The House Foreign and European Affairs Committee has recommended that the Government approves the ratification of the Stability, Coordination and Governance treaty signed in Brussels in March 2012.
Malta to present its economic programme to European Commission by October
Two economic analysts from the Finance Ministry’s economic policy unit, Efrem Arpa and Ritienne Demanuele, told the committee that 12 member states had already ratified the pact.
Making a presentation on the stability growth pact framework under the treaty, Ms Demanuele said that Malta had to introduce balanced budget rules in the Constitution and establish an independent fiscal institution to evaluate the macro fiscal forecasts and rules by the end of the year.
It also had to establish a medium-term framework that included targets which went beyond annual budgets. These targets were binding.
Mr Arpa and Ms Demanuele spoke of more stringent rules introduced in the stability and growth framework because of shortcomings in the previous one, which did not prevent the emergence of fiscal imbalances in member states leading to the EU fiscal and econo-mic crisis.
Among the shortcomings, they pointed out that no distinction was being made between temporary and permanent revenue and statistics failed to capture actual value of debt because of special purpose vehicles.
The new framework included measures where penalties and fines were being introduced on member states if they failed to make significant progress so that the deficit and debt fall under the three and 60 per cent mark respectively. The fines could also lead to a reduction in cohesion funds.
In case of debts above the 60 per cent mark, countries were required to commit themselves to reduce the difference from the actual debt by five per cent every year.
The new framework also established opening excessive debt procedures where the national debt exceeded the 60 per cent mark.
Ms Demanuele said that, under the new rules, an early warning would now be given to member states if the country deviated from the fiscal pact on balanced budgets. The assessment would be made according to forecasts by the European Commission.
She said that when Malta presented its stability programme it had argued the deficit would drop to 2.7 per cent in 2013 but the commission’s assessment forecast 3.6 per cent.
The commission had said that the Government’s forecasts of recovering losses from the cut in the motor vehicles registration tax were not realistic.
Ms Demanuele said that Malta would submit its economic partnership programme to the commission by next October. The programme had to include the country’s plan on cutting the deficit to below the three per cent mark. The plan had to be backed by actual data and measures. The latest forecasts on fiscal items made by Malta were more conservative than those made by the commission.
Earlier, the Deputy Prime Minister of Montenegro, Igor Luksic, gave the committee an overview of the actions taken by his country to start formal negotiations.
He spoke on the possibility of increasing relations with Malta in areas including medical resources, cultural cooperation and tourism.