Brussels has made it clear Malta will get no special treatment over the recommendation to open an excessive deficit procedure against it.
It reiterated that the island might be ordered to take “further corrective action” to the 2013 Budget if it was not satisfied with the plan to be submitted by the Maltese authorities this October.
The EDP is not something that is negotiated with member states
Following the EDP announcement by the European Commission last week, Prime Minister Joseph Muscat told Parliament that the Government had “negotiated with the EU so that no spending cuts are imposed on the island”.
“The EDP is not something that is negotiated with member states,” a commission official told Times of Malta. “The rules of the EDP are very clearly set out under the Stability and Growth Pact, which has been strengthened in the past couple of years.”
As guardian of the EU treaties, it is the commission’s responsibility and mandate to respect the rules.
Asked specifically to state whether the commission and Malta had negotiated the terms of the recommendation, as suggested by the Prime Minister, an EU official categorically said it was not the case.
When asked to give further details on the “negotiations” mentioned by Dr Muscat in Parliament, the Office of the Prime Minister did not repeat the term “negotiations” and said some informal discussions were held “about the country’s performance in 2012 and the way forward towards economic growth”.
Brussels said that the fact that Malta was given until 2014 to cut its deficit did not amount to any special concession. EU officials explained that, according to the treaties, the correction of the excessive deficit must be completed in the year after the deficit was noted.
“This is why we recommended a correction of the excessive deficit by 2014.”
According to the commission’s recommendation, which now needs to be endorsed by EU finance ministers in July, Malta must cut its deficit to 2.7 per cent of GDP by next year and this year’s deficit by a further 0.4 per cent of GDP to close the year at 3.3 per cent.
The Government insists that no spending cuts would be necessary over and above this year’s estimates as it was still projecting that the deficit would fall to below the three per cent GDP threshold by the end of this year.
The Finance Ministry has set up a spending review unit to see where it can cut costs.
Despite the Government’s assurances that there will not be any more austerity cuts, the commission is reserving the right to demand further action later this year.
According to EU officials, the need of further corrective measures depends on the report Malta will be submitting in October.
“The commission and the Council of Ministers will assess the report and, if they consider that the strategy is not adequate to ensure compliance with the recommendation, they will consider corrective action to be taken.”
This is the third time since 2004 that Malta has been put under an excessive deficit procedure.
In 2005 and 2008, the commission had taken similar steps to oblige the Maltese Government to reduce deficits to under the three per cent threshold.