Report from the Commission. Malta. Report prepared in accordance with Article 126(3) of the Treaty

Article 126 TFEU lays down the excessive deficit procedure (EDP). This procedure is further specified in Council Regulation (EC) No 1467/97 “on speeding up and clarifying the implementation of the excessive deficit procedure”, which is part of the Stability and Growth Pact. According to Article 126(2) of the Treaty, the Commission has to monitor compliance with budgetary discipline on the basis of two criteria, namely: (a) whether the ratio of the planned or actual government deficit to gross domestic product (GDP) exceeds the reference value of 3% (unless either the ratio has declined substantially and continuously and reached a level that comes close to the reference value; or, alternatively, the excess over the reference value is only exceptional and temporary and the ratio remains close to the reference value); and (b) whether the ratio of government debt to GDP exceeds the reference value of 60% (unless the ratio is sufficiently diminishing and approaching the reference value at a satisfactory pace).

Article 126(3) stipulates that, if a Member State does not fulfil the requirements under one or both of the above criteria, the Commission has to prepare a report. This report also has to “take into account whether the government deficit exceeds government investment expenditure and take into account all other relevant factors, including the medium-term economic and budgetary position of the Member State”.

This report, which represents the first step in the “excessive deficit procedure” (EDP), analyses the reasons for a breach of the deficit and debt criterion of the Treaty with due regard to the economic background and all other relevant factors. The amendments to the Stability and Growth Pact in 2011 addressed some weaknesses in the surveillance framework. In particular, the corrective arm was strengthened by putting the debt requirement on an equal footing with the deficit requirement in order to ensure that, for countries with a debt-to-GDP ratio above the 60% reference value, the ratio is brought below (or sufficiently declining towards) that value.

Since accession to the EU, Malta has been subject to two EDPs. The first was launched by the Council decision of 7 July 2004 and was abrogated by the Council on 5 June 2007. The second was launched on 7 July 2009 and abrogated on 4 December 2012, following a one-year extension, to 2011, of the deadline for correcting the excessive deficit on account of unexpected adverse economic events with major unfavourable consequences for the government finances that occurred in 2010.

Data notified by the authorities in April 2013 show that the general government deficit in Malta reached 3.3% of GDP in 2012, thus exceeding the 3% of GDP reference value. In addition, the general government gross debt was still above the 60% of GDP reference value and Malta did not make sufficient progress towards compliance with the debt reduction benchmark during the transition period. The Commission has therefore decided to initiate the excessive deficit procedure for Malta with the adoption of this report.

• Primary Source

EUR-Lex: COM(2013)294: Follow the progress of this report through the decision-making procedure http://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2013:294:FIN

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