The adoption of the Euro in Malta : inflation related policies

Abstract

The 1st of May 2004 marked a significant event for Malta when it became a member of the European Union. On that date Malta became, and still is, a 'member state with a derogation' of the Economic and Monetary Union. Another historical occurrence is expected to take place soon when Malta adopts the single currency of the European Union, the euro. Maybe this event is of even greater importance for the general public due to the direct involvement which the changeover entails, as was the case for Malta's last currency changeover that took place on 12 May 1972. Our own experience as well as of other member states which have adopted the euro emphasises the need for proper preparations so that Malta will be in a sound position to deal with the changeover, and any related effects this could have, particularly with regards to inflation. This study presents an overview of the need for these preparations and, through an analysis of the policies adopted in the euro area, it recommends some further measures that may be implemented. Suitable preparations are a must to allow Malta to make the changeover as smooth as possible and to reap all the benefits from the adoption of this new currency.