Prime Minister Lawrence Gonzi told Parliament this evening that euro adoption was a major step in socio-economic development, but it should only be seen as a point of departure for Malta .
“We have to continue working hard to fully translate euro adoption into greater wealth and to keep public finances on a sound footing so that we can overcome all the challenges which lie ahead .
“Through euro adoption we have given Malta a valuable tool to tackle its challenges and achieve the targets set for 2015,” Dr Gonzi said in a statement.
Dr Gonzi traced the process leading to euro adoption and said the historic step taken on January 1 consolidated Malta’s integration in Europe in line with the long-held government vision.
Euro adoption meant that Malta had achieved tough economic criteria and had now become a more attractive investment destination.
With EU membership in 2004, the government acknowledged that the full potential of accession could only be realised if Malta adopted the euro. In contrast to the opposition, the government believed in European integration while the MLP had wanted an isolated Malta as a Switzerland of the Mediterranean.
The opposition had recommended that Malta put off euro adoption until the economy achieved a growth rate of between 3 and 4 per cent, which, it said, would be around 2010.
The government, on the other hand, saw euro adoption as an essential ingredient for economic growth. Indeed, thanks to the measures taken for Malta to achieve economic convergence for euro adoption, the Maltese economy was now already growing at 4 per cent in real terms, four years earlier than the opposition had projected.
Dr Gonzi said euro adoption meant several advantages for Malta. For one thing, Malta was now part of a zone where monetary policy, exercised by the European Central Bank, was based on price stability and better control on inflation.
Consumers could now enjoy better price transparency because prices here and in the other eurozone countries could be easily compared.
Traders with eurozone countries now no longer had excchange risks or exchange costs.
There was also easier access to financial markets, with lower interest rates benefiting businesses and home buyers.
As confirmed in recent days, Malta was also enjoying improved credit ratings, making it more attractive for investment.
Dr Gonzi recalled how on May 2, 2005, Malta joined the Exchange Rate Mechanism (ERM II) and launched its economic convergence plan. Some were sceptical that the targets would be achieved. Others simply did not believe the government could do it. Some feared that a reduction of government spending would stagnate the economy.
Yet the Maltese economy which was creating jobs and wealth , with the government not having increased taxes in three years and actually having reduced them in the last two.
It was worth recalling that this government had reduced the deficit from just under 10 per cent to 2.6 per cent and by the end of 2009 Malta would have a balanced budget. The debt had also been reduced from 74 per cent to 64 per cent. These results were not achieved by coincidence. It was thanks to this hard work that Malta had the lowest rate of inflation in the EU.
Malta also had a record number of gainfully occupied, the lowest number of unemployed workers, record tourist arrivals and the highest number of people in post-secondary education.
Malta had also achieved a high degree of financial stability with the exchange rate having remained stable throughout the two years of the ERM II period and low interest rates on long-term government borrowing.
These results, Dr Gonzi said, were achieved against the background of an uncertain international economic situation, with oil prices having started their upward march six months after Malta joined ERM II.
Oil prices had reached $100 a barrel and some expected them to rise even further. Furthermore, Malta, like all other economies, were buffeted by the impact of rising cereal prices. These were economic reaities which underlined the need for Malta to stay focused on its economic targets to overcome the challenges ahead.
Dr Gonzi said the opposition was continuing to argue that the government should have devalued the lira by 10 per cent. This was yet another example of bad advice by the opposition and a perfect recipe for a higher cost of living. 10 percent of the people’s savings would have been wiped out at a stroke.
The Prime Minister recalled how in February 2007 Malta submitted itself for analysis and was subsequently accepted for eurozone membership, which came about on January 1.
He praised and thanked the Central Bank, the NECC, the public service and all those agencies and private sector organisations - such as the GRTU, the Chamber of Commerce, the MHRA and the UHM - involved in the preparations for euro adoption, saying their detailed preparations had paid off and the people were already getting used to the new currency.
An important element in the lead-up was the work done by the public sector, which included extensive legislative amendments and changes to 250 computer systems. “All went without a hitch except for the ATM!,” he joked.
The Prime Minister thanked the banks for their service and urged them to do their best to reduce delays by extending services to shops and consumers.
He said that consumers were by and large cooperating in the transition process but unfortunately some had not heeded the NECC advice to immediately start paying in euro and not use the shops as if they were the banks, making small purchases with big amounts of Maltese cash.
Shop owners, he said, had done an amazing job before and after the transition and were continuing to do their best to give their consumers good treatment.
He warned, however, that any complaints of abuse, however small, would be investigated with the seriousness which consumers deserved.