Malta yesterday joined 24 EU member states and officially signed the Fiscal Compact, a new treaty aimed at strengthening fiscal discipline, along with a new “balanced budget rule”.
Although Malta is now obliged to amend its Constitution to insert the so-called “golden-rule” – making a balanced budget compulsory – the government is still of two minds on how the amendment should be made.
Changes to the Constitution could be made through a simple majority in Parliament but in the case of a provision that is entrenched it would need two thirds of MPs would be required.
Asked at the end of the EU summit in Brussels yesterday whether the government would be seeking to entrench the golden rule, Prime Minister Lawrence Gonzi said the issue still had to be discussed with the opposition and no decision had been made yet.
“Amending the Constitution is a very serious matter and we need to have the text of the proposed amendment before we can discuss a way forward with the opposition,” Dr Gonzi said.
Pressed to say whether the government would prefer entrenchment to a simple provision, the Prime Minister would only say “discussions will only start when we know the required text”.
The European Commission is now expected to present the signatories of the Fiscal Pact with the text proposal of how national constitutions should be amended.
Member states will then decide whether to adopt such text or draft their own text using the Commission’s proposal as a guideline.
Some member states, particularly Ireland, will even go to the electorate to ratify the new treaty through a referendum. The majority of member states, including Malta, will, however, ratify the agreement through the usual parliamentary process.The treaty obliges participating member states – all EU members expect the UK and the Czech Republic – to insert the constitutional amendments by not later than one year from the entrance into force of the treaty.
The two-day traditional March economic summit in Brussels focused mainly on the EU’s efforts to boost growth the Union, now that green shoots of economic recovery are appearing.
Dr Gonzi said Malta was making strides forward in moving towards reaching the main goals of the EU’s 2020 economic growth strategy. He pointed out that, for the first time, the country last year surpassed the 40 per cent threshold of women participating in the workforce. “Recent statistics show that compared to the EU average Malta has one of the lowest unemployment and inflation rates in the EU and its economic growth is higher than the average,” Dr Gonzi said.
“I am not saying we are a problem-free country and all is rosy but we need to recognise the country is moving forward despite the economic turmoil,” he added.
At the end of the summit, Commission president José Manuel Barroso said EU leaders had discussed the way forward on further boosting the eurozone’s stability and agreed a decision on increasing the firepower of the bailout fund would be taken by the end of this year.
Fiscal Compact Treaty’s main elements
• A requirement for national budgets to be in balance or in surplus. This criterion will be met if the annual structural government deficit does not exceed 0.5 per cent of GDP at market prices.
• A balanced budget rule must be incorporated into the member states’ national legal systems, preferably at constitutional level, within one year from the entry into force of the treaty.
• In the event of deviation from this rule, an automatic correction mechanism will be triggered. It will be defined by each member state on the basis of principles proposed by the European Commission.
• The EU Court of Justice will be able to verify national transposition of the balanced budget rule. Its decision is binding and can be followed up with a penalty of up to 0.1 per cent of GDP, payable to the European Stability Mechanism in the case of euro area member states.