On a daily basis, moreover, the Central Bank of Malta liaises closely with the NECC, the Malta Bankers’ Association and other entities which for years now have been participating in joint technical meetings covering key operational areas, including the functioning of money and capital markets, payment systems and the gathering of statistical data. The Bank also has an internal plan, encompassing some 200 different tasks as well as time frames within which they need to be completed, for an orderly transition to the euro. This plan was drawn up using a bottom-up approach, with each department developing its own programme for adapting structures and procedures to the policy and operational requirements of EMU. Plan implementation is on track. Steps have already been taken to align the monetary operations, accounting and financial reporting frameworks with those of the Eurosystem. The Bank has also completed most of the necessary upgrades to its IT hardware and operating systems to ensure that it can exchange information and settle transactions with the Eurosystem in a seamless fashion. As far as the Cash Changeover Plan is concerned, this too is on schedule. The physical facilities for the storage and distribution of cash have been completed, the test run for the minting of Malta’s euro coins has commenced and arrangements for the procurement of euro notes are about to be finalised.
The benefits of the euro for individuals and businesses, its contribution to a more effective participation of Maltese enterprises in the Single Market and the possibility of using the euro as a means of competing on international markets were also important considerations. But while there were many compelling reasons for an early adoption of the euro, there was also an understanding of the need to avoid the economic costs of a premature entry. Consequently, there was some hesitation in adopting an ambitious reform programme. These concerns were well-founded. At the time Malta was preparing to join the EU, the economy was emerging from a period of stagnation, a widening output gap and a slow pace of productivity growth. In addition, while the Government planned to reduce the budget deficit from almost 10% of GDP in 2003 to below 3% by 2006, an adjustment of that magnitude clearly presented considerable political risks, not least because some fiscal tightening was already underway. The unemployment rate, meanwhile, was edging upwards in response to the ongoing restructuring process and the further liberalisation of markets as a result of EU accession, making any further retrenchment painful for most households. 1  For a fuller treatment of Malta’s case for adopting the euro, see Malta’s Strategy for Participating in Economic and Monetary Union and Adopting the Euro, Government of Malta, Central Bank of Malta, April 2005. BIS Review 77/2007  1  At the same time, many indicators suggested that Malta was well suited to participate in the EU single currency area.