As had been widely expected, yesterday’s gathering of European Union economy and finance ministers (ECOFIN) approved the lifting of the excessive deficit procedure against Malta, which had been in place since three weeks after Malta’s EU accession in May 2004.
The ECOFIN Council, meeting in Luxembourg on Monday and yesterday, also approved Malta’s convergence reports drawn up by the European Commission and the European Central bank.
Malta was represented at the meeting by the Prime Minister and Finance Minister, Lawrence Gonzi, finance ministry parliamentary secretary Tonio Fenech and Malta’s permanent representative to the EU, Richard Cachia Caruana.
The excessive deficit procedure is a punitive measure against member states running public deficits of over three per cent of the gross domestic product, and its removal yesterday signalled another green light for Malta’s prospective euro adoption on 1 January. Malta’s deficit had run as high as 9.7 per cent of GDP in the lead-up to EU accession in 2003.
The lifting of the procedure, a necessary precondition for euro adoption, had been anticipated, with EU Economic and Monetary Affairs Commissioner Joaquín Almunia having indicated as much early last month when assessing the EU’s spring economic forecasts.
In a statement issued yesterday, the ECOFIN Council found that, “The Council considered Malta’s deficit – which stood at 2.6 per cent of GDP in 2006 – to have been reduced in a credible and sustainable manner, given also that the commission services’ spring forecast projects the deficits for 2007 and 2008 to be further reduced.”
The council did, however, note that government debt was expected to remain at 66 per cent of GDP for 2007, well over the 60 per cent reference value, and was expected to fall to 64.3 per cent of GDP in 2008.
Speaking at the council yesterday, Dr Gonzi welcomed the two decisions and underscored that the positive result was the fruit of the government’s economic and fiscal programme as well as the efforts of Malta’s economic operators and the public.
Malta has made substantial progress in public finances over recent years, Dr Gonzi observed, adding that government expenditure and revenue figures for 2007 have already confirmed the country was on the road to meet its financial targets once again this year.
Dr Gonzi added that the findings of the EC and ECB convergence reports on Malta’s euro adoption bid confirmed that Malta would find its place in the eurozone come 1 January. The event, he said, would be an important step in Malta’s economic history.
Following yesterday’s dual announcement, and the previous endorsement of Malta’s euro bid by the EC on 16 May, the European Parliament will need to approve Malta’s eurozone candidature. Although some noise within the EP had been made with reference to Malta’s still excessive debt levels, no opposition is expected from MEPs when the matter is decided later this month.
After that, in July, finance ministers will set a final irrevocable exchange rate between the Maltese lira and the euro, which will mark a final decision on the matter.