EU lets Malta off the hook on deficit

European Union finance ministers yesterday agreed to close the excessive deficit procedure opened against Malta in 2004 "after the Maltese government succeeded in reducing its deficit below three per cent of gross domestic product (GDP)", the maximum threshold set by the EU's stability and growth pact.

Speaking to The Times from Luxembourg following yesterday's meeting, Prime Minister Lawrence Gonzi expressed his satisfaction that Malta managed to arrive to this point.

"Following the start of the excessive deficit procedure against Malta three years ago, we have taken tough decisions to put our finances on a sound footing. Today, we are very satisfied that we have reached our targets and this is now confirmed by the EU. I would like to thank the Maltese public for its support and sacrifices. We can now start looking forward to a more prosperous future with the aim of having a balanced budget in a few years time," he said.

In a council statement issued following the decision, the EU said it now "considers Malta's deficit, which stood at 2.6 per cent of GDP in 2006, to have been reduced in a credible and sustainable manner, given also that the Commission services' spring forecast projects the deficits for 2007 and 2008 to be further reduced".

The council however noted that Malta's government debt is expected to remain at about 66 per cent of GDP in 2007, still above the EU's 60 per cent reference value, falling to 64.3 per cent in 2008.

The excessive deficit procedure was opened after Malta ran up a deficit in 2003 amounting to 9.7 per cent of GDP.

The closure of the excessive deficit procedure is a necessary precondition for Malta's adoption of the euro on January 1, next year.

During yesterday's meeting, the EU finance ministers had a preliminary discussion on the Commission's recommendation issued a few days ago to allow Malta to join the eurozone as from January.

Dr Gonzi said that during the discussion Malta was praised for reaching the Maastricht eurozone entry criteria.

"Yesterday's discussion was very positive for Malta and we now look forward to a political decision at the next EU summit so that Malta will be able to adopt the euro. I am very confident the EU leaders will agree to our next step in integrating with the EU," he said.

The final decision on the euro, when the fixed irrevocable parity rate between the lira and the euro will be established, is scheduled to be taken at the first Ecofin council under the Portuguese Presidency on July 10.