The Central Bank of Malta has been collaborating with the Ministry of Finance and the Ministry of Economic Services in the preparation of the necessary documentation. To date, like all other accession countries, Malta has submitted two PEPs. Conclusion The road to EMU is clearly not an easy one as the tasks involved are both numerous and difficult. For a small central bank with limited resources they represent a formidable challenge. On a policy level,  BIS Review 70/2002  5  there are reasons to believe that the current fixed exchange arrangement should ideally be maintained until Malta adopts the euro. It should also be clear, however, that the Government’s commitment to contain the fiscal deficit and to pursue structural reforms is a vital prerequisite for the sustainability of the fixed exchange rate regime. The importance of fiscal discipline and of product and factor market flexibility will indeed increase as Malta progresses towards EMU. 6  BIS Review 70/2002
Looking at the countries, which experienced a similar process that Turkey went through, it is clear that the falling inflation period differs from the environments where chronic inflation had previously existed or price stability is maintained afterwards. The falling inflation process is a transition period. Therefore, the features of the targeted price stability environment and the former high-inflation period can appear together. This can be explained by the fact that some sectors and economic agents can adapt themselves to the process relatively fast, while some sectors, failing to adapt to the new environment, take on different expectations and perception of risk factors shaped in the framework of their former habits. Let me elaborate this point as it is of great importance with regard to the achievement of price stability. In relatively fragile economic environments such as Turkish economy, where price stability has not yet been fully maintained and current policies have not gained credibility, some economic agents may take the exchange rate, monetary aggregates, interest rates and similar aggregates as reference while  BIS Review 63/2004  1  making their decisions. Therefore, as you will agree with me, expectations and risk perceptions in the economy will change according to the size of the referenced aggregate. In this period, some of the economic agents that I have mentioned are negatively affected by the referenced aggregates, which are adopted in accordance with the former habits that contradict with economic realities.