Only days after a credit rating agency downgraded Greek bonds to junk status, eurozone members and the International Monetary Fund have knocked into shape a staggering €110 billion three-year bail-out aimed at preventing Greece from defaulting on its debt. The rescue package, to which Malta will be contributing its share, amounting to €27 million, will hopefully ease the pressure from financial markets, though it is unlikely, at least at this early stage, to cool the anger of the thousands of people who will be directly hit by the austerity measures announced by the government.

As governments and financial analysts across Europe and elsewhere wait to see how the situation is going to develop in the months to come, the European Commission has turned its guns on credit rating agencies. It has reminded them that, later this year, it planned to gain new powers "to ensure the quality of the rating methodology and the ratings is watched over". Even though the Commission is, of course, right in expecting the rating agencies to act in a "responsible and rigorous" way, it goes without saying, too, that a number of eurozone member countries have to seriously revamp their programmes to put their fiscal house in order. In the wake of the financial crisis and the recession that followed, deficits have mushroomed and debts have piled up as revenues declined and governments had to quickly draw up stimulus packages to shore up their countries' economies.

According to the latest figures published by Eurostat, only two countries managed to cut the deficit in the government's finances last year: Estonia and Malta. The average deficit in the euro area rose from two per cent in 2008 to 6.3 per cent last year and the average debt stood at 78.7 per cent. Malta's debt ratio is of 69.1 per cent but the government cut its deficit from 4.5 per cent to 3.8 per cent in 2009. This shows that even though Malta, too, has been hit by the recession, it still managed to make an improvement in its finances. But there is definitely no need for any undue rejoicing as the deficit is still above the limit allowed by EU rules. Not only that, but, while the European Commission has acknowledged that Malta is moving towards lowering its structural deficit, it is not satisfied with the plans to achieve a positive budgetary balance.

It wants to see more robust financial planning and would specifically like to see the government concentrate on further reform to cut its expenditure, particularly on healthcare and social services. Cutting expenditure on healthcare and social services is easier said than done. The subject is a hot potato, one that, for fear of losing support, political parties dread to tackle seriously. Yet, a sustained effort to bring about a higher degree of efficiency in the two sectors, plus keeping up the work being done to check fraud, could at least help contribute to making greater savings.

Very significantly, the Commission also said: "A more ambitious pace of consolidation than foreseen in the (government's) programme would also be warranted in view of the high risks to the long-term sustainability of the public finances." With all that is happening in government finances in Europe today casting a degree of uncertainty, it is doubly important for Malta to ensure that it keeps working hard to cut the deficit to below the three per cent limit allowed by the EU.