As from next year Malta will have to start giving Brussels details of preparations of its annual Budget months before it is actually tabled in Parliament, according to an agreement reached by EU finance ministers this week.

The new Budget review system, to be known as the European semester – a cycle of economic policy coordination – is intended to introduce more control by the Commission over the fiscal and monetary policies adopted by EU member states, in order to avoid another Greece-style mishap.

Malta was in favour of the new system and Finance Minister Tonio Fenech said this process should contribute to improvements in the quality and effectiveness of national economic and fiscal policy-making in the EU.

The semester is a six-month period every year during which the member states’ budgetary and structural policies will be reviewed to detect any inconsistencies and emerging imbalances. The aim is to reinforce coordination while major budgetary decisions are still under preparation.

In a new monitoring cycle, the European Council will each March identify the main economic challenges facing the EU and give strategic advice on policies. Taking this guidance into account, the member states will present their medium-term budgetary strategies in their stability and convergence programmes. At the same time, they will also draw up national reform programmes setting out the action to be undertaken to strengthen their policies in areas such as employment and social inclusion. All these programmes will be issued simultaneously in April.

Each July, on the basis of the programmes submitted in April by member states, the European Council and the Commission will provide policy advice before member states finalise their Budgets for the following year.

The European semester is one of the first initiatives to emerge from a task force chaired by the President of the European Council, Herman Van Rompuy, with a view to strengthening European provisions on economic governance. However, more initiatives are currently under discussion.

The next steps will involve stricter penalties for those countries which despite the recommendations by the Council and the Commission still do not take the necessary action to bring down their structural deficits and level of public debt.

The economic governance task force, headed by Mr Van Rompuy should soon be in a position to make further recommendations in this direction.

Currently, EU member states already submit multi-annual budgetary plans to the EU, known as the Stability and Convergence and National Reform Programmes, which detail the broad budgetary intentions of every member state for the following two years. Every year the Commission issues recommendations on which areas member states should focus on.

In the case of Malta, the Commission has repeatedly called for more details to the submitted plans as it viewed certain aspects of Malta’s budgetary projections to be vague, over-estimated and not accompanied by detailed plans.