Malta's deficit third highest in EU

Malta last year had the third highest deficit in the EU, despite having halved it from the previous year, according to Eurostat statistics published yesterday in Brussels.

The figures confirm that Malta last year managed to reduce its deficit to 5.1 per cent of GDP, thus achieving its best result since 1995 when the government ended its financial year with a deficit of 3.9 per cent.

The EU's statistical arm said that during 2004, Malta's deficit amounted to Lm94 million - Lm92 million less than the previous year. In 2003, the government deficit stood at 10.4 per cent of GDP or Lm186 million.

However, the 2004 deficit is still the third highest in the EU. The only two countries with a higher deficit than Malta were Greece which ended the year with a 6.6 per cent deficit and Hungary with 5.4 per cent.

According to Eurostat, the consolidated fund deficit for 2004 was Lm94.02 million, a slight reduction from the estimated Lm94.03 million that had been forecast last February.

Government debt is still on the rise. According to the latest figures, Malta's ratio of government debt to GDP last year reached 75.9 per cent, or Lm1,402 million. According to the EU Maastricht critera, debt should be reduced to under 60 per cent of GDP.

In 2004, the lowest ratios of government debt to GDP were recorded in Estonia (5.5 per cent), Luxembourg (6.6 per cent), Latvia (14.7 per cent) and Lithuania (19.6 per cent).

Eight member states, including Malta, had a government debt ratio higher than 60 per cent of GDP. Greece had the highest level with 109.3 percent, followed by Italy, 106.5 percent and Belgium reporting 95.7 per cent.

According to EU rules, the government finances of a member state in the eurozone or hoping to join the eurozone should not exceed a deficit of three per cent of GDP.

The government has pledged to reduce the deficit to under this level by the end of next year. Following an analysis last December, the European Commission concluded that Malta was on track.

The Commission had said that "based on current information and on the basis of the measures detailed in the 2005 budget, it appears that the Maltese government has taken effective action regarding the measures envisaged to achieve the 2005 deficit target in response to the Council recommendation."