Joining the Euro

Malta's formal application to join the Euro is reported by Busines Week:

.."Tomorrow we will be submitting the application," Maltese Prime Minister Lawrence Gonzi told reporters in Brussels. "The reasons are obvious: we have analyzed the situation and the country has been progressing in accordance with the targets that had been set." Cyprus sent in its application on Feb. 13. If the two nations get the all-clear to join the euro area next year, they would become the 14th and 15th of the EU's 27 member states to start using the currency.

The European Commission and the European Central Bank are likely to report by mid-May whether the two economies meet EU rules for euro economies on their budget deficits, debt and inflation. Final decisions from EU leaders and EU finance ministers would then come in June. Malta expects to bring its budget deficit under the 3 percent of gross domestic product limit set by EU budget rules in 2006, currently forecasting 2.6 percent -- down from 10 percent in 2004.
Overall debt will be slower to fall and is due to scrape under a 60 percent of GDP ceiling by 2009. However, that will not necessarily scupper Maltese euro membership plans because the debt is clearly on a downward trend, as required. Maltese officials said they believed the country had met EU targets to lower debt, saying it should be formally cleared of running an "excessive deficit" at around the same time that the EU assesses its euro membership.

EU economists did have some mild criticism for the Maltese government last month, telling it that growth forecasts were optimistic after 2007 and it should do more to spell out how it would control spending and push on with health care reforms. But Malta's euro membership prospects look good. It does not have anything close to the high inflation that derailed Lithuania's bid to join the euro last year. Average price increases in Malta were the lowest in the European Union in December at 0.8 percent. Officials said they expected that trend to continue.

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