Former Governor of the Central Bank of Malta Michael C Bonello believes that the decisions to join the EU and to adopt the euro in 2008 have been vindicated. Speaking to The Malta Independent, Mr Bonello said that there were several valid arguments for Malta’s very small, open economy to join a regional integration grouping in a globalizing world economy. “It so happened that our major trading partners were in Europe, and the EU was becoming the world’s second largest economy. The economic case for Malta joining the EU at the time was therefore a no-brainer”.

“Adopting the euro is an obligation of EU membership, which meant that Malta needed to restructure its economy in order to derive the full benefits of a monetary union. Today, with the benefit of hindsight, I believe that it was very opportune for Malta, and lucky in a way, to have adopted the euro when it did. Defending the Maltese lira without exchange controls in the midst of a global financial crisis after 2008 would have meant much higher interest rates and much tighter fiscal policies”.

Asked where he believes the euro would exist in 20 years’ time, he said, “Given the problems we are facing today in implementing all the requirements for a successful monetary union, I think it is difficult to predict what will happen in 20 years.  Since the costs of a break-up of the euro area would be disastrous, even for non-members, however, solutions to these problems will have to be found, even if reluctantly sometimes. The world is changing and countries that played a very minor role in shaping world economic affairs ten years ago will play a much larger role in 20 years’ time while the dynamics of growth in the world economy and trading patterns are changing. Europe’s output is expected to decline from 20% of world GDP today to around 10% by the middle of this century. Europe will therefore be relatively less important than it is today. Sticking together is thus in the interest of all Member States”. He stressed that the single market still has a lot of potential for growth.

Asked whether Malta could withstand a hypothetical UK exit from the EU, Mr Bonello said, “We are now less integrated with the UK economy than in the past.  Malta has a more diversified economy today, as are the sources of foreign direct investment and tourism, so I believe this would be something the Maltese economy would be able to handle”.

As for Turkey he was asked about the potential impact it would have should it one day join the EU, Mr Bonello said that “This is the subject of ongoing negotiations. What is sure is that Turkey has a large population and a well-developed, diversified economy. In terms of the value added it would bring to the single market there is therefore no doubt that this would be significant. There are however several issues that have to be ironed out in the meantime.”