At the SUERF Seminar that was held recently the Governor of the Centrl Bank of Malta spoke about the adoption of the Euro by New Member States, and the challenges and vulnerabilities that may be encountered during the process.
The government has announced that the Euro will be adopted on January 1 2008.
On the basis of 2005 data, amongst the new member states participating in ERM II, only Malta failed to satisfy the relevant criterion with a fiscal deficit to GDP ratio of 3.3%. It is expected that Malta will be within the reference value by the end of 2006. This represents a considerable fiscal consolidation effort, especially when viewed in the context of an average ratio of 6.7 per cent during the period 2000-2005.
This progress is expected to be successful, as it has been based on the restructuring of public sector entities, spending cuts and efficiency improvement, and not solely on tax measures, stated the Governor at the SUERF Seminar that was held recently, the Governor said.
The Governor spoke about the adoption of the Euro by New Member States, and the challenges and vulnerabilities that may be encountered during the process.
The Governor explained that the adoption of the euro is expected to produce significant new benefits for the new member states in the long run, and that literary proof points towards the probability of substantial output growth arising out of increased external trade in countries forming currency unions.
Recent studies, said Governor Bonello, suggest trade gains of between 6 per cent and 15 per cent from the creation of the euro after five years of its existence. On the basis of these estimates, euro adoption could raise the GDP by at least 1 per cent to 2 per cent over 20 years in new member states.
To gain from these prospective benefits, new member states will have to continue making substantial reforms to their economic, financial and social systems, advised the Governor. He said that it is these reforms which seem to be posing major challenges to a number of new member states that are exposing vulnerabilities which could threaten their successful participation in the euro area, unless these issues are addressed.
He concluded by saying that the future must be seen through looking over the recent past and recognising the major steps that the ten new member states had accomplished, in honouring their commitments to achieve the established macroeconomic targets and implement significant structural reforms, often against heavy odds.
See also:
EU funds to finance Euro Information Campaign
By MaltaMedia News - May 5, 2006,
© Copyright 2006 - MaltaMedia Online Network
Top of Page
| 
