the eurosystem for shaping monetary policy in the best interest of 320 million people in fifteen countries. this is a task which my colleagues at the bank and i approach with confidence and enthusiasm. from a national perspective, the challenge now is to maximize the benefits of participation in monetary union by making further progress on the path of reform. three conditions in particular need to be met : fiscal policy must remain supportive of macroeconomic stability ; wage increases must be justified by productivity gains ; and our product and labour markets must become more flexible and competitive. the new phase in malta ’ s economic history which was ushered in on 1 january, therefore, promises to be a challenging one, but it should also be an exciting time. for a country with a population of 400, 000, having a major reserve unit as its domestic currency is indeed a significant advantage. we thus have good reason to feel reassured now that we are about to reinforce our integration in europe with full economic and monetary union. for, while the eu has for fifty years brought peace and stability to the peoples of europe, the single market and emu have created a congenial environment in which economies can grow and people prosper. on another, but no less important level, the euro is also a symbol of a common identity and of shared values and, therefore, a potential instrument for bringing peoples closer together.

making the eu the most competitive and dynamic knowledge - based economy in the world. indeed, the strategy states explicitly that it is essential to exploit the potential of the euro to promote the integration of eu financial markets and also, therefore, sme growth and job creation. with this one should factor in the other elements of emu : the arrangements in place to promote fiscal discipline and economic policy co - ordination ; and the pursuit of price and financial stability by the european central bank ( ecb ). these contribute to a stable macro - economic environment which, together with the climate of greater predictability ensuing from reduced exchange rate risk, support investment and growth. it is with this perspective in mind that fellow central bankers and government officials in the other new member states have expressed their preference for an early adoption of the euro. it also constitutes the motivation for the maltese government ’ s commitment to implement the necessary reforms that will prepare the economy for the heightened levels of competition ensuing from the single market, while providing businesses with a favourable environment in which they should be better able to profit from malta ’ s entry in the euro area. new opportunities for business the benefits of the single currency for business could be substantial, and will occur along the various stages from eu entry through the erm ii period to entry in the euro area. they will, however, become more tangible when the euro is introduced as an accounting and physical currency. at that point, the value of the maltese lira in terms of the euro will be fixed and foreign exchange risk in euro will be eliminated. the need for dual accountancy systems and software will likewise be reduced. the single currency will also minimize the need for maintaining separate cash floats, a widespread practice in the local tourist sector. at the level of the individual firm, the single currency should also translate into a reduction in the risks and costs associated with managing exchange rate fluctuations. when malta adopts the euro, currency risks will be hedged automatically for a large volume of transactions, allowing businesses to focus their resources on those activities which generate real value. for locally - oriented smes in particular, the potential reduction in currency mismatches, and in the volatility in cash flows and profitability associated with them, can be substantial for whatever their dependence on foreign markets in terms of exports, they are all, in varying degrees, consumers of imports. the end result should be lower operating costs, higher levels of efficiency, improved profitability and healthier balance sheets, all of which should result