Yesterday's country-specific recommendations for Malta, issued by the European Commission showed how the commission has doubts about the government's fiscal targets, the PN said today.

The shadow minister for finance, Mario de Marco, noted that the commission had said that the government’s planned deficit targets wee at high risk of significant deviation;  public expenditure is rising faster than the potential GDP growth; State-owned enterprises are a source of potential risks to the state budget, and subsidies to the economy increased from 2.0% of GDP in 2004, with a moderation in 2009-2011 to 1.7% of GDP, to 2.5% of GDP in 2014. 

Furthermore, apart from one-off large-scale projects in 2014 and 2015, investment in Malta was lower than anticipated. 

The commission had said that the long-term sustainability of public finances in Malta remained a challenge, mainly due to the budgetary impact of ageing-related costs, such as healthcare and long-term care and pensions.  

It was also observed that no comprehensive transport strategy has yet been implemented, despite the fact that the development of a national transport strategy and master plan is a pre-condition for accessing EU structural and investment funds (2014-2020), which will be used to co-fund transport investments.  

In view of the forecasted slippage, the Commission recommended a significant long-term fiscal adjustment of 4.4% of GDP to put the Maltese public debt on a sustainable path. The Commission also recommended measures targeted at reducing primary expenditure (by 0.16% of GDP), especially in the areas of compensation of employees, intermediate consumption and capital transfers. 

Dr de Marco said these reports threw cold water on government’s claims that the national deficit was under control.

"The European Commission concluded that government’s fiscal targets are not believable, government expenditure is raising too fast and that economic growth is being fuelled by one-off events. The Commission also highlighted that government failed to address satisfactorily important structural issues such as those related to transport and pension reform," he said. 

"The European Commission’s position is in line with that of the Opposition which has in the past repeatedly warned government to keep its expenditure in check. Government chose to ignore the Opposition’s claims. The same concerns are now being highlighted by the European Commission." 

 

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