NEWS | Wednesday, 18 February 2009

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The European Commission will today open new excessive deficit procedures (EDP) against those member states whose deficits are over 3% of their gross domestic product.
Members of the eurozone have to ensure the ratio of their annual government deficit to GDP does not exceed 3% at the end of the preceding fiscal year.
Malta’s stability programme will be on the agenda today, along with those of France, Germany, Spain, Greece, Ireland and Holland.
The EDP sets out criteria, schedules and deadlines for the Council to reach a decision on the existence of an excessive deficit. No EDP procedure will be launched if the excess of the government deficit over the 3% of GDP threshold is considered temporary and exceptional and the deficit remains close to the threshold.
When the Council decides that a deficit is excessive, it makes recommendations to the member state concerned and establishes deadlines for effective corrective action to be taken. If the member state fails to comply, the Council can decide to move to the next step of the EDP, the ultimate possibility being to impose financial sanctions.
Joaquín Almunia, Commissioner responsible for Economic and Monetary Affairs, has not indicated which states will be given excessive deficit procedures.
“We have to stick to the rules when it comes to fiscal discipline,” Almunia told reporters at the European Parliament on Monday.
Almunia said the reformed stability pact of 2005 allows certain excessive deficits in exceptional circumstances or during particular crises, “but there are still the rules that have to be respected,” he said.
According to the Commissioner, respecting the 3% criterion is necessary for the same member states if they want their fiscal balances to stay healthy in the medium to long term.
“There are also certain risks one must pay due attention to, such as increasing debt, which is why we must adhere to this rule to make sure we are out of this crisis even quicker.”
The Commissioner is expected to carry out a complete analysis of the member states’ economic situations and see what were the reasons for country’s deficits having gone beyond the 3% threshold.
Almunia said there will be no procedures announced today, but a report will be presented, which will serve as the basis for discussions between European finance ministers (Ecofin) on 10 March.
Any procedures on excessive deficit will be taken after discussions held between the governments.
On 4 March 2008, the Council examined the first stability programme of Malta, which covers the period 2007 to 2010.
It was first predicted that real GDP would grow by 3.5% in 2007, slow down in 2008 and accelerate again to reach 3.4% by the end of 2010 – although things are not expected to be as positive this year.

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