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Thanks for the reply Ethel.
I rushed out and got some Lira when you replied!
I went to Malta and found that whilst the euro is accepted in quite a few places, there are some places that dont accept it yet. Therefore, your advice was correct!
I also noticed that the exchange rate in the hotel and in outlets was not very good compared to the UK.
For anyone else travelling to Malt soon, they are converting to the Euro on 1st January 2008. From 1st July 2007, all shops must display prices in Lira AND Euro but they do not have to accept Euro until 1st Jan. We found that quite a few shops had euro displayed but do not accept it yet.