history of our continent. since malta joined the eu in 2004, and particularly since the maltese lira entered erm ii in 2005, the central bank of malta has been making the case for an early adoption of the euro. and for good reason. for a start, the economy was clearly well suited to participate in economic and monetary union ( emu ) : it has a long history as a market economy ; it is already closely integrated with the euro area through trade and finance ; it has close similarities with the euro area in the sectoral composition of output and employment as well as in terms of business cycle synchronisation ; it enjoys a relatively high level of development, with a per capita gdp close to the euro area average ; and its currency has a long history of stability. the euro, furthermore, offered the prospect of enhancing the economy ’ s potential to grow faster. the elimination of exchange rate risk and currency conversion costs should result in increased trade, while the low interest rate and inflation environment of the euro area should make for reduced business costs and greater macroeconomic stability. combined with the fiscal discipline associated with monetary union, this is expected to translate into higher credit ratings and improved investment prospects. from a central banker ’ s perspective, moreover, a key benefit of euro area membership will be the elimination of the risks inherent in managing a small, vulnerable currency and their replacement by the greater security afforded by the world ’ s second most important currency. finally, the object of our quest, that is participation in emu, was desirable for another reason. we were aware that we would thus become part of a framework that has been successful in fostering economic growth and employment creation. much of the credit for this belongs to the european central bank ( ecb ), whose steadfast commitment to price stability has created an environment conducive to investment, reflected in the fact that interest rates are low across the yield curve. the ecb ’ s credibility in fighting inflation is now so well established, moreover, that long - term inflation expectations are well anchored at around 2 %. price stability clearly yields important welfare benefits. so there are both advantages and opportunities for policy makers and economic agents in the euro area. but in setting out on this new phase of malta ’ s economic development, we must be aware that, while the ecb can, and indeed has, delivered low and stable inflation, it cannot use the interest rate to permanently increase growth. from malta ’ s perspective, therefore, the

michael c bonello : the euro and beyond welcome address by mr michael c bonello, governor of the central bank of malta, at the conference “ emu governance and euro changeover – malta on the path to the euro ”, valletta, 1 october 2007. * * * prime minister, president of the european central bank, mr. jean - claude trichet, commissioner for economic and monetary affairs, mr. joaquin almunia, excellencies, distinguished guests, ladies and gentlemen, malta ’ s forthcoming adoption of the euro represents the final step in the country ’ s integration in the european union ( eu ) and is clearly a major milestone in its economic history. the presence here today of such a distinguished gathering indeed testifies to the importance of the occasion. i therefore would like to start by joining the prime minister in extending a warm welcome to president trichet, commissioner almunia and our other guests from abroad, including the governors and other senior officials of twenty - two national central bank members of the european system of central banks. reaching this milestone has by no means been an easy task. at the level of macroeconomic policy, difficult decisions were called for, and taken, to start addressing existing imbalances and other impediments to growth in order to satisfy the maastricht criteria. as for the logistics involved in preparing for the change of currency, a wide - ranging effort has been undertaken during the past two years to mobilise both the public and private sectors and to coordinate preparations at a national level. it is, therefore, appropriate on this occasion to acknowledge the valuable work carried out by the national euro changeover committee and its steering committee. i would also like to pay tribute to the staff of the central bank of malta for their contribution in preparing the bank for its role as a member of the eurosystem and in planning and executing the currency changeover. during more than two millennia the maltese people have used many different currencies in circumstances often dictated by the changing balance of power in the mediterranean, and reflective of malta ’ s status as a dependency of some larger and more powerful nation. the adoption of the euro, however, is a change of currency with a difference. this time it will occur because malta, out of its own choice, will join fourteen other sovereign member states of the eu in an economic and monetary union designed to complement the single european market, a venture that could rightly be described as an epoch - making development in the