EU assessment expected next month

The European Commission's assessment of Malta's updated convergence programme is underway and is expected to be published at the end of February.

Economic and Financial Affairs European Commissioner, Joachim Almunia said the Commission is planning that Malta's assessment will then be discussed and possibly adopted by the Economic and Financial (Ecofin) Council scheduled for March, just a few days before the EU summit in Brussels.

Malta submitted its update convergence programme to the European Commission last November. It included a revised deficit target for this year of 2.8 per cent of GDP, a slight change from the 2.3 per cent target for 2006 originally declared in its 2004 convergence programme.

Commission sources told The Times the EU is not likely to object to this change as Malta would still be reaching its target of cutting its deficit to under three per cent of its GDP by the end of this year. However, the sources said that "the examination of Malta's update by Commission officials is still ongoing and thus one has to wait until the end of February to have a final position".

Addressing a press conference about the assessment of the first six convergence programmes of Finland, the Czech Republic, Denmark, Slovakia, Sweden and Hungary, Mr Almunia said that the Commission feels that Finland, Denmark and Sweden meet the requirements of the revised stability and growth pact by maintaining appropriate medium term objectives for their public finances.

While Slovakia and the Czech Republic seem to be on track to correct their excessive deficits by 2007 and 2008 respectively, they are expected to strengthen the fiscal adjustment effort, also in the light of their favourable economic prospects.

In the case of Hungary, the situation is quite different as the Commission is not satisfied with its update programme. Thus, the Commission has invited the Hungarian government to present another version of its revised convergence programme by the beginning of September.

Meanwhile, the UK seems to be joining the club of EU members with an excessive deficit procedure as its budgetary deficit has surpassed the three percentage mark.

The excessive deficit procedure requires a member state to submit a convergence programme with a plan on how to come into line with EU economic policy regarding levels of deficit, public debt, inflation and other important criteria.

Mr Almunia said the Commission has taken the view that at 3.3 per cent of GDP in the 2004/5 financial year, the UK is running an excessive budget deficit and will be recommending to the Ecofin Council that the deficit be brought down to below three per cent by the forthcoming 2006/7 financial year.

He said that with the inclusion of the UK, 12 member states are now within the excessive deficit procedures, including six of the new member states. He said that further decisions will be taken regarding Italy, Portugal, Greece and France.

On the new member states that are in this procedure, including Malta, Mr Almunia commented that with the exception of Hungary, the Commission is very satisfied with the progress being achieved by these countries and this year it should be in a position to recommend the closure of proceedings against some of the new member states involved.