French daily Le Monde has raised the alarm on Malta’s economy, saying that it is likely to trigger “the next European crisis.”

“Malta’s tax system has attracted many deposits from non-residents, resulting in a bloated system that is too large for the government to save, especially seeing that it is currently undertaking fiscal consolidation having just emerged from the excessive deficit procedure last February.”

The report, published yesterday, says that should a crisis hit Malta, investors will probably be made to take a haircut on their deposits similar to the one in Cyprus, namely between 30-40% of deposits over €100,000.

The main concern raised by the study quoted by Le Monde is that Malta already has the lowest tax rate in the EU, putting further pressure on its fiscal sustainability.

The report does not even take into account the reductions in income tax that were brought in with the 2013 budget.

“Malta is considered to be a tax haven with little or no tax, no transparency and no real economic activity apart from online gaming.”

Le Monde warns that as international efforts against off shore banking, tax evasion and money laundering are stepped up, Malta could potentially lose out.

Another concern highlighted by the study is the fact that only banks with €5 billion worth of asset fall under the supervision of the European Union. This means that only Bank of Valletta, HSBC and CommBank Europe Ltd will be directly supervised.

The latter bank is an Australian subsidiary. The Le Monde report highlights how any crisis at CommBank could be easily absorbed by the Australian banking sector, but it would have a “disastrous” effect on the Malta economy.

A report by the International Monetary Fund in 2012 has already warned that Malta need to do more in managing the systemic risk posed by foreign banks.