# EUR-Lex - 52012PC0676 - EN

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# 52012PC0676

**Recommendation for a COUNCIL DECISION abrogating Decision 2009/587/EC on the existence of an excessive deficit in Malta /* COM/2012/0676 final */**

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Recommendation for a

COUNCIL DECISION

abrogating Decision 2009/587/EC on the
existence of an excessive deficit in Malta

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union,
and in particular Article 126(12) thereof,

Having regard to the recommendation from
the Commission,

Whereas:

(1)       By Council Decision 2009/587/EC
of 7 July 2009[1],
following a recommendation from the Commission in accordance with Article 104(6)
of the Treaty establishing the European Community (TEC), it was decided that an
excessive deficit existed in Malta. The Council noted that the general
government deficit in Malta had reached 4.7% of GDP in 2008, thus largely
exceeding the 3% of GDP reference value, while general government gross debt had been above the 60% of GDP
reference value since 2003 and stood at 64.1% of GDP in 2008[2].

(2)       Also on 7 July 2009, on
the basis of a recommendation by the Commission, the Council addressed a
recommendation to Malta in accordance with Article 104(7)TEC and Article 3(4)
of Regulation (EC) No 1467/97 on speeding up and clarifying the implementation
of the excessive deficit procedure[3],
with a view to bringing an end to this situation by 2010 at the latest. The
recommendation was made public.

(3)       On 16 February 2010, on
the basis of a Commission recommendation, the Council concluded that effective
action had been taken in compliance with its recommendation under Article
104(7) TEC but that unexpected adverse economic events with major unfavourable
consequences for government finances had occurred in Malta after the adoption
of its recommendation. The Council therefore adopted a revised recommendation
in accordance with Article 126(7) of the Treaty on the Functioning of the
European Union (TFEU) to Malta, extending the deadline for the correction of
the excessive deficit by one year, i.e. to 2011. The recommendation was made
public.

(4)       According to Article 126(12)
TFEU, a Council Decision on the existence of an excessive deficit is to be
abrogated when the excessive deficit in the Member State concerned has, in the
view of the Council, been corrected.

(5)       According to Article 4 of the
Protocol on the excessive deficit procedure annexed to the TFEU, the Commission
provides the data for the implementation of the procedure. As part of the
application of this Protocol, Member States are to notify data on government
deficits and debt and other associated variables twice a year, namely before 1
April and before 1 October, in accordance with Article 3 of Council Regulation
(EC) No 479/2009 of 25 May 2009 on the application of the Protocol on the
excessive deficit procedure annexed to the TFEU[4].

(6)       When considering whether
an excessive deficit procedure should be abrogated, the Commission and the
Council should take a decision on the basis of notified data. Moreover, the
excessive deficit procedure should be abrogated only if the Commission
forecasts indicate that the deficit will not exceed the 3% of GDP threshold
over the forecast horizon.

(7)       Based on data provided by
the Commission (Eurostat) in accordance with Article 14 of Regulation (EC) No 479/2009
following the notification by Malta before 1 April 2012 and on the
Commission services’ 2012 Autumn Forecast, the following conclusions are
warranted:

–
After the peak in 2008, the general government deficit
has narrowed gradually, reaching 2.7% of GDP in 2011, below the 3% of GDP
reference value. The significant improvement compared to 2010, when the general
govermnment deficit was 3.6% of GDP, was mainly due to an increase in revenues
by 0.7% of GDP. The impact of net deficit-reducing one-off measures in 2011 is
estimated in the Commission services’ 2012 Autumn Forecast at 0.7% of GDP. The
structural balance, i.e. the cyclically adjusted budgetary balance net of one-off
and temporary measures, is estimated to have improved by 1 pp. of GDP in 2011,
above the requested effort of at least 3⁄4% of GDP recommended by the Council.

–
The Commission services' 2012 Autumn Forecast
projects the deficit to fall further to 2.6% of GDP in 2012, mainly thanks to revenue-increasing
measures, most of which are considered to be of a one-off nature; the net
deficit-reducing impact of one-offs is estimated at 1% of GDP. On a no-policy change
basis, i.e. without incorporating the consolidation measures contained in the
2013 budget, which was adopted after the cut-off date of the forecast, the
general government deficit is projected to widen to 2.9% of GDP in 2013, before
narrowing again, to 2.6% of GDP, in 2014, thus remaining below the 3% of GDP
reference value over the forecast horizon. The April 2012 Stability Programme
targets lower deficits, of 2.2%, 1.7% and 1.1% of GDP in 2012, 2013 and 2014,
respectively. The difference between the Commission services' 2012 Autumn Forecast
and the Stability Programme target for 2012is mainly explained by more dynamic
revenue growth in the latter.

–
In the years after the 2011 deadline set by the
Council, the budgetary projections of the Commission services' 2012 Autumn
Forecast point to no improvement of the cyclically-adjusted budget balance, net
of one-off and other temporary measures, in 2012 and to an improvement of 1⁄4 pp.
of GDP in 2013. This is below the 0.5% of GDP benchmark for the adjustment
towards the Medium Term Budgetary Objective (MTO) required under the preventive
arm of the Stability and Growth Pact, notably Regulation (EC) No 1466/97[5]. This slow adjustment is
projected against broadly balanced cyclical conditions; i.e. the output gap is
estimated to be close to zero. At the same time, the composition of growth is
expected to be relatively tax-revenue-poor. Especially in 2012, economic growth
is driven by net exports, while domestic demand is projected to be rather weak
compared to the past trends. In 2014, the improvement is projected to amount to
of 1⁄2 pp. of GDP. Furthermore, in 2012, the real growth rate of government
expenditure, net of discretionary revenue measures, is projected to be below
the benchmark reference medium-term rate of potential GDP growth, as defined in
Article 5 of Regulation (EC) No 1466/97. However, on a no-policy-change basis,
the real net growth in expenditure would significantly breach this benchmark
reference rate in 2013 and 2014.

–
General government gross debt as a share of GDP has
been on an increasing trend since 2008 and reached 70.9% of GDP in 2011. The
Commission services’ 2012 Autumn Forecast projects the debt ratio to continue
increasing to reach 72.4% of GDP in 2012, 73.1% of GDP in 2013 and 72.8% of GDP
in 2014. By contrast, the 2012 Stability Programme projects the debt ratio to start
decreasing after 2011, to 67.4% of GDP by 2014. The difference between the two
projections is due to a lower primary surplus and higher stock-flow adjustment
in the Autumn Forecast.

(8)       The Council recalls that,
starting in 2012, which is the year following the correction of the excessive
deficit, and for a period of three years, Malta should make sufficient progress
towards compliance with the requirement under the debt criterion, in accordance
with Article 2(1a) of Regulation (EC) No 1467/97.

(9)       In the view of the
Council, the excessive deficit in Malta has been corrected by the 2011 deadline
and Decision 2009/587/EC should therefore be abrogated,

HAS ADOPTED THIS DECISION:

Article 1

From an overall assessment it follows that
the excessive deficit situation in Malta has been corrected.

Article 2

Decision 2009/587/EC is hereby abrogated.

Article 3

This Decision is addressed to the Republic
of Malta.

Done at Brussels,

For
the Council

The
President

[1]               OJ L 202, 4.8.2009, p. 42.

[2]               The general government deficit and debt for 2008 were
subsequently revised to currently 4.6% of GDP and 62.0% of GDP respectively.

[3]               OJ L 209, 2.8.1997, p. 6.

[4]               OJ L 145, 10.6.2009, p. 1.

[5]               OJ L 209, 2.8.1997, p. 1.