EU expected to lift anti-deficit procedure against Malta today

EU finance ministers meeting in Luxembourg today are expected to discuss a proposal moved by the European Commission to lift the excessive deficit procedure against Malta following the government's correction of its public finances over the past three years.

The decision will kick off the final decision-making process on whether Malta should join the euro next year, as recommended by the EU executive last month. EU finance ministers, including Malta's Prime Minister Lawrence Gonzi, are also expected to have a preliminary discussion on this recommendation during today's Ecofin Council.

A Council spokesman yesterday confirmed that Malta will feature prominently on today's Ecofin's agenda.

"I can confirm that the Council is expected to adopt decisions, under article 104 of the treaty, closing the excessive deficit procedure it opened against Malta in 2004. The draft decision requires two thirds of the weighted votes of 26 delegations, excluding Malta, but we are confident that EU ministers will support the Commission's recommendations as Malta has made substantial progress in the last three years."

The procedure with regards to Malta was opened following a government deficit of 9.7 per cent of Gross Domestic Product (GDP) in 2003. In July 2004, a few weeks after Malta's accession to the EU, the EU council adopted a decision under article 104 on the existence of an excessive deficit, and a recommendation under the EU treaty on measures to correct it by 2006 at the latest.

Following tough budgetary measures taken by the government, the deficit fell to 4.9 per cent of GDP in 2004 and to 3.1 per cent in 2005.

According to the draft Council decision, to be put to vote today, "Malta has succeeded in reducing its deficit to 2.6 per cent of GDP in 2006, below the maximum threshold though higher than the adjustment recommended by the Council".

The Council is expected to consider that Malta's deficit has thus been corrected in a credible and sustainable manner.

According to the Commission's spring economic forecasts, the deficit is expected to be further reduced to 2.1 per cent of GDP in 2007 and (on a no-policy-change basis) to 1.6 per cent in 2008, in the context of sustained economic growth.

Closure of Malta's excessive deficit procedure is a necessary precondition for Malta's adoption of the euro on January, 1, 2008.

The Council spokesman also said that during today's meeting, finance ministers will have an exchange of views, on the basis of reports by the Commission and the European Central Bank, on the fulfilment by Malta and Cyprus of convergence criteria and their obligations regarding economic and monetary union in the EU.

"The Council is due to make a preliminary assessment of Commission proposals for Council decisions aimed at allowing the two countries to join the euro area as from next January."

The political "go-ahead" is expected to be given by the EU's heads of state during their upcoming summit in Brussels later on this month with the final fixing of the irrevocable parity rate between the Maltese lira and the euro to be taken by the Ecofin Council on July 10.