Malta has been given an extra year to cut its structural deficit to three per cent of GDP after EU Finance Ministers yesterday agreed to endorse the European Commission's recommendation.

It was agreed that Malta should stick to its projections this year of having a deficit of not more than 3.9 per cent of GDP and "to ensure a fiscal effort of 0.75 per cent of GDP the following year".

Finance Minister Tonio Fenech said the decision confirmed Malta was on the right track.

"The Commission declared Malta has already taken steps to address the deficit issue, which increased due to the impact of the global recession on the islands' economy," he said when contacted.

"This extra year gives us more breathing space but we are determined to bring the deficit down by 2011, in line with the Commission's request."

Asked whether cutting the deficit would need extra fiscal measures this year, apart from those already announced in the Budget, Mr Fenech said this did not appear to be the case.

"At the moment, we don't think any extraordinary measures are needed. We hope not. However, it is still too early to predict how the economy is going to develop, both on the local and international level, so we have to keep our two feet on the ground and look out for any dangers that might come our way," he said. The EU Finance Ministers also discussed the situation in Greece, which has a deficit of 12 per cent of GDP and, consequently, affecting the strength of the euro.

The Ecofin Council agreed to set a 2012 deadline for Greece to bring its budget deficit within the three-per-cent limit allowed under the EU's Stability and Growth Pact. It must cut its deficit by four percentage points this year.

Economic and Monetary Affairs Commissioner Olli Rehu said officials from the Commission, the European Central Bank and the International Monetary Fund would be "on the ground in Athens in the next couple of days" to verify the implementation of agreed deficit-cutting measures.