Malta moving towards euro adoption : nominal and real convergence issues

Abstract

On the 1 st of May 2004, Malta became a member of the European Union (EU) and joined the Economic and Monetary Union (EMU) with the status of a "member state with a derogation". This date marked a definite commitment by the Republic of Malta to move towards adopting the European Union's single currency, the Euro. Since its introduction on the 1 st of January 1999, the currency has developed into one of the most intricate economic exercises ever implemented, and Malta looks to join the EMU as a full member, adopting the Euro in 2008. The adoption of the single currency will further contribute to the process of Malta's economic integration with the EU. This study presents a review of Malta's position in its quest for Euro adoption, particularly regarding the nominal and the real convergence criteria involved. Through a comparison of Malta's economy to the Euro zone in terms of these criteria, a proposed competitive strategy is presented, and the implications of adopting the single currency are considered.