Weaker sterling must be discussed during Brexit talks -EU presidency

* Malta's PM wants agreement within EU state aid rules

* Says weaker sterling raises competitiveness questions

By Robin Emmott

VALLETTA, March 29 (Reuters) - The euro zone will need to discuss the impact of the weaker British pound during Britain's negotiations to leave the European Union, the head of the EU's rotating presidency said on Wednesday, warning against advantages for London.

Malta's Prime Minister Joseph Muscat said the remaining 27 EU governments, and especially the 19 sharing the euro currency, needed to mitigate any negative consequences stemming from the sharp drop in sterling since Britain's June 2016 vote to leave.

"There are consequences for everyone ... that are very obvious," Muscat told a news conference alongside Spain's prime minister Mariano Rajoy, speaking just after Britain formally notified the EU of its decision to leave.

"There is one that the countries of the euro area are experiencing, the change in the value of the pound sterling," he said, citing the higher prices of goods, services and holidays for Britons coming to the euro zone, of which Malta is a member.

"It's making some products less competitive for the Europeans, more competitive for the British," Muscat said.

He said the final agreement on a future relationship between the European Union and Britain must be inferior to full membership of the bloc.

Muscat said the euro zone would need to discuss the issue "not to come up with a fixed exchange rate but because some companies will need help", stressing that any proposals would be within EU limits on state aid.

The pound's dramatic fall to levels against the dollar not seen since the mid-1980s has made companies and citizens in both Britain and Europe fearful about the direction of the British currency.

Reuters most recent polling, covering expectations out to a year, runs from a German bank predicting a fall to around $1.05 to Investec (LSE: INVP.L - news) 's $1.35. British banking majors show a tighter range -- from $1.10 to $1.31. (Editing by Philip Blenkinsop and Catherine Evans)