The basis for recovery already exists with the recently strengthened EU rules on economic governance and surveillance. It is being further reinforced through a 'Fiscal Compact' agreed by EU leaders in the pursuit of budgetary discipline and reinforced economic policy coordination and governance throughout the euro zone.
In the pre-crisis period, the euro area as a whole benefitted from macroeconomic stability with stable inflation, low interest rates, an exceptionally long period of economic growth and a stronger internal market. The 332 million people who use the euro no longer have to pay extra costs to exchange currencies and there is more transparency in cross-border transactions, enabling consumers to compare prices between one euro zone country and another.
European Commission Vice-President for Economic and Monetary Affairs and the Euro, Olli Rehn, said, "against the backdrop of today's economic fragility, this is an opportune moment to recall the fundamental principles on which the euro was built and bring about a return to a Europe of strength and opportunity. We have the bricks and mortar; we have the manpower. We now look forward to political will, strong determination and swift action to restore economic growth, and create more jobs and restore confidence in investors and the public."
Malta adopted the euro on the 1st January 2008, less than four years after becoming a Member State in 2004. The euro replaced the Lira, the Maltese national currency since its independence in 1964.
Before joining the euro, without exception, all potential member countries are required to adhere to strict economic and monetary criteria in order to maintain budgetary discipline. The euro drew Member States towards closer cooperation for the common aim of a stable currency and economy that would benefit us all. Before the banking crisis struck in 2008, the European Union was on track to achieving these goals.
The euro does not bring economic stability and growth on its own. First, this is achieved through the sound management of the euro-area economy under the rules of the EU Treaty and the Stability and Growth Pact (SGP), a central cog in the wheel of Economic and Monetary Union (EMU). Secondly, the euro as the currency of the European Union is the key mechanism for enhancing the benefits of the single market, trade policy and political co-operation.
The SGP has just been strengthened through the 'six-pack' set of rules which entered into force in the EU on 13 December 2011. These new instruments will help ensure, now more than ever, that everyone sticks to the jointly agreed rules, and will therefore significantly help stabilise the EU economy and prevent a new crisis from occurring again. This set of tools includes fiscal rules and a new emphasis on reducing high levels of debt, backed up by a credible sanctions mechanism, and an effective framework to prevent and address broader macroeconomic imbalances.
This major milestone was made just days after the European Council of 9th December, which EU leaders took courageous decisions to strengthen the credibility of our crisis response, both as regards further reinforcement of economic governance towards a new fiscal compact – and strengthening the financial firewalls to contain the contagion and ultimately protect economic growth and jobs.
Malta reacted positively to the challenge.
In his reaction, Maltese Prime Minister Lawrence Gonzi had said that he considered the EU summit of 9th December to be a major success because it had agreed on the measures expected by the financial markets to safeguard themselves and create jobs.
Opposition Leader Joseph Muscat had said that the Opposition agrees with Government on the changes needed in the Constitution of Malta to reflect the new approach to fiscal policies.