Bringing an end to the situation of an excessive government deficit in Malta - Main contents

EN

Official Journal of the European Union

C 180/1

According to Article 126 of the Treaty, Member States are to avoid excessive government deficits.

The Stability and Growth Pact is based on the objective of sound government finances as a means of strengthening the conditions for price stability and for strong sustainable growth conducive to employment creation.

On 21 June 2013, the Council decided, in accordance with Article 126(6) of the Treaty, that an excessive deficit existed in Malta.

In accordance with Article 126(7) of the Treaty and Article 3 of Council Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure (1), the Council is required to address recommendations to the Member State concerned with a view to bringing the situation of an excessive deficit to an end within a given period. The Recommendation has to establish a maximum deadline of 6 months for effective action to be taken by the Member State concerned to correct the excessive deficit. Furthermore, in a recommendation to correct an excessive deficit the Council requests the achievement of annual budgetary targets which, on the basis of the forecast underpinning the recommendation, are consistent with a minimum annual improvement in the structural balance, that is, the cyclically-adjusted balance excluding one-off and other temporary measures, of at least 0,5 % of GDP as a benchmark.

In accordance with Article 2 of Regulation (EC) No 1467/97, the budgetary target recommended for the final year of the correction period must ensure that the required reduction in the differential between the debt-to-GDP level and the 60 %-of-GDP Treaty reference value will occur over the two years following the correction of the excessive deficit, based on the Commission forecast.

The Commission 2013 spring forecast projects that the deficit will continue to be above the reference value in 2013 and 2014, respectively at 3,7 % and 3,6 % of GDP. Those budgetary projections are based on current policies, thus incorporating the 2013 budget that was endorsed by Parliament in April 2013, which includes expansionary measures on both the revenue and expenditure side as well as the already planned equity injection into Air Malta (0,6 % of GDP), with a net deficit-increasing impact of 0,3 % of GDP. The expansionary measures are only partially compensated by increases in excise duties, the collection of tax arrears as well as the expenditure savings and higher social contributions stemming from the 2006 pension reform. In addition, the contribution of net deficit-reducing one-offs, as identified by the Commission, to the consolidation effort would fall sharply after 2012. Due to the expected continued primary deficits in 2013 and 2014, the general government debt, according to the Commission 2013 spring forecast, is projected to rise further, to 73,9 % of GDP in 2013 and to 74,9 % of GDP in 2014. In 2015 and 2016, the general government deficit is projected to remain above the 3 % of GDP reference value, and the debt-to-GDP ratio would increase to 75,6 % of GDP by 2016.

According to Regulation (EC) No 1467/97, the correction of the excessive deficit should be completed in the year following its identification, unless there are special circumstances. A correction of the excessive deficit by 2014 is therefore justified. In...