Fresh spending cuts announced by the government four days ago seem to have pacified the European Commission, which now believes that the island is moving in the right direction.
Malta’s efforts are commendable
The projected cuts of €30 to €40 million, announced through an official statement on the day when national attention was focused on the Cabinet reshuffle and its fallout, came barely two months after the government’s Budget for 2012. The cuts follow a number of technical meetings with Brussels.
A Commission spokesman in Brussels said that the latest government announcements to restrict spending by about 0.5 per cent of GDP this year were considered to be “positive” and “go in the direction of our earlier concerns”.
Sources close to the Commission said that, thanks to the latest measures, Malta should “avoid sanctions”. “Malta’s efforts are commendable and the island is moving in the right direction,” the sources told The Times.
“The prevailing economic scenario in Europe is bleak and the latest measures taken by the Maltese government are intended to have more realistic projections given the situation,” they added.
Brussels will be issuing its “definitive assessment” on Malta’s efforts to close its excessive deficit procedure in the coming days and the latest realignment of the 2012 budget is being seen as another step in the “right direction”.
“Commissioner Olli Rehn (responsible for economic and monetary affairs) will, in the coming days, communicate the Commission’s definitive assessment of the latest measures announced by the Maltese government and on their impact on the excessive deficit procedure,” the Commission spokesman said.
Last November, before the Budget was presented, the Commission had sent a letter warning that sanctions would be imposed if Malta did not take corrective measures to rein its deficit to under three per cent of GDP by the end of 2011.
Action was initiated by Brussels in 2009 obliging Malta to slash its deficit. In the last Budget, the government said it would close the year (2011) at 2.8 per cent of GDP and would further reduce the deficit to 2.3 per cent this year.
Brussels disagreed, saying the island would still have a deficit of over three per cent by the end of 2011. That was contested by the government and the definitive data will only be published by Eurostat at the end of March or the beginning of April.
Malta is not the only member state that had to get in line with EU deficit rules by the end of 2011. Belgium, Cyprus, Hungary and Poland also received a warning letter in November.