19 SEPTEMBER 2001
By David Lindsay
Eventual membership of the European Monetary Union is undoubtedly one of the government's goals over the longer term. While some EU candidate countries plan on joining the common currency immediately upon accession, the Maltese government's views on the subject are still a bit ambiguous.
The stance is correct, according to Pablo Solbes, EU Commissioner for Economy and Monetary Affairs, who is adamant that the best way to prepare for eventual EMU membership is to simply meet the economic criteria for EU membership itself.
At the Euro 2002 conference held in Budapest last week, the Commissioner urged candidate countries not to attempt reaching convergence criteria laid out in the Maastricht Treaty prematurely. As he explains, "In the run-up to accession, the candidates should concentrate primarily on furthering the process of structural and economic reform leading to strong, well-functioning market economies.
"This also requires build-up of the appropriate administrative and institutional capacity. In so doing, candidates will also increase their future capacity to grow, and to grow faster than the EU average, which will be the only way to close the high income gap with current Member States.
"However, it is essential that joining the euro is not seen as an end in itself. The ultimate objective is a full and successful economic integration. By the time the accession of the first new Member States takes place, the euro will have been in circulation for some years. The procedures and practices of economic policy co-ordination will be further developed, the euro's market reputation will be more firmly established.
"It is the stated intention of most future Members States to adopt the euro as soon as possible after accession and a successful euro will certainly increase this desire. The existing Member States and the candidate countries have a common interest to pursue policies which are mutually supportive and which lead to a successful economic and monetary union and a stable euro."
In line with EU policy, upon accession to the EU the new member states will participate in the EMU with the status of member states with a derogation from adopting the euro.
However, at that point there will be some obligations, with the new member states being required to treat their exchange rate policies as a matter of common concern and they are expected to join the exchange rate mechanism, the ERM2.
Once the new member states reach a high degree of sustainable nominal convergence, which means fulfilling all Treaty convergence criteria, including at least two year participation in the ERM-2, in a sustainable manner, they can adopt the euro. The equal treatment principle, will be applied in full to the candidate countries.
The EU is also ensuring that the "sequencing" towards economic and monetary integration is right, by encouraging and monitoring progress towards the fulfilment of the Copenhagen economic criteria.
These criteria require candidate countries to be functioning market economies, able to cope with competitive pressures and market forces within the EU by the time of accession.
Mr Solbes emphasises, "I have had the opportunity to stress this point previously, but I will relentlessly continue to do so: I firmly believe that in the transition countries, implementing the economic reforms required for accession to the EU is the most proper way to prepare for EMU participation."
This week's issue of the Malta Financial and Business Times applies
a special focus to the euro.