So there we are, again.

We’re back in the (European) corner where the bad boys are sent to.

Announcing the decision yesterday, Commissioner Rehn used the word ‘Unfortunately’ with regard to Malta. Unfortunately Malta has not sustained the momentum which brought it, just a half year ago, out of the Excessive Deficit Procedure.

Unfortunately, also, Malta is the only EU country moving in the opposite direction to the rest of Europe. While seven countries have now moved out of EDP since a year ago, Malta is the only one to have moved back.

Clearly, there is something systemic which is going bad in Malta, or at the very least non-functional.

It must be made clear, at the outset of these remarks, that the Commission was studying the Member States’ finances at the end of 2012, at which time Malta was still under the Nationalist government. As the IMF said, no doubt tongue-in-cheek, in its Report published on this paper last week, “after notable progress in 2011, the fiscal deficit widened to 3.3% of GDP in 2012 amid the election cycle” which triggered a reassessment of Malta’s public finances under the EDP.

The Commission’s Spring Forecast for Malta, also reproduced in last week’s issue, forecast that not only will Malta’s deficit not be brought down in 2013 but on the contrary, it will widen to 3.7% of GDP.

The government on Tuesday tried to forestall the firestorm as a result of the EDP announcement by stating that the Commission has not asked for any cuts in spending. Reading the Country Specific Recommendations that we carry in this issue, that is not immediately clear.

It is clear enough that by pushing Malta back in its EDP corner, the Commission was expressing a negative judgement on the Maltese public finances and their trend.

At the same time, the government is undoubtedly right in blaming its predecessor for the many expansionary collective agreements it signed in the weeks before the election at a time when that government knew that the 3.0% glass ceiling had been burst.

But to state that Brussels has not asked for any Budget cuts is rather rich. Brussels wants the Maltese public finances to be brought under control, whichever way that is done and for Malta to get back under the glass ceiling. Whether that is done by means of spending cuts or by means of growth in the economy is rather immaterial at this point, although this government, like the one in France, has been vociferous in arguing against a Europe of austerity and for a Europe of growth.

Clearly, as time goes by, the government will decreasingly be able to blame its predecessor and will be asked by the Commission what it intends to do about the situation.

The Finance Minister has told the media over the past days that it did try to argue that the country had been in an election mode and so people paid in less taxes. But the Commission, quite rightly, turned down this argument and said that a general election does not count as a ‘temporary economic shock’ as defined by the EU treaty.

The Commission recommendations are clear enough yet they also complain that not much has been done on the 2012 recommendations. “The identified challenges have hence remained broadly unchanged over the past year,” the Commission said.

Malta has “adopted some measures to improve tax compliance but they must be properly implemented to achieve results.”

Malta “should accelerate its ongoing pension reform, link retirement age with life expectancy, promote private pension savings, develop a comprehensive ageing strategy and increase cost-effectiveness in the healthcare sector.”

On two recommendations, education and energy supply, the present government’s policy thrusts are or seem to be in line with the Commission’s recommendations, though one must of course wait for their implementation to check against their delivery.

Finally, much against what the government has been arguing after the Cyprus issue, “the foreign banks which do not operate in the domestic economy but which nevertheless account for 790% of Malta’s GDP, must be closely supervised and monitored.”

Last week, we termed the two reports, the IMF one and the Commission’s Spring Forecast as being ‘From the Horse’s mouth”. Now we can go one further and state that ‘the writing is on the wall’.