Only two weeks after the International Monetary Fund expressed concern over the widening deficit in public finance, the European Commission is recommending that Malta be placed, once again, under an excessive deficit procedure.

The procedure, triggered when the deficit of a member state exceeds the deficit ceiling, requires the taking of corrective action. Unless this is done, sanctions may be taken against the country falling behind the targets.

So, while there is reason for satisfaction at the fact that Malta has managed to show “remarkable resilience” in the face of the crisis in Europe, as the IMF well put it, on the other hand, all is not yet well in public finance.

The Commission did not mince words: ‘’Malta faces important entrenched challenges that affect the sustainability of its public finances and its potential growth, and was one of the countries identified as experiencing macroeconomic imbalances, pertaining in particular to the financial sector and public finances”.

In the face of such a stark statement, it is difficult to understand how the Government could say in its reaction that the Commission’s report on Malta showed that “it is confident in the new government’s plan, which is a positive sign for the future of the Maltese economy”.

The contrary seems to be the case, as the Commission would not have otherwise raised the deficit forecast for the year from the Government’s 2.7 per cent to 3.7 per cent.

Calling for reforms in pensions and healthcare, two matters that have been worrying financial analysts for years, the Commission is recommending to the European Council that Malta should address its excessive deficit situation by 2014, which is relatively a short time frame.

Specifically, it says, Malta should reach a headline deficit target of 3.4 per cent of GDP for 2013 and 2.7 per cent of GDP in 2014.

On its part, the Government is insisting that it plans to bring down the deficit to 2.7 per cent this year. Although the deficit dropped in the first four months, it is too early to say who is likely to be right. But perhaps it bears recalling here that before the election Labour used to consider projections by both the Commission and the IMF as “prudent”.

The Commission is recommending a raft of measures to improve economic performance, and the IMF too believes that additional measures are needed to bring down the deficit to below the EU threshold. The task is therefore probably more difficult than the Government is making it out to be.

Malta is taking far too long to get to grips with reforms to ensure the sustainability of the health service. Pensions and stipends – a topic over which both parties have buried their heads in the sand despite sensible advice to the contrary – present other problems.

The situation is made more difficult when certain decisions are taken, or not taken, simply on purely political grounds. Was the timing of the income tax cut wise? What measures are being taken to collect due tax? Not enough according to the Commission.

Instead of indulging, for political reasons, in the usual propaganda rhetoric, the Government ought now to see to the Commission’s recommendations so that the country will fall in line again in the shortest time possible.

The Opposition can of course help, by reaching consensus on certain measures that till now have been political no-go areas.