Brussels will next month decide whether to institute an excessive deficit procedure against Malta, The Times has learnt.
Sources close to the European Commission said that, although the EU executive was verifying the data submitted by Malta earlier this month, it was “likely” that the island would again be subjected to this strict scrutiny procedure.
Although according to the previous Nationalist Administration’s projections Malta would have remained within the EU’s deficit parameters, a revision by the new Labour Government indicated that the island ended 2012 with a deficit of 3.3 per cent of GDP – which is a measure of the country’s economic activity.
It is essential for Malta to bring the deficit below three per cent of GDP
Finance Minister Edward Scicluna explained in his Budget speech that this was mainly caused by a significant drop in revenue in the latter part of the year, primarily from taxes.
His predecessor, Tonio Fenech, admitted some slight revenue slippages due to the electoral climate but said the Government had taken the excessive deficit procedure issue too lightly.
He argued it could have been easily avoided if some funds owed to the Government were taken into consideration in terms of the 2012 accounts.
Officially, the Commission refused to comment on whether Malta would be sanctioned for the 2012 figures. “We are aware of the revision and our statistical office, Eurostat, is verifying the data,” a spokesman said.
Asked whether Brussels had already started any discussions with Malta on the issue, the spokesman said it had not “as we have to wait for Eurostat to validate the data supplied by Malta”.
The Commission, however, underlined the need for a “credible” strategy if Malta wanted to avoid sanction.
“It is essential for Malta to make every effort to bring the deficit below three per cent of GDP in 2013 in a durable way,” the spokesman said.
“The 2013 Budget that has just been adopted is crucial in this respect. The Commission services will closely examine it in preparation for the forthcoming spring forecasts, which will be the basis for its assessment on the EDP procedure.”
The procedure contemplated by Brussels would put the island’s public finances under the spotlight of the Commission, which will make recommendations that the country must strictly follow in order to rein in the deficit.
If such a procedure is instituted against Malta, it will be the third against the island since it joined the EU in 2004.
The first came upon accession when the island had one of the highest deficits for 50 years. Another procedure was opened in 2008 when Malta surpassed the EU deficit threshold due to the ongoing economic recession.
The majority of EU member states are facing scrutiny due to high deficits.