Commission to assess Malta’s Excessive Deficit Programme
Charlot Zahra The European Commission (EC) will today be assessing Malta’s actions under the Excessive Deficit Procedure (EDP) programme and whether the country had taken sufficient action during the past six months to curb its budget deficit effectively.
In July 2009, the Council of EU Finance Ministers (ECOFIN) had decided that Malta’s budget deficit for 2008, which stood at 4.7%, had exceeded the EU’s threshold of 3.0%as set out by the EU’s Stability and Growth Pact, and initiated EDP procedures against Malta.
This gave Malta a six-month period within which it was to effectively address the country’s budget deficit. This period officially expires this month.
However, Malta’s deficit appears to have soared over the same period, with the latest deficit figures for November last year, issued by the NSO, showing a deficit of €410.5 million at the end of the month.
This represents an increase of €153.5 million when compared with the €257 million figure that Finance Minister Tonio Fenech had projected in the 2010 Budget Speech last November.
In its projections for 2010, the Maltese Government had in fact abandoned its quest for a balanced budget by 2011, as Fenech pledged the previous year.
Instead, the Finance Minister projected a budget deficit of 3.79% for 2009 (€217 million), a slight increase over the 3.93% of GDP for 2010 (€233 million), and down to 3.2% in 2011 (€200 million).
On 30 December 2009, sister paper Business Today had reported that the EU had already warned Malta to bring down its deficit in line with the EU’s Stability and Growth Pact guidelines of 3% of GDP within a year and a half, when confirming the EDP against Malta in July 2009.
The EC was still discussing Malta’s request for an extension to the EDP programme by one year till 2011, however the latest figures indicate that the EU was “unlikely to grant this extension in view of the repeated lack of Budget deficit discipline by the Maltese Government,” Business Today had reported.
“Unless there is a significant increase in revenue in December, which is unlikely given the recessionary moment and the hefty utility bills announced a couple of weeks ago, Malta looks set to register a whopping budget deficit close to the 4% mark for the second year running,” Business Today added.
In the Commission’s Spring Economic Forecasts, Malta’s budget deficit was predicted at 3.6% for year, falling to 3.2% in 2010, just 0.2% short of the threshold set by the EU
As for the public debt figures, the EC had also forecast a growth beyond the 60% limit set out by the Stability and Growth Pact, with 67.0% for 2009 and 68.9% for next year.
In its final report in September 2009, the International Monetary Fund (IMF) had warned that the fiscal deficit was expected to narrow marginally to 4.5 per cent of GDP in 2009.
However, excluding the substantial one-offs of 2009, the balance would deteriorate by over 0.5 of a percentage point of GDP, the IMF had said.
The IMF report also had a harsher forecast, that Malta’s budget deficit would only fall below the 3% threshold set out by the EU’s Stability and Growth Pact in 2013, with public debt reaching 70% of GDP. czahra@mediatoday.com.mt
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