Michael C Bonello: The adaption of the euro Welcome address by Mr Michael C Bonello, Governor of the Central Bank of Malta, , during the concert held to mark Malta's membership to the euro area on Saturday, Valletta, 12 January 2008. *  *  *  You have joined us here today to mark a major milestone in our country’s economic history. During more than two millennia the Maltese people have used many different currencies in circumstances most often reflective of Malta’s status as a dependency of some larger and more powerful nation. The adoption of the euro, however, is a change of currency with a difference. This time it has taken place because Malta, out of its own choice, has joined fourteen other sovereign Member States of the EU in an economic and monetary union designed to complement the Single Market, a venture that could rightly be described as an epoch-making development in the history of our continent. For Malta, as for the other new members of the euro area, the euro offers the prospect of enhancing the economy’s potential to grow faster. The elimination of exchange rate risk and currency conversion costs should result in increased trade, while the low interest rate and inflation environment of the euro area should make for reduced business costs and greater macroeconomic stability. Combined with the fiscal discipline associated with monetary union, this should translate into higher credit ratings and improved investment prospects.
But it would be disappointing if that debate degenerates into recrimination and antagonism. That would be to obscure the remarkable consensus that now exists - throughout the European Union and indeed more widely, and across a broad spectrum of political opinion within the countries of Europe, including this country, on the broad approach to macro-economic management. This unforced consensus extends to monetary policy directed to price stability, and it extends to budgetary policy directed to medium and longer-term fiscal sustainability. There is growing recognition, too, across the continent, of the importance of structural policy directed to supply-side flexibility. This strengthening consensus is fundamentally important - more fundamentally important, in terms of the economics of it at least, than whether these common objectives are pursued inside or outside the framework of monetary union. Pulling these thoughts together, it would be a mistake in my view for monetary union to go ahead without reasonable confidence of genuine, sustainable, convergence between its members; and it would be a mistake for any individual country to seek to join, or to be permitted to join, unless it had achieved genuine, sustainable, convergence. If there are serious doubts - generally or in any particular case - it would be in no-one’s interest to proceed. But it would be just as big a mistake, if monetary union does not go ahead, or for countries on the outside, if individual governments saw that as an opportunity to seek to take short-term advantage of the apparent macro-economic freedom that that gave.