Neil Portelli - Executive, EU Policy & Legislation, MEUSAC

Malta's draft National Reform Programme (NRP) for 2015 was presented to the social partners and civil society by the Minister for Finance, Prof. Edward Scicluna, at a joint MEUSAC-MCESD meeting on March 27.

The NRP forms part of the Economic Semester - the EU's annual cycle of economic policy coordination to boost growth and jobs in order to reach the 'Europe 2020' targets. The European Semester kicks off in November of each year with the publication of two key economic reports by the European Commission: the Annual Growth Survey (AGS) and the Alert Mechanism Report (AMR).

The AGS analyses the progress that the EU has made towards its long-term strategic priorities. In essence, it sets out general economic priorities for the EU and provides Member States with policy guidance for the forthcoming year.

The AMR is an early warning report used to detect and address economic trends or imbalances that could prove harmful to individual Member States or to the Economic and Monetary Union (a system for the coordination of economic and fiscal policies in Europe).

The AGS and the AMR are then discussed by EU heads of state or government at the March European Council meeting and a common direction for fiscal and structural policies, as well as for fiscal consolidation, is decided upon. This year's European Council meeting, held on March 19-20, approved the three main pillars of this year's AGS, namely: Investment, Structural Reforms, and growth-friendly Fiscal Consolidation. Prior to this meeting, the European Commission published an economic assessment for each Member State analysing its economic situation, reform agenda and, whenever deemed relevant on the basis of the AMR, identifying possible imbalances faced by the individual Member States.

In its assessment for Malta, the Commission observed how in 2014 Malta's economy and the labour market continued to perform well and deemed outlook for 2015-16 as favourable. Despite the challenging external environment and the high import-intensiveness of domestic demand, Malta's exports continued to outpace imports and the net external position is expected to have improved over the past year.

Overall, Malta has made progress on addressing its Country-Specific Recommendations (CSRs) issued by the Commission in June 2014. The CSRs are intended to provide tailor-made policy advice to Member States in areas deemed as priorities for the next 12-18 months before they start to finalise their draft budgets for the following year.

More specifically, progress was registered in Malta on increasing the participation of women in the labour market, improving the quality of public finances, and reforming the fiscal framework with the adoption of the Fiscal Responsibility Act and the appointment of the members of the Fiscal Council. However, the Commission observed that the concrete impact of the new set-up will take time to materialise. There has also been some progress on reducing the dependence on imported energy sources, improving the connections between the educational system and the labour market, improving alternatives to debt financing for companies and improving the sustainability of the healthcare system. However, according to the Commission, measures to reform the pension system to ensure its long-term sustainability are still lacking.

Member States are to submit their Stability or Convergence Programmes and NRPs, in accordance with the AGS's priorities, by the end of this month. The Commission then assesses the plans of each Member State and issues CSRs to each Member State. These policy recommendations will then have to be approved by the European Council in June. Finally, towards the end of June or in early July, they are formally adopted by the Council.

The joint MEUSAC-MCESD meeting on the NRP held with the Minister for Finance is an essential tool for Government to consult the relevant stakeholders on the national priorities to be addressed in the formulation of its budgetary plans for the coming year. Participants had the opportunity to raise a number of issues such as the Youth Guarantee scheme, the Apprenticeship scheme, active labour market policy and access to finance for SMEs.

The social partners will also have the opportunity to discuss this year's country-specific recommendations for Malta during the MEUSAC Core Group meeting with the Prime Minister to be held in June, just a few days prior to the European Council meeting which will discuss and approve the CSRs which will serve as policy guidance to the Government in its preparations for the 2016 Budget which will be presented to Parliament this October.