Brussels grants extension
The European Commission is to recommend that Malta be given an extra year to cut its deficit to the levels set by the EU's financial rules.
The EU last July adopted an excessive deficit procedure (EDP) against Malta, ordering the island to bring its deficit down to under three per cent of GDP by the end of 2010.
However, Malta asked for more breathing space while the economy was still recovering from recession and tomorrow the Commission is expected to accede to the request.
The final decision is expected to be taken by EU's finance ministers in the coming weeks. However, the Commission's recommendation is not likely to encounter any objection.
"In our assessment of the measures being contemplated by Malta to correct its deficit, the Commission found that, over the past months, Malta did indeed take effective action to lower its deficit," a Commission official said.
"It is also a fact that Malta is being hit by the global recession much more than we anticipated. This has prompted us to accept Malta's request and we will now be recommending to member states that Malta should be given an extra year, until the end of 2011, to bring its deficit down to three per cent of GDP."
Other member states are experiencing higher deficits than Malta's, including Germany, France and the UK, which have already been granted extensions to put their finances in order.
But the extension will come at a price because Brussels will want to monitor more closely how the island's finances are being managed.
"There will be enhanced surveillance of Malta's public finances as this is now necessary in view of the new deadline for the correction of the excessive deficit.
This will require timely and regular monitoring of the progress made in the implementation of the fiscal consolidation strategy to ensure the correction of the growing deficit.
In this context, Malta will have to submit more regular and precise updates on its financial situation to the Commission," the official said.
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.