The idea of a single currency has a long history dating back to the 1970's. In 1979, the European Monetary System (EMS) was founded to help ensure currency stability in the Community, and in the late 1980's the Single Market programme gave increased importance to this idea. The decision to move towards Economic and Monetary Union (EMU)
was made in the Maastricht Treaty in 1992.
MU is a major milestone in that it was the creation of the "euro", the new single currency for Europe. The euro was officially created on the 1st January 1999, from the fixing of conversion rates of eleven national currencies, although euro notes and coins came into circulation in 2002.
The introduction of the euro has several advantages such as:
- the elimination of exchange rate risks and foreign currency transaction costs for trade, tourism and investment among participating member states
- the increased likelihood of low and similar interest rates
- the promotion of price stability, stable public finances and low inflation growth
Any EU member state that adopts the euro will no longer be able to devalue its currency or change its interest rates in response to changes in the economy. This is because monetary policy within the euro zone is decided upon by the European Central Bank; each euro zone member must give up its control over its monetary policy. This may be seen as a disadvantage by some. However, any such disadvantages are outweighed by the longer term advantages of the euro.
Malta, and any other member state that wants to adopt the euro, must meet a number of criteria. In summary, these limit the extent of government borrowing, the level of government debt and require low inflation and monetary stability. Once these criteria have been met, Malta will be able to adopt the euro as its official currency, as from 1st. January 2008.
Designs for euro notes (which are common for all participating states) were chosen following a competition across the EU. The competition was based on the theme of "Ages and Styles of Europe", reflecting Europe's cultural heritage. Windows, gateways and bridges were the main themes. The notes also carry the word euro in both the Latin and Greek alphabets, the initials of the European Central Bank (ECB), and the signature of the President of the ECB.
The coins have a European side and a national side. The designs for the European side were also chosen following a design competition, and three designs were chosen. The first shows Europe's position in the World, the second shows the EU member states and the third depicts the euro zone. The Maltese designs were chosen following a national consultation - the three winning designs were the Maltese Cross, the Maltese Coat of Arms and the Altar of the Mnajdra Temples.
Most of the legislation that is applicable with regards to the adoption of the euro has been set at a European level on the basis of a regulation, and thus directly applicable to Malta.
However, the government established a legal framework and mechanics to provide for the adoption of the euro as the currency of Malta and for the replacement of the Maltese lira by the euro on the date to be established in agreement between the Government of Malta and the Council of the European Union.
The Euro Adoption Act gives the Prime Minister, or the delegated authority, the power to make regulations in fields such as dual display, the prohibition of charges with regards to euro changeover, the imposition of penalties or fines with regards to infringement of regulations and the amending of any law which necessitates changes due to euro changeover.
The Government of Malta decided to amend each and every piece of primary and secondary legislation to convert monetary values from Maltese lira into euro. All amounts will be rounded at the irrevocably fixed conversion rate, and any amounts that require smoothing i.e. adapted to reflect a rate/amount which is easier to display/remember, such as 10 euro as opposed to 10.24 euro, will be smoothed downwards.
The first subsidiary legislations enacted under the Euro Adoption Act was the Legal Notice on Dual Display and Euro Pricing. This makes a legal requirement: to implement dual display once the irrevocably fixed conversion rate is set; to observe the central parity rate if implementing dual display prior to the mandatory period ; not to put up prices solely for the reason of the euro changeover and other related matters.
Legal Notice 369 - Smoothing
According to the dispositions of LN 369, the smoothing of monetary amounts is only permitted when such smoothing results in a monetary amount in euro which is less than the equivalent monetary amount in Maltese lira prior to conversion.
Legal Notice 369 can be downloaded here
Legal Notice 441 - Cash Changeover Regulations
LN 441 establishes the provisions for dual circulation throughout January 2008, obliges retailers to provide change exclusively in euro as from 1st January, and provides for the continuity of contracts. Banking operations during the first week of January are also legislated.
Legal Notice 441 can be downloaded here
It will facilitate business and trade transactions
- Enjoys international reputation as an invoicing currency
- 20 per cent of global daily foreign exchange transactions are carried out in euro
- Better financial planning due to elimination of foreign exchange risks
- No foreign exchange costs for business transactions
- Lower interest rates on debts and credit facilities
It also makes economic sense
- Promotes price stability
- Harnesses public debt and fiscal deficit
- Provides protection to a vulnerable economy
- Logical for an economy dependent on EU imports
- Anchors the country within a world class currency
Travelling will be made easier
- Internationally recognised currency for tourism
- No foreign exchange costs
- Easier to compare prices between countries
- The currency of 13 European countries and 320 million people
- Facilitates travelling by foreigners to Malta
It encourages investment
- A credible international currency
- Better credit rating standing for Malta
- A strong, stable currency
- No transaction costs for foreign investors
- No loss of value for Maltese investing abroad
Comparison of prices will become easier
- Traders can easily compare prices when carrying out business transactions
- Instant comparison of retail prices in shops with other euro area countries
- Boosts consumer confidence
- Promotes price stability thereby easing inflation
- Creates a level playing field between Euro area traders