European Commission to propose opening excessive deficit procedures against Malta

The European Commission has announced that it will be taking action against Malta and seven other member states over their government deficits, which are above the three per cent maximum allowed under EU fiscal stability rules.

Apart from Malta, the affected countries are Italy, France, Poland, Belgium, Slovakia, and Hungary.

In a 44-page report, the Commission said it would be submitting a proposal to the Council to open excessive deficit procedures against these countries in July.

It further noted that it had been warning about this possibility since last year, encouraging member states to take its warnings into account when preparing their government budgets for 20024.

Malta has been running an expansive budget over the last year as it seeks to support the local economy in overcoming major successive challenges, from the COVID-19 pandemic and the ensuing shipping crisis to the energy price shock and rampant inflation that followed Russia’s invasion of Ukraine.

It is expected to continue running deficits above the three per cent limit in 2024 and 2025.

In the report, the Commission once again insisted that the Maltese Government should put a stop to the generous energy subsidies that have maintained price stability even as prices on the continent were subject to major fluctuations.

Although it called on Malta to withdraw the subsidies by the coming winter of 2024/25, Maltese Prime Minister had made it clear, while on the campaign trail for the elections taking place earlier this month, that the Maltese Government has no intention to do so.

A reaction released by the Government did not mention the energy price support directly. Instead, it highlighted the “particularly positive” acknowledgement by the Commission that “that Malta’s economy will continue to outperform other member states in 2024 and 2025.”

This growth, it said, “is expected to be driven by net exports and private consumption” – which can be read as a pointed rejoinder, since such exports and consumption are directly related to energy prices.