs union.

It is "politically and emotionally" understandable that the new member states wanted to join the euro area. But it may not be in the best interest of Malta to adopt the euro, the Commissioner warned.

The entry into the EU may have certain economic consequences, which were difficult to foresee, he said.

Once a member state formed part of the Economic and Monetary Union and had to adopt the euro it could no longer devalue its currency and it could be in the interest of Malta to revalue or devalue the exchange rate.

"I would say make haste slowly. As I will tell all the other candidates, take your time to see whether it really is in the interest of this country.

"Remember once you adopt the euro, in principle it's forever, and the situation may change, the price of oil might change and industry is seriously affected. When things are uncertain it's best not to jump, if you don't have to jump."

Mr Dalli interjected and said that the euro would only be introduced according to circumstances.

"The euro will be adopted not because anyone is pushing us but depending on what's in our best interests," he said.

Malta has, however, made a commitment to join the euro by 2010 and Mr Dalli has effectively ruled out a currency devaluation.

Mr Dalli reiterated that once Malta brings the deficit in line by the target date of 2006, it would be very beneficial to join the euro.

Mr Bolkestein said the only points of contention with Malta on a policy level were in connection with taxation and freedom of movement of services, yet he had no doubt that any problems would be resolved by May 1.

He said that the levels of taxation in Europe were too high, especially since this was curbing fiscal competitiveness. However, he noted that the Commission would not stray into national taxation policies, saying that this was the jurisdiction of national governments.

Mr Bolkestein said he did not agree with any changes to the Stability and Growth Pact, even if the Commission was discussing ways of making it more flexible.

The Commissioner earlier held a meeting with Prime Minister Eddie Fenech Adami and addressed the Malta Chamber of Commerce and Enterprise.