EU to consider Excessive Deficit Procedure against Malta
Charlot Zahra
The European Commission (EC) will this morning examine Malta’s budget deficit and decide whether to issue an Excessive Deficit Procedure (EDP) against Malta for violating the rules of the Stability and Growth Pact.
Under the provisions of the Stability and Growth Pact, Member States have to respect two criteria: a deficit-to-GDP ratio of 3 per cent and a debt-to-GDP ratio of 60 per cent.
In 2008, according to the European Commission’s interim forecasts, Malta’s deficit-to-GDP rate shot to 4.6 per cent, well above the 3 per cent limit set out in the Euro zone convergence criteria.
At the same time, Malta’s debt-to-GDP ratio for 2008 was revised upwards from 60.0 per cent to 62.9 per cent, exceeding the threshold set out by the Stability and Growth Pact.
For 2009, Malta’s debt-to-GDP ratio was also being revised upwards, from 57.2 per cent to 61.9 per cent, also in excess of the 60 per cent threshold.
If a Member State exceeds the deficit ceiling, the Excessive Deficit Procedure (EDP) is triggered at EU level. This could lead to different actions – including the possibility of sanctions – to encourage the Member State concerned to take measures to rectify the situation.
The EDP is established in the Treaty and specified in the Stability and Growth Pact legislation.
The EDP legislation sets out criteria, schedules and deadlines for the Council to reach a decision on the existence of an excessive deficit.
However, no EDP procedure will be launched if the excess of the government deficit over the 3 per cent of GDP threshold is considered “temporary and exceptional” and the deficit remains close to the threshold.
A European Commission spokesperson was tight-lipped when asked whether the Commission has recommended an EDP to be opened against Malta.
During the same meeting, the Commission will also examine Malta’s updated Stability Programme from 2008 to 2011.
Along with Malta, the EC will be examining the Stability and Convergence Programmes of Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Latvia, the Netherlands, Poland, Spain, Sweden and the United Kingdom.
Last Thursday, the influential Brussels newspaper European Voice reported that the European Commission is going to issue an excessive deficit procedure next Wednesday against six EU member States for overshooting their budgets, “even though the current economic crisis makes it likely that excessive spending will be tolerated”.
The six counties mentioned in the EV report were France, Ireland, Greece, Spain, Latvia and Romania.
In the euro area, Portugal’s deficit was forecast to reach 4.6 per cent this year (the same percentage as Malta’s), France’s 5.4 per cent and Italy’s 3.8 per cent.
Ireland’s budget deficit for this year was expected to reach 11 per cent, the UK’s deficit was expected to hit 8.8 per cent, Romania’s budget deficit was forecast at 7.5 per cent and Latvia’s 6.3 per cent.
