In a ministerial statement during the first sitting of the New Year, Prime Minister Lawrence Gonzi yesterday spoke at length about the developments that led to the replacement of the lira with the euro, highlighting the work that was carried out by the Central Bank and the National Euro Changeover Committee to make the process as smooth as possible

Dr Gonzi said that seven days ago, the country became part of the eurozone, consolidating its position in the European Union and implementing an ambitious vision. It confirmed that Malta had achieved economic criteria established by the union, and this made Malta more attractive for foreign investment.

Giving a chronology of the events that led to Malta’s joining the eurozone, Dr Gonzi said that one of the decisions he took as Prime Minister was linked to the Nationalist government’s conviction about Malta’s great achievement as soon as the country joined the EU.

Dr Gonzi said that the country’s future was linked to membership with, not isolation from, the EU. The government believed in the Maltese people’s capabilities to compete, and removed the fears that the opposition tried to instill during the campaign that led to the 2003 referendum.

This pushed the government into starting negotiations to establish the criteria needed to be met for Malta to achieve eurozone membership, soon after the country joined the EU.

When Malta joined the EU on 1 May, 2004, it did not meet the economic criteria and, like all other new members, was given a derogation. Malta was given time to adjust to the criteria, and each country was allowed to establish its own deadlines as to when it thought that such criteria could be met.

The difference between the government and the opposition emerged. For the MLP, the step taken was nothing but an obligation that we could not escape from. The MLP had said that Malta should consider joining the eurozone when its economy started growing between three to four per cent, sometime in 2010 according to the opposition.

For the government, joining the eurozone was a natural step after EU membership. The main advantages were a union with a zone, the monetary policy of which was administered by the European Central Bank; more transparency for the consumer, less expenses for traders on the exchange market, access to larger financial markets and improvement in the country’s credit rating.

Also, the country needed to reach the five convergence criteria because the government believed that this could be beneficial for the country’s economy as a whole, Dr Gonzi said.

In this light, on 2 May 2005, Dr Gonzi, together with parliamentary secretary Tonio Fenech and Central Bank governor Michael C. Bonello, had announced that the country should aim to join the eurozone on 1 January 2008.

That day, the government had announced its plans on how it would have to work to reach the established goal. There were sceptics who did not believe in the country’s capabilities, and who criticised the convergence plan. But today, the country’s economy was growing by four per cent in real terms, three years before the timeframe stipulated by the opposition, Dr Gonzi said.

The country was generating employment and wealth, so much so that in the last three budgets taxes were not increased. On the other hand, the income tax had been reduced, the Children’s Allowance had been increased and other benefits had been introduced.

The country’s deficit had been reduced from 10 per cent to three per cent, while the public debt had dropped from 74 per cent of GDP to 64 per cent of GDP, Dr Gonzi said.

All this was achieved in spite of the fact that it happened during unfavourable times, especially with regard to the increase in the international price of oil, which recently had surpassed the $100 per barrel mark.

The opposition kept repeating the idea that the lira should have been devalued by 10 per cent. This was more wrong advice put forward by the opposition, as this meant that all essential products would have increased in price by 10 per cent, while all the savings in the banks would have been reduced by 10 per cent too.

Dr Gonzi said that on 27 February, the government and the Central Bank had presented a formal request for Malta to join the eurozone, knowing that an analysis of the economic situation would have revealed that Malta met the criteria established in the Maastricht Treaty. The European Commission had studied the situation and gave the green light for Malta to join the eurozone on 1 January this year.

With this step, the country’s destiny is further linked with that of the European Union. Today, the country’s economic efforts have been recognised. Foreign investment had reached record levels; the number of employed people is the highest ever in history; the number of unemployed people is the lowest it has been in 10 years; the number of tourists who visited the country has also reached unprecedented levels; the number of students at the University and MCAST is the highest ever and " we are now aiming to put Malta in the top league in the financial services sector, IT, manufacturing, tourism, health and education by 2015,” Dr Gonzi said.

This is confirmed by Moody’s, which has once again increased Malta’s credit rating. This is a clear message for foreign investors that Malta is an attractive country, and that the government’s strategy to join the eurozone was the correct way forward.

This is not a question of currency, but a question of the creation of job opportunities. The step has been taken; the change has been made, and the people are getting used to the new currency.

Although only seven days have passed, it is clear that the preparations made have led to positive results.

The changeover to the euro required detailed preparations on several levels. The Prime Minister praised the work carried out by the National Euro Changeover Committee that worked incessantly to see that the changeover was carried out in the smoothest way possible, and at the same time keeping in mind the interests of the consumer. The NECC had met 52 times to discuss all related aspects with all the social partners.

The NECC had met all those who, in more ways than one, would have been affected by the changeover. This was done to explain the process and address problems that were envisaged. The FAIR scheme included the participation of 7,620 shops that showed a commitment to prepare themselves well for the changeover. Dr Gonzi thanked the constituted bodies that encouraged their members to prepare themselves well.

The Prime Minister also referred to the public sector’s involvement in the process. Dr Gonzi said the sector had responded in a professional way to the challenges that it faced. In particular, Dr Gonzi thanked the principal permanent secretary Godwin R. Grima, the MEU team that coordinated the process, the MITTS team and the people working at the Attorney General’s Office and the Finance Ministry.

Dr Gonzi also praised the effort put in by the financial sector – the Central Bank, the commercial banks and all other related areas.

The Central Bank is still responsible for the production of the Maltese euro coins, and this involved great preparation and work. The equivalent of e1 billion had to be shipped to Malta – some 80 million euro notes and 200 million coins. These were brought over within a period of eight weeks and 93.45 per cent of them were passed on to the commercial banks before 1 January.

Dr Gonzi, here thanked the CBM governor and his staff, and also praised the security services provided by the Armed Forces during this delicate operation.

He said that e115 million are already in circulation after 350,000 transactions took place in this first week. Although the pressure on the banks is still on and it is expected that it will continue for some time, it is clear that the process is moving at a fast pace.

The information campaign had also led to the desired results. Statistics showed that until last Saturday, 58 per cent of the Maltese had only euro notes in their pockets, while 73 per cent of the payments in shops was done in euros. In 99 per cent of the cases, the shop owners were giving change in euros.

However, it seems that not everyone is following the NECC’s instructions. People have been urged to pay in euros and not to use shops as banks, and not to use Maltese high-value currency to pay for small items purchased. Dr Gonzi appealed to consumers to cooperate with shop owners, whom he thanked for their sterling work in the changeover process.

He said that steps had been taken against a few who abused of the system by increasing the price of their products or services, but these could serve as examples to show that every report was taken seriously by the NECC.

The European Commission had declared that everything possible had been done to safeguard the interests of the consumers, Dr Gonzi said.

Dr Gonzi ended his address by thanking all those involved in the changeover process, starting with his Cabinet of Ministers, but making particular reference to Parliamentary Secretary Tonio Fenech, and the officials in the Finance Ministry led by permanent secretary Alfred Camilleri.

He thanked the NECC, especially chairman Joseph F. X. Zahra and executive director Alan Camilleri for the professional contribution, as well as all organisations that in some way helped to make the changeover a smooth affair.

The rest of the parliamentary sitting will be reported tomorrow