(RTTNews) - The extraordinary stimulus measures in effect in the euro area to assist the ailing financial system are expected to be rolled back gradually, the Central Bank of Malta said in a report on Wednesday.

"Looking ahead, as the recession bottoms out and tentative signs of a global recovery can be glimpsed, attention is beginning to focus on preparing an appropriate exit strategy," the central bank said in its quarterly review report. "As far as monetary policy is concerned, at the euro area level the extraordinary measures taken to combat the crisis are expected to be phased out gradually and in a timely manner."

The central bank urged governments to turn their focus to fiscal consolidation to ease the burden on public finances, and added that effective expenditure control will have to be the main driver of fiscal consolidation in Malta.
"On the fiscal front, governments should be laying the ground consolidation," the bank said. "This would strengthen public finances in the face of increased debt servicing costs, as interest rates eventually change course and as the negative repercussions of population aging begin to be gradually felt."

The central bank warned that the global financial system would look different post-crisis compared to pre-crisis with growth in the major industrial nations unlikely to be as robust as before, and urged Maltese exporters to brace themselves for increased competition on the market.

"Gains in competitiveness can best be achieved through structural reforms," it pointed out. "The further opening up of key economic sectors to competition should help improve productivity while containing price pressures."

by RTT Staff Writer

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