a marked improvement in the deficit in 2006 to 6. 3 % of gdp. in the long run, however, this imbalance needs to be further reduced to a more sustainable level. this can only be achieved to the extent that growth is driven more by export - oriented activities and less by consumption. in view of the large amount of currency in circulation and your interest in ensuring a smooth changeover to the euro, what advice would you give to the public in this regard? as i said earlier, the amount of currency in circulation has been contracting and there is evidence that cash hoards and bank deposits are being converted into euro. we are trying to discourage this premature conversion because portfolio diversification at this stage is expensive and makes little sense. in the case of maltese lira bank deposits, these will be converted automatically, and at no cost, into euro on the changeover date. as for cash conversions, people who are buying euro currency notes from banks and other financial institutions are having to pay exchange commissions ; those who obtain euro notes outside the banking system are being offered an even more unfavourable exchange rate, besides running the risk of receiving counterfeit notes. these early conversions, moreover, constitute a drain on the bank ’ s reserves. we are, therefore, encouraging the public to deposit maltese lira cash holdings into the banking system and retain them in maltese lira denominated deposits, thereby earning interest. in this regard, some of the domestic banks have launched special deposit schemes to attract such funds. those who already hold lira deposits, bonds and similar assets do not need to do anything. such assets will be automatically converted into euro when the changeover takes place, and free of any charges. for those who own maltese lira and euro assets that represent income previously not declared for income tax purposes, the recently launched special registration scheme represents a timely opportunity for such persons to regularize their holdings in terms of the law. in summary, therefore, i would say that there is no advantage to be gained by converting maltese lira assets into euro before the changeover date. from that date onwards, there will be an ample supply of euro notes and coin to satisfy the needs of the public. more importantly, euro currency will be provided at the official conversion rate without any changes or commissions. still on the euro, do you think that people are as worried about inflation as they were? according to the eurobarometer poll taken in september 2006, some 70 % of maltese respondents said

them permanent are needed to bring the recently high budget deficit towards a more comfortable level in 2011. the resulting budget deficit of 6 % is not a magic number, though! circumstances permitting, the deficit could be even smaller, provided latvia with higher rating, lower interest rates, new investments and new jobs. this would also bring us much closer to the euro introduction in 2014 as an exit from the international support program. i am perfectly aware that this is not an easy task ; however, it is realistic should we have a strategic mindset and enough ambition. in conclusion let me quote the estonian president toomas hendrik ilvess from what he said back in april 2009 during a meeting with his latvian counterpart valdis zatlers : “ in estonia we know that tax revenue is lower than expected and additional steps are required. (.. ) at times when money runs out, there are no simple or pleasant solutions left – expenditures have to be cut. it is an illusion to think that we will be able to spend money, which we actually do not have. that is impossible – for individuals and states alike. therefore – if one does not have the money to spend, expenditures have to be cut. the question then naturally is – where to cut. i believe that both estonia and latvia are clearly aware that it is fiscally responsible to make these complicated choices now and not dump these complicated choices on the future generations. thank you for your attention!