As Malta and Cyprus await the publication of their respective convergence reports tomorrow, they will be working together to ensure a smooth and seamless changeover to the single European currency.
Like Malta, Cyprus is also awaiting the go-ahead from the European Commission to adopt the euro by January next year.
A few months ago, the EC had approached the National Euro Changeover Committee to pass on information to the Cypriot authorities regarding the Fair-pricing Agreements In Retailing (Fair) initiative and other measures introduced as a means of ensuring a smooth changeover.
NECC public and media relations manager Melvyn Mangion yesterday said that a Cypriot delegation is due in Malta on Thursday. The Maltese and Cypriot euro teams will be sharing knowledge on the euro information campaign and logistics.
Although he stopped short of commenting on the NECC’s expectations regarding the EC’s convergence report, Mr Mangion said that should the report be positive for both Malta and Cyprus, the collaboration between the two countries would lead to a more intensive campaign in the coming months.
“Both islands can learn from past changeovers, avoiding certain mistakes while analysing the tools used by countries like Austria, Ireland and France, where the changeover was considered to be very smooth.”
Like Malta, Cyprus is also carrying out an initiative similar to Fair, under which retailers commit themselves not to raise prices and use the dual display of prices system during the changeover period.
Among the presentations that will be given during the Cypriot delegation’s visit to Malta, the NECC is planning to share information on technical preparations, the business awareness campaign, the national training strategy and the euro observatory, just to name a few topics.
The Maltese government submitted its formal application to the EC to adopt the euro on 27 February. In its letter, it called on the EC to analyse whether or not the country’s economic and financial situation was compliant with the established criteria necessary for an EU member state to adopt the single European currency.
The letter specified points regarding the adjustment of the government’s excessive deficit, national debt levels and the rate of inflation, as well as interest rates.
While the deficit was reduced to 2.6 per cent of GDP by the end of last year and should fall by a further 0.2 or 0.3 per cent this year, national debt levels are also under control.
These were reduced from 74.2 per cent of GDP in 2005 to 68.3 per cent last year, but the government’s target is to reduce national debt to the EU reference point of 60 per cent by 2009.
These are the critical factors that will determine whether or not Malta will be fit to join the eurozone in January. Malta certainly made significant strides forward during these past years. Just to name one factor, the country’s deficit amounted to a substantial 10 per cent of GDP until 2003. This decreased drastically to 4.9 per cent of GDP by 2004 and was down by a further 1.8 per cent in 2005.
Deficit levels have decreased steadily since then and according to the National Statistics Office, this amounted to Lm53.6 million, or 2.6 per cent of GDP at the end of last month.
As for the inflation rate, a Eurostat survey recently showed that Malta was the EU member state that registered the lowest annual inflation rate in February.
Tonio Fenech, parliamentary secretary in the Finance Ministry had said he believed the country’s rate of inflation was expected to remain “stable” this year.
Mr Fenech said the country now appeared to have recovered from the shock of the steep rises in the price of oil and was now registering a “deflation”.
In fact, month after month since last summer, the country registered steady decreases in the Harmonised Index of Consumer Prices (HICP), bringing the inflation rate closer to the reference value of the eurozone convergence criteria.
The rate of inflation was the crucial factor behind Lithuania’s failure to pass the euro test last year. The country did not qualify because the inflation rate was 0.1 per cent higher than it should have been and its entry into the eurozone had to be postponed to 2011.