The European Commission yesterday published the Third Alert Mechanism Report on macroeconomic imbalances in EU states.

This is what the report has to say about Malta:

In April 2013, the Commission concluded that Malta was experiencing

macroeconomic imbalances arising from the significant exposure of the financial sector to the  property market and the risks for the long-term sustainability of public finances. The updated  scoreboard shows improvements in several areas, although a number of indicators continue to  exceed their indicative thresholds, namely the depreciation in the REER, and private and  general government sector debts. The external position of the economy has improved and  current account indicators moved to within the threshold, while the positive NIIP increased.

The depreciation in the REER to below the lower threshold, largely on account of the nominal  depreciation of the euro, played a supporting role. Nevertheless, the loss in export market  shares in recent years could point to an erosion of competitiveness even if the indicator  measuring the five-year change is still within its threshold. On the internal side, private debt continues to exceed the threshold, although the asset side of the private sector balance sheet  appears sound.

The government debt also exceeds the threshold and is on an upward path due to persistent primary deficits, while risks to the long-term sustainability of the public finances  relating to the ageing population remain to be addressed. The housing market appears to have  stabilised, although it continues to warrant monitoring given the interlinkages with the  domestic banking sector.

Concrete action to strengthen loan-loss provisioning policies is  needed in view of the continued increase in non-performing loans also in the first half of  2013.

Overall, the Commission finds it useful, also taking into account the identification of  imbalances in April, to examine further the persistence of imbalances or their unwinding.

An analysis of the country-specific recommendations made by the Commission shows that countries which got the same recommendation as Malta include Belgium, Bulgaria, Denmark, Spain, France, Italy, Hungary, The Netherlands, Slovenia, Sweden and the UK.

Eurostat, the statistical office of the European Union, yesterday published the indicators of the Macroeconomic Imbalances Procedure Scoreboard. The MIP is part of the Six-Pack regulation on economic governance adopted by the European Parliament and Council in November 2011.

The MIP Scoreboard, based on data as of 1 November, 2013, provide the statistical support to the annual Alert Mechanism Report released by the European Commission at the start of the European Semester. The Alert Mechanism Report contains a macroeconomic reading of potential imbalances and identifies those Member States for which in-depth analyses are required.

The Scoreboard consists of 11 headline indicators relevant for the early detection of existing or emerging macroeconomic imbalances at Member State level. The full data series are available on a regularly updated dedicated section of the Eurostat website. Compared to 2012, the definition of some scoreboard indicators has been modified to better meet user needs.

Brief definitionof the indicators

Current account balance
The current account covers all transactions occurring between resident and non-resident entities, and refers to international trade in goods and services, income and current transfers. For the Scoreboard indicator, the current account balance as a percentage of GDP is expressed as the average of the past three years.

Net international investment position
International investment position statistics record the net financial position (assets minus liabilities) of a country vis-à-vis the rest of the world. Data cover stocks of direct and portfolio investments, financial derivatives and other investment and reserve assets. The indicator is expressed as a percentage of GDP.
Real effective exchange rate (REER)
The REER aims to assess a country's competitiveness relative to its principal competitors in international markets. This depends on exchange rate movements, but also on the relative cost or price developments in the country and its trading partners.
The specific REER for the scoreboard takes account of exchange rate and consumer price developments in a basket of 42 countries (the EU28 Member States plus Australia, Brazil, Canada, China, Hong Kong, Japan, Norway, New Zealand, Mexico, Russia, South Korea, Switzerland, Turkey and United States). The indicator is expressed as the percentage change over three years (a positive value means a loss of competitiveness).

Share of world exports
This indicator captures the share of exports of goods and services of a country in total world exports. The indicator is expressed as the percentage change over five years.

Nominal unit labour cost
This indicator compares remuneration (compensation per employee) and productivity (GDP per person employed including self-employed) to show how the remuneration of employees is related to the productivity of their labour. The indicator is expressed as the percentage change over three years.

House price developments
This indicator measures the evolution of prices in the house market relative to the evolution of the whole final consumption basket. The house price index captures price changes of all residential properties purchased by households (flats, detached houses, terraced houses, etc.), both new and existing, independently of their final use and their previous owners. The indicator is expressed as year on year growth rate.

Private sector credit flow
The private sector credit flow represents the net amount of liabilities (loans and securities other than shares excluding financial derivatives) which the sectors Non-Financial corporations and Households and Non-Profit institutions serving households have incurred during a year. Transactions within sectors are eliminated (consolidated). The indicator is expressed as a percentage of GDP.

Private sector debt
The private sector debt is the stock of liabilities in the form of loans and securities other than shares excluding financial derivatives held by the sectors Non-Financial corporations and Households and Non-Profit institutions serving households. Transactions within sectors are eliminated (consolidation). The indicator is expressed as a percentage of GDP.

General government debt
Public debt is defined in the Maastricht Treaty as consolidated general government gross debt at nominal value, outstanding at the end of the year. The general government sector comprises central government, state government, local government, and social security funds. The indicator is expressed in percentage of GDP.

Unemployment rate
The unemployment rate is the number of unemployed persons as a percentage of the labour force based on International Labour Office definition. The labour force is the total number of people employed and unemployed. Unemployed persons comprise persons aged 15 to 74 who: - are without work during the reference week; - are available to start work within the next two weeks; - and have been actively seeking work in the past four weeks or had already found a job to start within the next three months. The indicator is expressed as the average of the past three years.

Total financial sector liabilities
The financial sector liabilities measure the evolution of the sum of all liabilities (which includes currency and deposits, securities other than shares, loans, shares and other equity, insurance technical reserves and other accounts payable) of the financial  sector. The indicator is expressed as year on year growth rate.