share and competitive pressures. in addition, a disproportionately high percentage of these businesses reported higher costs in 2009. in this regard, the automatic adjustment of wages to inflation through the cola mechanism, irrespective of the level of productivity, is one of the factors that has been contributing adversely to the cost structure of these enterprises, and consequently to their competitive position. here i must reiterate that a currency union member country like malta, whose only sustainable source of long - term growth are its exports, cannot afford to allow nominal wages to grow faster than productivity, which is what has happened during the past decade. the competitive position of these enterprises is also constrained by their ability to introduce more efficient production processes. the proportion of enterprises that did not undertake some form of restructuring last year was one of the highest in europe. this is probably one reason why malta has lagged behind its european peers in pursuing the targets set by the lisbon innovation scoreboard, in particular in the areas of entrepreneurship and human resources. 6 another frequently mentioned cost factor are administrative burdens. this is an endemic problem in malta, confirmed by a recent survey in which a reduction in such burdens featured as the priority recommendation by executives of foreign - owned companies operating in malta as a means of enhancing the attractiveness of the island to foreign investors. 7 finally, with regard to the constraint represented by the small size of the domestic market, maltese entrepreneurs have no option other than to attempt to break into foreign markets. this is not an easy task. during the past decade, malta has registered one of the slowest european innovation scoreboard 2009. link available at : < > http : / / www. proinno - europe. eu / sites / default / files / page / 10 / 03 / i981 - dg % 20entr - report % 20eis. pdf ernst & young ’ s 2009 malta attractiveness survey. average annual export growth rates in volume terms in the eu. survey information from micro and small enterprises reveals that the most frequently cited obstacles to exporting relate to taxation issues in foreign markets, inadequate market intelligence and insufficient capital. 8 recent initiatives and the way forward this suggests the need for a comprehensive strategy to help these small enterprises exploit the opportunities offered by the eu single market, building on the existing public and private initiatives. the budget for 2010, for example, included measures aimed specifically at easing some of the constraints i have just referred to. chief among these is a

- accession economic programme report for 2002, where it is noted that the current regime has served malta well in promoting real and nominal convergence. in view of these considerations, and given the importance which exchange rate stability has for trade and investment, the current regime remains the preferred arrangement for malta. taken together, therefore, the institutional arrangements governing erm ii and the successful experience with the current fixed exchange rate regime suggest that the way forward will consist of a gradual reduction in the weight of the us dollar and sterling in the currency basket, such that by the time malta will be ready to join erm ii the euro will be the sole reference currency. if the united kingdom were to join emu in the meantime, this would automatically raise the proportion of the euro in the currency basket, making the approach to erm ii that much easier. consistently with this objective, the weight of the euro in the basket was increased from 56. 8 % to 70 % last august. given that malta ’ s optimal exchange rate strategy in the run - up to erm ii has been identified, the next question concerns the choice of the central exchange rate and the fluctuation bands. the choice of the central exchange rate and fluctuation bands some might argue that the choice of the central rate is not vitally important. after all, the central rate can be re - aligned if necessary, although such a move would require the agreement of the ecb and the other national central banks participating in the euro area. in practice, however, the initial central rate chosen is important because it conveys a signal to the market about what the ecb and the national authorities consider to be the equilibrium exchange rate. the determination of the central rate is also crucial because if the selected rate turns out to be incompatible with economic fundamentals, market intervention by the ecb and the central bank of malta could become too frequent in relation to the resources available. determining the appropriate central rate, however, is not an easy task. nevertheless, though the available evidence suggests that in the current economic climate the maltese lira exchange rate is sustainable at prevailing levels, work is being undertaken in order to estimate an equilibrium rate. the second choice concerns the fluctuation band. it is a matter of choosing between the lower degree of uncertainty and volatility associated with a narrow fluctuation band and the flexibility inherent in a wider fluctuation band. on the one hand, the flexibility necessitated by the absence of capital controls would strengthen the case for a