Malta has made a lone stand against the approval of recommendations made by the European Commission aimed at pushing EU member states to implement major economic and financial reforms.
We are insisting this is not the way forward for us and we hope that in the long-run the Commission will understand our arguments
Its objections were in vain, however. The island was overruled and the so-called Country Specific Recommendations were endorsed en bloc by EU finance ministers in a Brussels meeting yesterday attended by Malta’s Tonio Fenech.
Malta has specifically objected to two of the Commission’s recommendations for Malta, first proposed last May, saying the island is not in a position to implement them. This is in relation to pensions and the cost-of-living adjustment (COLA).
The Commission wants the country to accelerate its reform and increase the effective retirement age but Malta argues this is not necessary as the current reform is already sufficient according to financial and demographic projections.
Brussels also asked Malta to restructure the COLA mechanism to better reflect developments in labour productivity and reduce the impact of prices of imports on the index.
But the government argues that this is a technically faulty recommendation as the mechanism will become meaningless if imports are taken out of the equation. The island imports almost all of its consumption needs.
Speaking to The Times after the meeting yesterday, Minister Fenech said it was a pity that the Commission had not budged on its position and refused to change the text.
“We will not accept a take it or leave it approach, even if we stand alone on this position,” Minister Fenech said.
“We explained our position in detail and presented studies showing that the Commission’s recommendations on pension reform and the cost of living adjustment are flawed.
“Unfortunately, there was no change in attitude on the Commission’s side.”
Although the Commission’s recommendations – now approved by Ecofin – are not legally binding, Malta will continue to face pressure from Brussels to implement them.
“We still expect the Commission to keep insisting on its position and more peer pressure will be put on us to toe the line.
“However, we are insisting this is not the way forward for us and we hope that in the long-run the Commission will understand our arguments,” Minister Fenech said.
On the other hand, Malta agreed with the other recommendations made, which include a continued effort to further reduce debt and deficit levels; a reduction in the high rate of early school leavers; less dependence on imported oil for energy production and the strengthening of the banking sector.
During the Ecofin meeting, the ministers also agreed to make available to Spain, by the end of this month, the first €30 billion tranche to recapitalise its ailing banks. The money is to be provided through the European Financial Stability Facility (EFSF).
Later on in the year, a total of €100 billion will be provided through a more permanent bailout fund – known as the European Stability Mechanism – which still needs to be ratified by several member states.
According to the Finance Ministry, Malta’s share of guarantees in the first tranche to Spain will amount to €30 million.
The transaction does not need any approval by the Maltese Parliament as the island has already approved an overall capping of €700 million in guarantees to the temporary EFSF.