The Nationalist Party this afternoon urged the government to come clean about the real situation of the country's public finances after the European Commission this morning officially warned Malta that its (draft) budget for 2015 “is at risk of non-compliance” with EU rules.

Malta was warned together with Belgium, Spain, France, Italy, Austria and Portugal. The budgets of the other member states were approved without any concern being expressed.

According to an assessment of the Malta Budget by the Commission, the structural effort (deficit reduction) in 2014 was far from what was recommended in the Excessive Deficit Procedure issued last year highlighting that “the risk that the correction of the excessive deficit may not be achieved, owing to the apparent lack of a sufficient effort to support it.”

Brussels also warned Malta that compliance with the debt rule fell slightly short in 2014.

The Nationalist Party said the European Commission's formal statement was "truly worrying" for the prospects of the Maltese economy.

But in a statement, the Finance Ministry noted that Malta was not being requested to change its Budget.

It noted that the €28 million worth of fiscal consolidation measures announced in the Budget were not formally taken into consideration by the European Commission in its evaluation.

This was because the deadline for the submission of the draft plan came well before the announcement of the budget in the Maltese Parliament so details could not be given beforehand so as to avoid market instabilities.

“In spite of this significant omission, dictated by the calendar, Malta was still not placed in the category of member states whose position would be examined once again in early March 2015.”

"Indeed, in its reaction to Malta’s Draft Budget 2015, published on November 17, the European Commission acknowledges the progress registered by the Maltese Government with regard to the Commission’s fiscal recommendations issued last year," the ministry said.

Addressing a news conference later, Prof. Scicluna said the government will next year try to synchronise budget measures better.

The formal statement issued by the European Commission this morning, stating that the Maltese Budget 2015 is at a risk of non-compliance, while also doubting the targets set for 2014, is truly worrying for the prospects of the Maltese economy.

In its statement, the government said it acknowledged the risks pointed out by the Commission in relation to the implementation of the large investment projects, developments in expenditure and the inter-linkages between the domestic economy and external macroeconomic environment, and was actively following them.

The ministry said that, on its part, the Commission acknowledged Malta’s progress with the implementation of fiscal-structural reforms, and stated that "Malta had adopted the reform of the fiscal framework, has rolled out a number of already reported measures to improve tax compliance and fight tax evasion, and finally is in the process of approving a bill providing for the set-up of third pillar pension scheme with a view to improving pension adequacy."

The Commission noted “a significant deviation” from the adjustment path towards the medium term objective was to be expected in 2015 based on the Commission’s forecast, according to both the structural balance and the expenditure benchmark.

Brussels invited the Maltese government to take the necessary measures within the national budgetary process to ensure compliance with the Stability and Growth pact – the rules that underpin the euro.

In its report, the Commission also acknowledged that Malta made some progress with regards to the structural part of the fiscal recommendations issued by the council in the context of the 2014 European semester.

“However, it invites the authorities to accelerate progress on the planned efforts to improve fiscal sustainability of the healthcare system, to ensure that further pension reform measures are put in place and to ensure that the efforts to improve tax compliance and fight tax evasion yield the expected results."

PN urges government to come clean on public finances

The PN said the European Commission quashed the government’s credibility on the stability of finances, pointing at the lack of effort to correct the deficit as well as the increasing levels of debt.

In particular, debt levels rose significantly since March 2013, fuelled by increases in the public sector wage bill and the operational expenditure by Labour’s hugely-inflated Cabinet.

Since March 2013, the government managed to increase Malta’s debt levels by over €500 million – a staggering increase of €3 million with little new capital investment to justify such an outlay, the PN said.

It said the Commission also expressed doubts on the levels set for 2014, where contrary to the indications continuously given by the government, its reaction with regards to the government’s finances for 2014 was that the government’s performance was “far from what was recommended”.

"Worryingly, the Commission points out the risk that the correction of the excessive deficit may not be achieved, owing to the apparent lack of a sufficient effort to support it.”

The Nationalist Party pointed out that the targets for this year were still very dependent on the power station and public transport sagas.

It noted that with regards to public transport, the Prime Minister yesterday claimed that Transport Malta made €30 million in losses, which, as was the case with the €60 million in losses taken over from Arriva, were not included, so far, in the government’s financial books.

"Should the ambitious financial targets being set by the government with regards to energy and public sector be met, the deficit and debt levels will spiral to uncontrollable levels," the PN said.

It said the Commission also called on the government to implement the necessary reforms in the pension sector, a day after the Finance Minister's bold declaration that “the future is looking brighter for pensions”.

The PN urged the government to come clean about the real situation of the country's public finances, to avoid any negative surprises for the public in the coming months.

"Rather than seeking creative measures to reach its targets, presenting the real picture is crucial for the stability of the Maltese economy.

"Achieving financial stability is essential not only for the stability of our family's future but in keeping Malta as an attractive investment location - an area, where the country can afford no further setbacks," it said.