Because of this correction, unit labour costs in the stressed economies have plateaued and are now converging with those in the better performing countries (refer to Chart 4). While unit labour costs in Malta have been lower than in other euro area countries, it is crucial to ensure that higher productivity supports wage growth, thereby safeguarding the country’s competitiveness. Conclusion – Malta as a regional hub In the recent past, our economy was able to attract sectors and niche markets, such as financial and business services, and the aviation maintenance sector. Further investment promotion calls for continued efforts to identify new areas of growth, and to develop a labour force with the necessary skills and qualifications. The financial and other service sectors have been crucial for economic stability and growth. Recent expansion in the financial services sector can serve as a springboard for further development in view of new opportunities in the Mediterranean region. Further diversification of the range of financial and other services will provide opportunities for Malta to develop further as a regional hub for various activities. Proficiency in the English language, a sound legal system, the high standards of the legal and accounting professions and the mantle of EU membership offer fertile ground for those who want to do business here. Certainly, a growing financial sector needs to be supported and protected by appropriate legislative and supervisory frameworks to ensure that potential risks are minimized. Malta has managed to host a relatively large financial sector without exposing itself to excessive risks.
The financial stability analyses focus on macroeconomic stability factors and on the strength and soundness of the financial system as a whole. The Bank addresses both these principal areas with a strong professional ambition. Its two main fields of analysis reinforce each other and benefit from close cooperation among the staff. Both areas have forced us to put our analyses, projections and policies on a longer-term perspective which provides an opportunity for better overall economic and monetary policy management. Although much remains to be explained about the nature of the interaction of monetary and financial stability, I mentioned earlier that a sound financial system is a precondition for economic and monetary stability and the implementation of an effective monetary policy. In this respect, these areas support each other. Since financial liberalisation was introduced, we have not faced circumstances where financial stability concerns have directly affected or conflicted with monetary policy decisions. Our aim is to prevent such a situation from arising. The potential risks to financial stability at the end of the last upswing were defused by the swift achievement of monetary stability and the restoration of internal and external balance. In conclusion, I would like to repeat my warm welcome to all the participants in the seminar. I trust that both the seminar and your stay in Iceland will be interesting and rewarding, professionally and socially. BIS Review 34/2004  3