Joining the euro

Malta joined the European Union in May 2004 and entered the exchange-rate mechanism ERM II in May 2005, fixing the Maltese lira at 0.4293 to the euro for the following period. The Central Bank of Malta, which had previously kept the lira pegged to a basket of currencies, then used fiscal consolidation and a stable exchange rate to meet the Maastricht criteria, including keeping its deficit under 3 percent of GDP in 2006. Malta adopted the euro on January 1, 2008, and the central bank became part of the Eurosystem, which now sets interest rates for the whole area. Inflation and interest rates since then have followed euro-area levels, while Malta's growth, driven by tourism, financial services, online gaming and a rapidly rising population, has been among the fastest in the euro area.