above example ). proponents of more government spending should also bear in mind that even in the absence of the euro adoption factor, malta would still have to abide by the stability and growth pact ( sgp ). you might recall that even the british government, which has no immediate plans to adopt the euro, was called to order by the eu council some time ago because of its growing budget deficit. then again, sound public finances are fundamentally a matter of economic common sense and prudence. so much so that in recent years there have been repeated calls on the government from all quarters to reduce the deficit and the public debt. is it not strange, therefore, that just when headway is finally being made in this very direction, we hear calls for a reversal of this policy and for engineering what would at best be a short - term boost to growth? one should also bear in mind that malta ’ s main challenge is to become more internationally competitive. in this respect, an increased fiscal deficit will not solve anything. malta needs quality growth, preferably resulting from foreign direct investment, which brings with it capital, technology and markets. and that kind of investment tends to go to countries with sound economic fundamentals, including a budget that is balanced over the course of the business cycle. more immediately, if we renege on the convergence programme targets, there would be a real risk of a drop in investor confidence. this is confirmed by recent developments in interest rates and in bond markets in central europe, where markets have started to punish countries who risk delaying euro adoption. it is indeed relevant to point out that malta ’ s current ‘ a ’ rating is predicated upon the continued pursuit of fiscal consolidation. there is an additional short - term gain from staying on course. as i have mentioned, fiscal restraint also helps to reduce the country ’ s external imbalance, and this, in turn, could allow a cut in the interest premium that investors require in order to hold maltese lira assets. this would mean lower interest rates. on balance, therefore, the outcome of a u - turn on fiscal policy is unlikely to be positive. 4. last year ’ s entry in erm ii has been described as hasty and premature. why the rush to join the euro? does it not rule out any possible adjustments to the value of the lira? one of the arguments made in support of this view is that our euro adoption calendar does not allow government to run a higher deficit and thus promote faster growth. i

##isation purposes. the adoption of the euro will also integrate further malta ’ s financial system with that of the euro area, so that the bank ’ s financial stability and internal audit responsibilities will assume a cross border dimension because weaknesses in any one member state could impact directly on the stability of the entire system. for example, we will have to cooperate closely with other central banks and the ecb to prevent the emergence of systemic crises. this will involve strengthening our institutional and analytical capacities to detect potential vulnerabilities in our own financial system. as for the audit role, we will have to provide internal control assurances to the ecb on all the functions we will be carrying out on their behalf. all of this, of course, has important implications for essential support functions such as information technology and human resources. i need only mention the fact that euro area membership entails considerable electronic reporting obligations and the maintenance of several statistical databases. the bank is gearing up to take on these new, more specialized functions, and i would like to note that it is only able to do so with confidence because it has a substantial core of qualified and dedicated professionals in all these areas.