The convergence of productivity and living standards gives rise to differentials in inflation rates via the rate of increase of non-traded goods prices. Countries with higher levels of economic development tend to have higher prices of non-traded goods. BIS Review 123/1999  2  Higher living standards mostly reflect high productivity in the traded goods sectors but, given integrated national labour markets, wages are generally higher in the economy as a whole and although the scope for productivity gains may be more limited in the non-traded sectors of the economy, a general rise in wages tends to lead to higher relative prices in the non-traded to traded goods sectors. The euro area countries undergoing this catch-up process will, therefore, in general have higher inflation. As an ultimately temporary but nevertheless protracted phenomenon, there is also an ongoing process of convergence of prices of individual goods. Price differences across countries will tend to be reduced for goods and services which are widely traded across national boundaries as a result of increasing integration of the single market. The introduction of the euro can, of course, be expected only to intensify this process through increased price transparency and the elimination of exchange rate risk. Are national differences a cause of concern? Are differences in growth and inflation among euro area countries a matter of concern? In terms of growth, there are no indications that the differences are particularly large or unusual.
I am pleased to see that the recent euro barometer showed a steady progression in the satisfaction of the Maltese with the adoption of the euro (from 40% in September 2005 to 64% in June 2007). Let me hand over the euro star to Governor Bonello to symbolically flag that the Central Bank of Malta will join the Eurosystem on 1 January 2008. We look forward to welcoming you wholeheartedly into the euro area. Thank you very much for your attention. BIS Review 110/2007  1