The euro has been the national currency of 12 member states of the European Union for a number of years. The target set by the government is to introduce the euro in Malta in January 2008. With this important event on its doorstep, Malta will be marking another major achievement similar to the historic moment when Malta joined the EU in May 2004.

The concept of a single currency began to take shape during The Hague Summit in 1969, when the heads of state and government decided to make economic and monetary union (EMU) an important goal of the Community and set up a high-level group to examine how to achieve it. In 1970 the Werner Report (compiled by Luxembourg’s Prime Minister Pierre Werner) was published.

It proposed a three-stage plan to create an economic and monetary union within a decade:

• Reduction of the fluctuation margins between member states’ currencies, broad guidelines for economic policy at Community level, coordination of budgetary policy, preparation of treaty changes to facilitate later stages of EMU;

• Integration of financial markets and banking systems to create free movement of capital, progressive elimination of exchange rate fluctuations, closer coordination of short-term economic policies and budgetary and fiscal measures;

• Irrevocable fixing of exchange rates between participating national currencies, convergence of economic policies, establishment of a community system of central banks.

In 1971 the American economy experienced a period of instability, which affected the foreign exchanges. As a result, the EMU project was temporarily abandoned. In 1978, following a Franco-German initiative, the Community decided to re-launch monetary integration at the Brussels European Council by creating a European Monetary System (EMS), with the objectives of stabilising exchange rates through the concept of ERM (Exchange Rate Mechanism), reducing inflation, and preparing for monetary integration. The EMS entered into force on 13 March 1979. This initiative created more security within the Community and more countries decided to join. In February 1986, the Single European Act was signed, which introduced monetary cooperation as a new area of Community competence.

In 1988 a committee was set up under the chairmanship of Commission President Jacques Delors with “the task of studying and proposing concrete steps leading towards this union.” Subsequently, the Delors Report was issued in 1989. It set out a plan to introduce EMU over three stages, including an institutional framework to allow policy to be decided and executed at the Community level in economic areas of direct relevance for the functioning of EMU. It included the creation of a monetary institution, namely a European System of Central Banks (ESCB), which would become responsible for formulating and implementing monetary policy as well as managing external exchange rate policy.

For further information you may wish to visit the NECC website on www.euro.gov.mt or call the Euro Helpline 154.

Daniela Xuereb is Information Officer of the National Euro Changeover Committee

This article continues next Saturday