The European Commission said today that Malta had taken effective action to rein in its deficit, and it therefore extended its deadline for the deficit to be brought under 3% by a year.

"The Commission concluded that effective action had been taken in response to the July 2009 Council recommendations," the EU said in a statement.

"However, due to a sharper impact of the global crisis on the Maltese economy, than was expected in the spring 2009 forecast, the budgetary position has been adversely affected beyond the government’s control. As a result, the existing deadline of 2010 for the correction of the excessive deficit has become unrealistic.

"Therefore the Commission recommends that the deadline should be extended to 2011. To this end, the Maltese authorities should achieve the 2010 deficit target of 3.9% of GDP set in the budget, if necessary by adopting additional consolidation measures, and ensure in 2011 a fiscal effort of ¾ p.p. of GDP."

Malta ended 2008 with a deficit of 4.7 per cent of GDP and is projecting that this will drop to 3.8 per cent for 2009, with the final data still to be published.

According to the Commission's recommendation, Brussels is now expecting the island to stick rigorously to its projected deficit of 3.9 per cent in 2010 and lower it to at least three per cent in 2011.