value for the inflation rate was undershot by ten member states. in the other five member states ( greece, italy, portugal, spain and the uk ), the pace of inflation had slackened distinctly. by contrast, the consolidation of government finances remained unsatisfactory. thus, the financial deficit of the majority of countries overshot the reference value of 3 % of gdp. the level of government debt was above the reference value of 60 % of gdp in no fewer than eleven countries. as a result, the european council decided in december 1996 that the conditions for the launch of the single currency had not yet been met, and that emu should therefore not be launched until the beginning of 1999. the convergence assessment required to that end took place in the spring of 1998, on the basis of the economic statistics for the year 1997. by that time, the pace of price rises in all eu countries other than greece had dropped below 2 %, so that the ceiling of 2. 7 % for the inflation rate was no longer much of an obstacle. greater convergence had also been achieved in exchange - rate movements and in long - term interest rates. hence almost all attention was focused on the question of which countries could be said to have a sustainable government financial position. in 1997 only greece overshot the reference value for the budget deficit, but the reference value for the level of debt was still exceeded by eleven countries. the scale of the overshootings ranged from a few percentage points to a debt level of over 120 % of gdp in the case of italy and belgium. after long discussions, the european council decided on may 2, 1998 to launch a monetary union consisting of i would like to thank christina gerberding and axel jochem for their valuable contributions to this paper. eleven member states. of the four eu nations not taking part, denmark, sweden and the uk had previously declared that they would not join emu on january 1, 1999. greece met none of the convergence criteria. ii. differences in growth and inflation rates since the launch of monetary union 1. scale and progress of the divergences since january 1, 1999, the european central bank has been responsible for longer - term price movements in the euro area. but the single monetary policy does not rule out the possibility of individual member states ’ inflation rates diverging from one another. as a matter of fact, a number of statistical indicators show that the inflation differentials between the member states of emu have widened somewhat again since the

eucompliant legislation and access to passporting rights in the vast european market, which allows licensed financial institutions to exploit previously unavailable avenues for growth. malta has also capitalized on its other strengths. its small size facilitates access to the single regulator, allowing for a swift licensing process and the possibility of custom - made solutions. the financial services industry is supported by a modern telecommunications infrastructure and a plentiful supply of experienced, english - speaking tax professionals, legal and accounting firms and other service providers. labour and rental costs are competitive, while malta ’ s geographical position enables it to serve as a finance hub in the mediterranean region. these attributes are complemented by a competitive tax regime. in the 2008 forbes tax misery and reform index, malta was classified as the fifth most tax - friendly country worldwide for companies and the most attractive in the eu. in addition, malta has an extensive network of almost fifty double taxation treaties, and income earned overseas may be exempted from double taxation even when no bilateral treaty exists. malta ’ s development as an international financial centre is reflected in the range of financial services available. complementing the traditional retail functions, banks are increasingly offering private and investment banking, project finance, treasury services and syndicated loans. malta also hosts a number of institutions specializing in trade - related products such as structured trade finance, factoring and forfeiting. at the end of last year, the number of banks stood at 22, up from 17 in 2004. the assets of the banking system, including both the domestically and the internationally - oriented banks, totalled €41. 9 billion at the end of 2008, an increase of 10. 5 % over 2007 and nearly double the total in 2004. other areas, too, have experienced rapid growth. these include fund management and collective investment schemes, captive insurance, asset management, back office processing facilities and call centres. following the recent legislation on professional investment funds, considerable interest has also been shown by the hedge fund industry. the establishment of specialized international institutions has enabled malta to place 34th among 134 countries in terms of financial market sophistication, according to the global competitiveness report 2008 / 09, published by the world economic forum. the same report ranks the balance sheet soundness of maltese banks in the 10th place. the sustained growth of the financial services industry is having positive effects on the real economy. the number of persons employed in the industry rose from 4, 300 in 2004 to around 6, 000 in 2008. furthermore, these figures