26 November 2003

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Euro-ambitious budget

By Kurt Sansone
Minister John Dalli's budget speech on Monday was the clearest policy statement yet since the election on government's intention to join the euro two years after membership.
It seems that government has taken heed of the advice given by Central Bank governor Michael Bonello on 14 November, who had argued for the early adoption of the euro on the basis that it would benefit the economy more to form part of the single currency market.
Upon EU membership next year, government is expected to apply to participate in the Exchange Rate Mechanism by January 2005. This is a clear signal that government intends joining the euro two years after membership.
The minister was bullish about Malta's prospects to satisfy all the Maastricht criteria in time to join the euro "as soon as possible." In his speech, Mr Dalli said that the country already satisfied criteria related to inflation, interest rates and the rate of exchange but fell short of satisfying criteria related to the fiscal deficit and public debt.
However, the minister forecast a deficit of Lm52 million or 2.2 per cent of GDP by 2006, which would enable the country to satisfy the deficit-related Maastricht criteria.
Mr Dalli was adamant that any strategy to delay the entry of the euro was detrimental to the economy. He warned that Malta could fall back both in the convergence criteria as well as the economic rhythm required to reach the economic growth levels attained by current member states.
No accession country is expected to join the euro before two years have elapsed after membership. And adoption of the euro will still be subject to the strict Maastricht criteria.
kurt@maltamag.com



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