The European Commission has given Malta the green light. The euro will be replacing the lira as from 1 January. Although the decision is still to be formally confirmed by the EU council later on this year, the first big step has been made and it is highly unlikely that there will be a different decision in Brussels.

It was an ambitious target for Malta to reach, as Prime Minister Lawrence Gonzi, visibly pleased with the commission’s recommendation, told a news conference called after the official announcement was made.

The criteria that had to be met were tough, and it was known that sacrifices would have to be made for Malta to reach the parameters laid down in the Maastricht Treaty and become eligible to join the eurozone.

Starting off with a 10 per cent deficit in 2003, this was gradually brought down – at a huge cost materially for everyone – to 2.6 per cent within three years, a remarkable achievement indeed. Inflation – which was probably the government’s main worry all through 2006, when it hovered above the three per cent mark for several months – was also brought down to 1.8 per cent for the 12 months leading up to last March.

Government debt is still above the 60 per cent of GDP mark, but there has been a steady whittling down over recent years, reaching 66.5 per cent in 2006 and expected to go down further to 64 per cent this year. Added to this, the long-term interest rate stability and the stability of the exchange rate were also criteria that were met.

The Prime Minister was rightly euphoric last Wednesday when the announcement was made, saying that the decisions the government had made over the past years – some of which may not have been so popular – had borne fruit. The EC had given Malta written confirmation that the government’s policies are sustainable and credible and that Malta can look towards a brighter future when the euro replaces the lira.

But Dr Gonzi was also ready to admit that the road ahead is still full of challenges that need to be faced, and that more reforms are needed for Malta to become economically stronger. Of course, he said, we should all be proud of what we have managed to achieve, but we cannot sit back and be complacent.

And this, in fact, is what was pointed out by European Commissioner for Economic and Monetary Affairs Joaquin Almunia, when he announced the commission’s green light for Malta. Although the economy has picked up and the necessary conditions for euro eligibility have been fulfilled, he said more needed to be done to consolidate public finances and to overcome the challenges of an ageing population and the fact that the economy needed to be more resilient, flexible and adaptable to ensure that the advantages of the single currency are maximised.

He warned that if these targets are not reached there could be economic repercussions, once the euro was introduced.

Just as much as the government worked hard to bring Malta in line with the criteria needed for Malta to be given the go-ahead to join the Eurozone, it is now important that the tempo be raised to reap the full benefits of such an important milestone in the country’s history.

What is encouraging is that the government is the first to realise this, and that the ball has already started rolling in this regard. Now that a major hurdle has been overcome, the momentum must be maintained so that the continuous economic development that has been registered since 2003 is kept up, possibly improved, to enable Malta to take full advantage of the new situation that will come about on 1 January.