Subject to the caveat referred to above, these experts generally share our conclusion that there is no unequivocal indication of a significant misalignment in the exchange rate. If our EU counterparts in the ERM II-related decision-making process also share these views, one would, therefore, expect Malta to join ERM II with a central parity rate which broadly corresponds to the current exchange rate level. Some commentators have cautioned against what in their view is a hasty approach to euro adoption. How would you respond? A judgment as to whether the path to euro adoption is hasty or otherwise can only be made in relation to the economic principles which underlie the criteria and conditions attached to participation in EMU. This is precisely the approach taken in the Treaty, which contains indicators for measuring the degree of economic preparedness of a country, as also in our own study. The obligation to participate in ERM II for a minimum period of two years serves that purpose. The underlying premise is that once a country reaches the point at which it can derive the considerable, undeniable benefits of monetary union, it should do so. In the case of a small, open economy which must support an independent currency in a fully liberalised trade and capital environment, these benefits must also be evaluated in the light of the costs and risks - which are not negligible - of delaying participation. The report presented to Cabinet builds on that approach.
Before it can adopt the euro, a member state should have fulfilled the convergence criteria, known as the Maastricht criteria, on the interest rate, inflation and public finances, achieved a high degree of structural similarity with the euro area and completed the necessary logistical, administrative and legal preparations. Details of these preparations were explained in an article which was published in the June 2003 edition of the Bank's Quarterly Review. The Treaty, however, does not specify a target date for the completion of these preparations. Neither does it specify a date for entry in ERM II. You have pointed out on several occasions that you are in favour of an early adoption of the euro. What are your arguments for that? What are the implications of a delayed entry? The importance for Malta's small, open economy to lock in, at the earliest practical opportunity, the increased economic security and credibility which this step implies is indeed acknowledged by all the experts the Bank has exchanged views with. This is because the euro offers the prospect of being anchored in the relative safety of the world's largest economy. This would not only mean reduced exchange rate risks and less uncertainty for Maltese economic agents and their foreign business partners but it would also eliminate the need to maintain higher interest rates to compensate for the element of risk associated with the small size of the Maltese economy.