In a rare public statement, made in the very first appearance of the governor before the Public Accounts Committee (one of two such appearances a year, a result of the recently amended Central Bank Act) and forgetting the Central Bank’s traditional phlegm and total lack of speculation, Mr Bonello said that from what one can see today, Malta’s joining the euro will not have a negative impact on the Central Bank. At most, Malta will have a three year positive impact and a four year negative impact, during which Malta will pay the European Central Bank some Lm700,000 a year, so that at the end of the first seven year period, the overall impact will be neutral.

And as for the dire prediction that Malta will have to pay some Lm10 million a year in fines to the ECB, liquidity in Malta would have to rise by some six-fold, from the present all-world record of Lm0.5 billion to Lm3 billion, and the euro would have to have a lesser world spread than it has today – totally improbable situations.

The Lm10 million annual fine story originated from a series of articles in l-orizzont by Joe Sammut, who originally referred to a meeting held by Mr Bonello for the 25 managers at the Central Bank.

Mr Sammut claimed that Mr Bonello had told the managers that the Central Bank could not give wage increases to its employees because it has been losing money and profits and that it will lose more money with accession to the euro, when it faces fines of up to Lm9 million, based on a simple calculation.

Mr Bonello condemned what he called a grievous infringement of confidentiality and pointed out that wage negotiations are conducted with the union and not with managers. However, he did confirm that he had held a meeting with the managers at which he had spoken about the bank’s situation now and in the future. He also admitted having spoken about the euro mechanism, about which the Central Bank now knows more than it did two years ago.

However, Mr Bonello denied having ever said that the bank will default or require a government subsidy to keep afloat.

Even so, Mr Bonello added, the bank now knows even more about the mechanism than it knew when he spoke to the managers.

Knowing what it now knows, and being uncommonly speculative, the bank has now calculated that if the euro were to expand worldwide by 10 per cent a year, instead of by the current 14 per cent per year, Malta will benefit from that expansion of euro notes.

Secondly, the amount that Malta will owe to the ECB, if anything, will be based on the liquidity in the country. The Central Bank expects that this liquidity will fall with euro entry.

On the basis of these hypotheses, taking the first seven years of euro membership, Malta will profit in the first three years after accession and will have to pay something like Lm700,000 a year in the four years after that, with the overall result being neutral.

Beyond 2015, the effect on Malta’s membership will be positive, even in this regard. For Malta to have to pay some Lm10 million a year, he said, unimaginable developments would have to occur.

Mr Bonello also replied to Mr Sammut’s sarcasm in reply to an Ivan Camilleri article in The Times that quoted an unnamed ECB spokesman who confirmed what the Central Bank had said in reply to Mr Sammut’s first speculations. Mr Sammut had asked if Mr Camilleri had spoken to the ECB caretaker once he did not name his source.

On the contrary, Mr Bonello told the PAC, it is now confirmed that Mr Camilleri acquired his information from an ECB director, no less, who is now livid that such things happen in Malta.

PAC chairman Charles Mangion asked how come – considering that the ECB mechanism was not known three months ago, let alone a year ago – the Central Bank had given the government advice to join ERM II?

Mr Bonello replied that details of the internal workings of the ECB are not known outside the structure. In fact, Britain, being outside the euro area, does not know of these details.

The ECB had known all along about Malta’s high liquidity rate but it must have come to the same conclusions as those to which the Central Bank has now come: that neither Malta nor the Central Bank would be negatively affected by the ECB rules.

What really mattered in reaching a decision to propose joining ERM II were the Maastricht convergence criteria.

Parliamentary Secretary Tonio Fenech pointed out that the Central Bank does not exist to make a profit, but to ensure that Malta’s economy remains stable by having low inflation, as its mission statement says.

The main arguments for joining ERM II, which leads to the euro, were economic, not how much profit the Central Bank will make.

“Today you have re-assured us,” Dr Mangion told Mr Bonello at the end of his statement.

Mr Bonello first gave a long presentation on the Central Bank’s role and how it manages monetary policy. He also found time to state that it is only one bank that fuels liquidity in Malta, as the other bank does not do so.

Mr Bonello’s ordeal in front of the PAC is not over: he is due to appear again next Tuesday.