In this context it is important to note that these opportunities are now also available to the other nine new Member States, so that the benefits of membership cannot be taken for granted. On a macro level, success in this endeavour will depend on the overall competitiveness of the economy; and, on a micro level, on the efficiency with which the country’s resources are utilised and on the ability of the business community to identify profitable opportunities and exploit them in the new operating environment. It is to these issues that I next turn my attention. Policy orientations for growth There are no easy or short-cut solutions to promote economic growth in Malta. Measures aimed at stimulating demand, through fiscal or monetary expansion, can only be effective in the short term. And in any case, their impact is limited. This is because they do not help to expand the economy’s supply capabilities, which is a prerequisite for sustained growth. In the current situation characterised by high fiscal and external deficits, moreover, the stimulation of aggregate demand would do more harm than good to the country’s economic prospects. Living standards can only be raised on a sustained basis if we succeed in adding value to imported inputs and by providing services in a manner that is cost-effective in relation to our competitors. With regard to growth-oriented policies, inspiration can be obtained from a number of EU programmes, including the Lisbon Agenda for Competitiveness and the Stability and Growth Pact.
Although most Member States have fallen behind in meeting the targets of the Lisbon Agenda, Malta must make even more pronounced efforts to achieve them, particularly in the areas of human resource development and innovation. The National Action Plan for Employment is a step in the right direction, but it can only produce the desired results if all social partners take ownership of it. With regard to macroeconomic stabilisation, the successful achievement of the Convergence Programme objectives would restore the use of fiscal policy as an instrument of economic management and lead to a better allocation of resources in the economy. It would also contribute to a smooth transition through ERM II and towards the adoption of the euro. As a small and highly open economy, Malta stands to benefit significantly from the introduction of the single currency, mainly through the elimination of exchange rate risk and uncertainty and lower interest rates and transaction costs. On the microeconomic level there are a number of issues which need to be tackled to improve the efficient allocation and use of resources and to raise productivity. Unlike macroeconomic policies, which tend to yield results only in the medium-term, efficiency improvements at the micro level are likely to produce more immediate benefits in terms of new economic activity and job creation. The truth is that sustained improvements in the country’s economic fundamentals cannot be attained without enhanced efficiency and productivity in both the public and private sectors. The achievement of such improvements requires efforts on a number of fronts.