2007/464/EC: Council Decision of 5 June 2007 abrogating Decision 2005/186/EC on the existence of an excessive deficit in Malta
Date: 2007-06-05
Institutions: Council of the European Union
Subjects: Council of the European Union, EC Decision, Malta, budget deficit, public finance, repeal, stability pact

6.7.2007

EN

Official Journal of the European Union

L 176/19

(Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)

II

DECISIONS

COUNCIL

COUNCIL DECISION

of 5 June 2007

abrogating Decision 2005/186/EC on the existence of an excessive deficit in Malta

(2007/464/EC)

THE COUNCIL OF THE EUROPEAN UNION,

deficit is to be abrogated when the excessive deficit in
the Member State concerned has,
in the view of the
Council, been corrected.

Having regard to the Treaty
Community, and in particular Article 104(12) thereof,

establishing the European

Having regard to the recommendation from the Commission,

(4)

Whereas:

(1)

(2)

By Council Decision 2005/186/EC (1), following a rec-
ommendation from the Commission in accordance
with Article 104(6) of the Treaty,
it was decided that
an excessive deficit existed in Malta. The Council noted
that the general government deficit was 9,7 % of GDP in
2003, of which 2,9 % of GDP was due to a one-off
operation,
this being above the 3 % of GDP Treaty
reference value, while general government gross debt
stood at 72 % of GDP and was likely to further diverge
from the 60 % of GDP Treaty reference value in 2004.

On 5 July 2004, in accordance with Article 104(7) of the
Treaty and Article 3(4) of Council Regulation (EC) No
1467/97 of 7 July 1997 on speeding up and clarifying
the implementation of the excessive deficit procedure (2),
the Council addressed a recommendation to Malta with a
view to bringing the excessive deficit situation to an end
by 2006 at the latest. The recommendation was made
public.

(3)

the Treaty, a
In accordance with Article 104(12) of
Council Decision on the existence of an excessive

for

the data

implementation of

In accordance with the Protocol on the excessive deficit
the Commission
procedure annexed to the Treaty,
provides
the
the
procedure. As part of the application of the Protocol,
Member States are to notify data on government
deficits and debt and other associated variables twice a
in
year, namely before 1 April and before 1 October,
accordance with Article 4 of Council Regulation (EC)
No 3605/93 of 22 November 1993 on the application
the Protocol on the excessive deficit procedure
of
annexed to the Treaty
the European
Community (3).

establishing

(5)

Based on data provided by the Commission (Eurostat) in
accordance with Article 8g(1) of Regulation (EC)
No 3605/93 following the notification by Malta before
1 April 2007 and on the Commission services’ spring
2007 forecast, the following conclusions are warranted:

— The general government deficit was reduced from
10 % of GDP in 2003 to 2,6 % of GDP in 2006,
which is below the 3 % of GDP deficit reference
value. This is slightly better than the target set for
2006 in the January 2006 update of the convergence
programme, although somewhat above the targets
endorsed by the Council
recommendation
under Article 104(7),

in its

(1) OJ L 62, 9.3.2005, p. 21.
(2) OJ L 209, 2.8.1997, p. 6. Regulation as amended by Regulation

(EC) No 1056/2005 (OJ L 174, 7.7.2005, p. 5).

(3) OJ L 332, 31.12.1993, p. 7. Regulation as last amended by Regu-

lation (EC) No 2103/2005 (OJ L 337, 22.12.2005, p. 1).

L 176/20

EN

Official Journal of the European Union

6.7.2007

— More than half (around four percentage points) of the
7,4 percentage points of GDP reduction in the deficit
ratio between 2003 and 2006 was accounted for by
higher revenue, reflecting changes in indirect taxation
as well as more efficient tax collection. A lower ratio
of expenditure to GDP explains the remaining 3,5
percentage points, in part reflecting higher recourse
to one-off operations, namely sales of land, which are
conventionally recorded as negative expenditure. The
expenditure ratio would have declined by less if the
substantial one-off expenditure-increasing operation
the shipyards of
related to the restructuring of
around 3 % of GDP in 2003 is
In
excluded.
addition, expenditure restraint was achieved through
entities,
downsizing and restructuring of public
restrictions
in hiring in the public service and
control in social payments.

— One-off deficit-reducing operations averaged around
1 % of GDP between 2004 and 2006. Without one-
offs (0,7 % of GDP), the 2006 deficit would have
remained above the reference value, at 3,3 % of
in the structural balance,
GDP. The improvement
being the cyclically-adjusted balance net of one-off
and
is
in
estimated at slightly above 1 % of GDP,

temporary measures,

2006

other

— For 2007,

the Commission services’ spring 2007
forecast projects that
the deficit will be reduced
further, to 2,1 % of GDP, driven by additional expen-
diture savings. One-offs are envisaged to amount to
0,6 % of GDP, broadly similar in magnitude to the
preceding year, so that without one-offs the deficit
would be below the reference value. This is broadly
in line with the official deficit estimate of 1,9 % of
GDP set in the April 2007 notification. For 2008, the
spring forecast projects, on a no-policy-change basis,
a further decline in the deficit
to 1,6 % of GDP
without recourse to one-offs. This indicates that the
deficit has been brought below the 3 % of GDP
ceiling in a credible and sustainable manner. The
structural balance is projected to improve marginally
in 2007 and, on the basis of a scenario without

changes of policy, by an additional percentage point
in 2008. This has to be seen against the need to
make progress towards the medium-term objective
for the budgetary position, which for Malta is a
balanced budget position in structural terms,

— Government debt declined from its peak of 73,9 % of
GDP in 2004 to 66,5 % in 2006. According to the
Commission services’ spring 2007 forecast, the debt
ratio is projected to fall further to around 64,3 % by
the end of 2008, thus coming closer to the 60 % of
GDP reference value.

(6)

In the view of the Council, the excessive deficit in Malta
has been corrected and Decision 2005/186/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.

Decision 2005/186/EC is hereby abrogated.

Article 2

This Decision is addressed to the Republic of Malta.

Article 3

Done at Luxembourg, 5 June 2007.

For the Council
The President

P. STEINBRÜCK