Finance Minister Edward Scicluna wants Brussels to end its EDP. Photo: Darrin Zammit Lupi

Malta’s public finances will continue to be closely monitored by the European Commission for at least another year despite lobbying by the government to end the ongoing excessive deficit procedure (EDP).

A Commission official told Times of Malta yesterday that although the island had managed to lower its headline deficit in 2013 by a better margin than recommended, Brussels was still unconvinced it could maintain such progress.

“Though the Budget deficit was below the recommended target in 2013 and it is forecast to overachieve it also in 2014, Malta has not complied with the debt rule.

“As a result, early closure of the procedure is not possible at this time,” the official said.

“Moreover, an insufficient structural effort underpinning the reduction of the headline Budget deficit could yet undermine the achievement of the EDP target in 2014 and the durability of the correction,” he added.

The EDP against Malta was opened last year when the deficit had surged to 3.3 per cent of GDP by the end of 2012. According to EU rules, member states’ annual deficit cannot exceed three per cent of GDP.

Although, originally, Malta was given until the end of this year to bring the situation under control, the government had managed to lower the deficit by 2.8 per cent at the end of 2013.

This boosted its efforts to lobby Brussels to end the procedure against Malta a year earlier than planned.

Finance Minister Edward Scicluna said last month that, due to the positive results achieved in 2013 with regard to the deficit, the government was insisting Brussels end its EDP “at the first possible opportunity”.

Malta has not complied with the debt rule. As a result, early closure of the procedure is not possible at this time

Explaining why it decided against ending the procedure just yet, the Commission said that although it was true that Malta was making progress, it was not working hard enough, particularly in the reduction of the structural deficit, which should not include one-off measures.

“The change in the structural balance in cumulative terms in 2013-14 falls short of what is recommended,” Brussels said.

The Commission is also wary of the government’s achievements in terms of debt, which is also an important aspect of the EDP. According to the Commission, Malta did not manage to lower its debt last year although this could be possible this year.

Malta ended 2013 with a debt of 73 per cent of GDP, way above the 60 per cent threshold. It plans to reduce debt to 69.4 per cent this year by partly privatising Enemalta and selling the BWSC plant at Delimara power station to the Chinese government.

The Commission decided on Monday to recommend EDP against six countries: Austria, Belgium, the Czech Republic, Denmark, the Netherlands and Slovakia. It also said that Poland and Croatia, which have EDPs against them, “have taken effective action in response to its recommendations under the EDP rules”.

The EU’s Council of Finance Ministers is expected to endorse the Commission’s recommendations when it meets in July.