Balanced budget 'within a few years'

Malta should have a balanced Budget within the next few years, Prime Minister Lawrence Gonzi said, stopping short of committing himself to a specific date.

He said he hoped the government would be in a position to give a precise target date for getting rid of the deficit and attaining a balanced Budget.

"We are still committed to having a balanced Budget in a few years' time as we believe we should continue on the path of consolidating our public finances," the Prime Minister said at the end of a two-day summit in Brussels.

Asked to say specifically when Malta was expected to balance its Budget, Dr Gonzi said he would not like to set a target date in the light of the current volatility of the international economic scenario.

"I want to establish a precise target when we see the international economic activity settling down. At the moment I don't want to be drawn into such a commitment although a balanced Budget remains our target," Dr Gonzi said.

Earlier this week, the European Commission criticised Malta for not indicating a clear direction for its public finances in the medium term.

Although recognising that Malta was on the way to reducing its deficit to below three per cent of GDP by 2011, it was not yet clear whether it would manage to continue to lower its structural deficit afterwards, the Commission said.

However, Dr Gonzi stressed Malta would continue to aim to reduce its deficit after 2011.

Following an agreement to help Greece face its financial crisis on Thursday, the 27 leaders yesterday focused on reaching a political agreement on a 10-year plan aimed at revitalising the EU's economy.

Dr Gonzi said an agreement on the plan's main principles had been reached but more discussion should be held in the coming months to try and agree on the blueprint during the next EU summit in June.

The 10-year plan, called EU2020, is meant to reverse the EU's economic decline by the end of the decade by making it more innovative, competitive and climate-friendly.

"We have set the agenda for a smart, sustainable and inclusive Europe," European Commission president José Manuel Barroso told journalists after the meeting.

The strategy, based on Commission proposals, called for an agreement on five targets which would, if achieved, encourage growth. Yesterday's summit formalised three of the targets but puts off further decisions until June.

The 2020 strategy should "bring to 75 per cent the employment rate for the population aged 20-64, including through the greater participation of women," and boost research and development spending to three per cent of GDP, the summit's final declaration said.

The EU should also live up to pledges to cut greenhouse-gas emissions to 20 per cent below 1990 levels and raise energy efficiency and the use of renewable energy to 20 per cent.

The Commission called for 40 per cent of young people to have a university degree by 2020, but Germany opposed the target, fearing agreement would violate its Constitution.

In Germany, education policy is in the hands of the 16 federal states, not the national government, leaving the government open to a legal challenge if it tried to impose education goals.

The European Council also scrapped a call by the Commission to bring 20 million people out of poverty by 2020, arguing that definitions of destitution were so varied it would be impossible to decide whether targets had been reached.

So the EU agreed it would "promote social inclusion, in particular through the reduction of poverty", but "further work is needed on the appropriate indicator". The June summit will tackle the issue.

Following the two-day talks, questions remained over the EU's will and ability to stick to the goals, as some analysts believe the Lisbon strategy failed because of a lack of enforcement mechanisms.

The new strategy is meant to get around this problem by allowing EU summits to pressure under-performing states.

Member states will not have to reach the same targets but will have to draw up individual plans, called National Reform Programmes, in which separate targets are set.

Malta has until the end of this year to draw up its plan, which will then be monitored by the Commission on an annual basis.