MaltaMedia.com

The Council has recognised that Malta’s open economy exists within the context of the current global economic downturn and so it cannot be totally insulated from the uncertainty and the risks that are still inherent in the international economy.

The Council has recommended that Malta corrects its excessive deficit by 2010; this recommendation will be reviewed after 7 January 2010 following an assessment of actions and measures Malta would have taken in order to tackle its deficit. It could be the case that the correction deadline is also reviewed at this point.

It is important to note that today’s decision is not the launch of an infringement procedure against Malta before the European Court of Justice but an implementation of the Stability and Growth Pact which all Member States (both within the Eurozone and not) commit to as the cornerstone for sound public finances at national level.

The excessive deficit procedure established for Malta today by the Council, already applies to another 10 other Member States in 2009 (France, Greece, Hungary, Ireland, Latvia, Lithuania, Poland, Romania, Spain, United Kingdom), and by the end of the year is likely to be established for another 9 Member States (Austria, Belgium, Czech Republic, Germany, Italy, Netherlands, Slovenia, Slovakia, Portugal).

These 19 Member States are expected to have deficits above the 3% of GDP reference value of the Stability and Growth Pact in 2009. In setting out this Decision today as well as the Recommendations to end the excessive deficit situation, Malta is being given support from the rest of the European Community to bring its public finances in line with the Stability and Growth Pact.

Malta’s recommended deadline of 2010 is based on the Commission’s macro economic assessment of Malta’s past and forecast economic situations. The fact that Malta experienced a GDP growth of above 3% between 2005-2007 and a positive, although lower, GDP growth in 2008 despite the economic downturn has led the Commission to conclude that Malta is likely to be able to correct its deficit by the end of 2010.

Tuesday’s decision is based on a government deficit of 4.7% of GDP in 2008, a year when the Maltese economy experienced a number of extraordinary expenditures which remain exclusive to 2008 only. These are:

The voluntary termination schemes for Malta Shipyards’ employees
The late payments of corporate taxes in the last quarter of 2008
The substantial subsidy granted to Enemalta Corporation, to cushion the impact on consumers of the high international energy prices in 2008.

The Minister of Finance, Tonio Fenech commented that ”the international adverse conditions are also affecting the Maltese economy; therefore, while Malta is committing itself to address the excessive deficit, we need to be extremely careful not to take measures that could make a potentially bad economic situation even worse. The priority of the government remains that of supporting jobs in these difficult times”.