24 May 2006

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Business Today

Euro plan B is January 2009

Karl Schembri

Malta’s second chance to join the eurozone should the European Commission and the European Central Bank reject its bid next year will be January 2009, a spokesperson for Parliamentary Secretary for Finance Tonio Fenech said yesterday.
The new date for Malta’s “Plan B” comes just in the wake of Lithuania’s rejected bid to join the eurozone because of its high inflation rate and price instability.
While the prospects of Malta reducing its deficit and national debt remain attainable, the high inflation rate is proving to be a big headache for government to regulate as the soaring water and electricity bills stifle the economy and the prices of medicines and certain foodstuffs jack up the cost of living.
“To join the Euro in 2008, we need to meet all the criteria; that was always made clear from the start,” Fenech’s spokesperson said. “The Government is doing its utmost to ensure that this happens, but in the eventuality that we don’t meet the criteria, we will continue working in that direction and January 2009 will become the next plausible date.”
According to the EU monetary issues commissioner Joaquin Almunia, Lithuania’s inflation rate is expected to reach 3.5 per cent in 2006.
A spokesperson for Almunia said the EU executive was taking into consideration "not just the inflation figure at a particular time" but also how sustainable it is. “Our analysis has proved right,” she said to EUObserver, pointing out that Lithuania's inflation has risen according to fresh data. “The Lithuanian government should now ensure that inflation gets on the downward path so that they can try and catch the train for 2008.”
The EU Commission’s rejection of Lithuania’s bid was however met with controversy as according to a Eurostat survey published last Wednesday, the reference value – calculated using the average inflation rates in April in the three EU best performers (Sweden, Finland, Poland) plus 1.5 percentage points – was 2.7 percent. The corresponding inflation rate in Lithuania was 2.7 percent, with some MEPs reacting angrily to the news.
Graham Watson, leader of the liberal group in the European Parliament, said the commission should not have ignored the most recent information. "We demand an explanation," he said.
Lithuanian liberal MEP Danute Bukreikaite added, "I cannot understand how and why the commission could take such a negative decision regarding our entry to the eurozone based on figures that are no longer current. I dare not believe that there were hidden political considerations."


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