started to abate, moreover, the hicp inflation rate has stayed below the eu reference value since last november. meanwhile, the maltese lira continued to trade at the central parity rate against the euro in erm ii and the long - term interest rate converged further towards the reference value. as for the economic recovery, although this partly reflects stronger demand in malta ’ s main trading partners, it also owes something to the reforms implemented in recent years. these included measures aimed at increasing participation in the labour market and improving its functioning. school curricula have been modified and training opportunities broadened. there has also been heavy investment in ict infrastructure and education, as well as better targeted financial and technical support to smes, including a privately - managed venture capital institution. on the fiscal front, steps have been taken to reform the pension system and to avoid abuse of the social benefit system and tax evasion. in some areas, however, the pace of reform has been modest and the central bank of malta has repeatedly called for the remaining weaknesses to be addressed. in particular, more effort is required to ensure that domestic inputs are priced competitively, and hence the need for continued wage moderation ; to raise productivity levels ; and to ensure faster progress towards key lisbon agenda objectives such as educational attainment and innovation. measures aimed at strengthening the economy ’ s physical infrastructure and the quality of its human capital, a more efficient delivery of support services by the public and private sectors, and enhanced competition both in product and resource markets are crucial in this regard. this is the only way to increase the economy ’ s capacity to respond flexibly and competitively to new challenges and opportunities, and thus derive the full benefits of emu. a high level of economic convergence and flexibility, however, are not sufficient for a successful transition to the euro. this also requires both careful logistical planning and public acceptance of the single currency. as for the former, the necessary structures have been in place for two years and they seem to be working well. at the apex stands the national euro changeover committee ( necc ), which has drawn up a national master plan. the central bank of malta is represented on the steering committee which oversees the work of the necc, it participates in the financial sector committee of the necc and it is also present on a task force responsible for co - ordinating national training activities related to the euro. on a daily basis, moreover, the central bank of malta liaises closely with

ceps forum : reconstructing the union emu governance : a reality check address by dr mario vella governor of the central bank of malta brussels, 23 february 2017 the five presidents ’ report on completing europe ’ s economic and monetary union argues that economic and political convergence underpinning emu needs to go deeper if it is to ensure prosperity for all its members and fairer outcome for its citizens. in the first phase, which was meant to be completed in june, the report envisages a number of steps including : − a new boost to convergence, employment and growth, through the creation of a euro area system of competitiveness authorities and stronger implementation of the macroeconomic imbalance procedure ; − the completion of the banking union and the launch of the capital markets union ; − the establishment of a new advisory european fiscal board ; − a reorganisation of the european semester, with greater parliamentary control and accountability. the commission should soon be publishing a related white paper on the future of europe. before moving forward, let ’ s see what ’ s been achieved so far. in the twenty - five years since the maastricht treaty was signed, the euro has been established a successful currency. it is widely accepted as a medium of exchange and store of value, not only within the euro area itself, but also beyond it. it enjoys popular acceptance and support. although the process of financial integration in the euro area was heavily disrupted in the aftermath of the global financial crisis in 2008 and the sovereign debt crisis in the euro area in 2011, the single currency area has held together. these gains should not be lightly discarded. but the double shock of the financial crisis and the subsequent fiscal crisis has hit emu hard. the euro area economy is currently in a moderate, gradual recovery that has been under way since the second quarter of 2013. however, in some member states that were hit the hardest by the sovereign debt crisis, output remains considerably below the levels registered in 2008. unemployment rates diverge considerably across the euro area, ranging from over 20 % in greece to below 4 % in germany. the euro area is facing pressure along four different fault lines. first, there is the tension between euro area member states that are in different cyclical and, in some cases, secular positions and yet face the same nominal interest rate and exchange rate. second, there is the related tension between monetary policy that is determined at the level of the euro area as a whole and fiscal policy which has remained, in effect,