COMMISSION STAFF WORKING DOCUMENT Assessment of the 2012 national reform programme and stability programme for MALTA Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on Malta's 2012 national reform programme 2012 and delivering a Council opinion on Malta's updated stability programme, 2012 - 2015
Date: 2012-05-30
Institutions: European Commission
Subjects: Malta, banking system, budget deficit, budgetary equilibrium, dropout, energy saving, energy supply, pay policy, property market, retirement conditions

EUROPEAN COMMISSION 

Brussels, 30.5.2012  
SWD(2012) 321 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2012 national reform programme and stability programme for 
MALTA 

Accompanying the document 

Recommendation for a  

COUNCIL RECOMMENDATION 

on Malta's 2012 national reform programme 2012 and delivering a Council opinion on 
Malta's updated stability programme, 2012 - 2015 

{COM(2012) 321 final} 

EN 

   EN 

 
 
 
 
  
 
 
CONTENTS 

EXECUTIVE SUMMARY................................................................................................. 3 

1. 

INTRODUCTION....................................................................................................... 4 

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES.......................................... 5 

2.1.  Recent economic developments and outlook .................................................... 5 

2.2.  Challenges ......................................................................................................... 6 

3.  ASSESSMENT OF POLICY AGENDA.................................................................... 7 

3.1.  Fiscal policy and taxation.................................................................................. 7 

3.2.  Financial sector ............................................................................................... 12 

3.3.  Labour market, education and social policies ................................................. 13 

3.4.  Growth and competitiveness structural measures ........................................... 17 

3.5  Modernisation of public administration .......................................................... 21 

4.  OVERVIEW TABLE................................................................................................ 22 

ANNEX............................................................................................................................. 24 

2

 
 
 
EXECUTIVE SUMMARY 

In  2012,  Malta's  economic  activity  is  expected  to  slow  down  compared  to  2011,  regaining 
momentum  in  2013.  GDP  growth  is  projected  to  decrease  to  1.2%  according  to  the 
Commission services’ 2012 spring forecast. The unemployment rate of is projected to remain 
well below the euro-area average at 6.6%.  

The  Maltese  economy  continues  to  perform  relatively  well.  Malta's  general  government 
deficit is reported to have been below 3% of GDP in 2011. Malta has also invested to better 
adapt its education system to industry requirements. A series of initiatives were launched in 
the  energy  field  to  reduce  the  dependency  on  imported  oil,  increase  the  share  of  renewable 
energy  and  promoting  energy  efficiency,  though  they  are  still  at  a  relatively  early  stage  of 
development. 

Malta's challenges remain broadly unchanged. Concrete progress on strengthening the fiscal 
framework  and  adopting  additional  consolidation  measures  has  been  limited.  The  projected 
long-term increase in age-related expenditure poses a risk to the long-term sustainability of its 
public  finances.  The  underutilisation  of  its  human  capital,  namely  of  older  workers  and 
women, adds to the scope of the challenge. Strengthening labour skills and reducing Malta's 
high rate of early school leaving remain high on the agenda. Malta's mandatory cost-of-living 
adjustment  mechanism  may  hamper  its  competitiveness,  especially  in  labour-intensive 
sectors. Tackling the very high dependence on imported oil remains a challenge. Finally, the 
large exposure of its banking system to the real estate market poses potential risks. 

3 

 
1. 

INTRODUCTION 

Procedural aspects 

In  June  2011,  the  Commission  proposed  five  country-specific  recommendations1  for 
economic and structural reform policies in Malta. In July 2011 the Council of the European 
Union  adopted  these  recommendations2,  which  concerned  public  finances  and  the  fiscal 
framework,  the  pension  system,  education  and  training,  the  system  of  wage  indexation  and 
energy. 

In November 2011, the Commission published its Annual Growth Survey for 2012,3 in which 
it set out its proposals for building the necessary common understanding about the priorities 
for action at  national  and EU  level in  2012. It focused  on five priorities — growth-friendly 
fiscal  consolidation,  restoring  normal  lending  to  the  economy,  promoting  growth  and 
competitiveness,  tackling  unemployment  and  social  consequences  of  the  crisis,  and 
modernising public administration — and encouraged Member  States  to implement them in 
the 2012 European Semester. 

Against  this  background  Malta  presented  its  2012  national  reform  programme  on  23  April 
2012  and  its  2012  stability  programme  on  30  April.  They  detail  progress  made  since  July 
2011 and plans going forward. The national reform programme was prepared in consultation 
with  the  social  partners  and  its  implementation  is  subject  to  bi-annual  assessment.  Both  the 
national  reform  programme  and  the  stability  programme  were  approved  by  the  Cabinet  of 
Ministers.  Malta  has  ensured  coherence  between  the  two  programmes,  notably  in  terms  of 
macroeconomic  scenario  and  inter-linkages  between  fiscal  and  other  macroeconomic  areas, 
and both programmes are consistent with the Code of conduct and the guidance provided by 
the  Commission.  This  Staff  Working  Document  assesses  the  state  of  implementation  of  the 
2011 recommendations as well as the Annual Growth Survey 2012 in Malta, identifies current 
policy challenges and, in this light, examines the country’s latest policy plans. 

Overall assessment 

towards 

implementing 

Overall,  Malta  has  not  made  sufficient  progress 
the  2011 
recommendations. On the positive side, economic growth was robust in 2011 and the country 
reported a government deficit below 3% of GDP in 2011. In addition, progress has been made 
towards  raising  the  skill  level  of  the  workforce  and  reducing  the  economy’s  dependence  on 
imported  oil  by  launching  projects  and  schemes  that  promote  energy  efficiency  and  energy 
produced  from  renewable  sources.  Notwithstanding  these  policy  efforts,  progress  with 
reforms in other areas, such as the fiscal framework, pension reform, early school leaving and 
the  wage  indexation  mechanism,  has  been  limited.  Therefore,  in  these  areas  the  challenges 
identified in July 2011 and re-iterated in the AGS 2012 remain valid. 

1   SEC(2011)  726  final  of  7  June  2011,  available  at:  http://ec.europa.eu/europe2020/reaching-the-

goals/monitoring-progress/recommendations-2011/index_en.htm 

2   OJ  C  215  of  21  July  2011,  available  at:  http://ec.europa.eu/europe2020/reaching-the-goals/monitoring-

progress/recommendations-2011/index_en.htm 

3   COM(2011)  815  final  of  23  November  2011,  available  at:  http://ec.europa.eu/europe2020/reaching-the-

goals/monitoring-progress/annual-growth-surveys/index_en.htm. 

4 

 
 
                                                 
Malta  faces  the  challenges  of  ensuring  the  long-term  sustainability  of  public  finances, 
improving the utilisation of human capital, ensuring appropriate wage developments, reducing 
its dependence on imported oil and safeguarding the robustness of the banking system. 

The  policy  plans  submitted  by  Malta  generally  appear  relevant,  although  concrete  reform 
plans in the area of wage indexation are still missing. At the same time the level of ambition 
in some areas, such as early school leaving and pension reform, is insufficient to address these 
challenges in a comprehensive way.  

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES 

2.1.  Recent economic developments and outlook 

Recent economic developments 

The Maltese economy continues to weather the global economic and financial crisis relatively 
well. Real GDP contracted relatively mildly compared to the euro area in 2009 on the back of 
a resilient performance by net exports and a contained decline in employment, partly thanks to 
government  assistance.  Improving  external  trade  and  a  pickup  in  business  investment 
contributed  to  a  strong  rebound  in  economic  activity  in  2010.  The  positive  momentum 
continued in the first half of 2011 but the economy started losing pace in the second half of 
the year. In 2011 as a whole, real GDP expanded by 2.1%, compared to 1.4% in the euro area. 

Unemployment remained low by euro-area standards as employment growth,  particularly in 
financial  services,  outweighed  the  expansion  of  the  labour  supply.  The  improvement  in  the 
employment  rate  in  recent  years  has  been  driven  by  more  and  more  women  entering  the 
labour  market,  thanks  to  targeted  policy  action  and  a  favourable  cohort  effect,  as  younger 
generations are more active on the labour market. 

The general government deficit reached 4.6% of GDP in 2008, reflecting the impact of some 
one-off  expenditure-increasing  items.  Since  then,  the  deficit  has  been  on  a  downward  path, 
narrowing to 2.7% of GDP in 2011 according to data reported by Malta. The government debt 
ratio has been increasing gradually and reached 72% of GDP in 2011. 

Outlook 

According to the Commission services’ 2012 spring forecast, real GDP growth is forecast to 
decelerate  further  in  2012,  to  1.2%,  given  subdued  private  consumption  and  stagnating 
business investment. In 2013, growth is projected to recover to 1.9%, supported by stronger 
employment  and  average  wage  growth,  an  improvement  in  business  investment  and  a 
strengthening of exports. The unemployment rate is projected to remain well below the euro-
area average, while inflation is expected to remain broadly  stable over  the forecast horizon. 
The  general  government  deficit  is  projected  to  fall  to  2.6%  of  GDP  in  2012  and  to  rise, 
assuming no further policy changes are made, to 2.9% in 2013. The debt ratio is projected to 
rise further over the forecast horizon, to 75.2% of GDP in 2013. 

Projected real GDP growth for 2012 in the Maltese stability programme and national reform 
programme  is  slightly  higher  than  according  to  the  Commission  services’  2012  spring 
forecast, driven by stronger job creation, private consumption and investment. The differences 
in the growth forecast for 2013 are smaller and relate to the same components. In the outer 
years of the stability programme, real economic growth exceeds potential growth as estimated 

5 

 
by  the  Commission  services.  The  stability  programme  and  the  national  reform  programme 
incorporate the beneficial impact of structural reforms on potential output, which is estimated 
by the authorities at 0.05% per year on average over 2012-15. 

2.2.  Challenges 

The  main  bottlenecks  that  weigh  on  Malta’s  growth  potential  have  remained  broadly 
unchanged  over  the  past  year.  One  exception  is  the  business  environment,  including  the 
administrative  and  regulatory  burden,  which  was  highlighted  as  a  challenge  in  the  2011 
European  Semester  policy  coordination  round  but  which,  in  view  of  good  overall  progress, 
can  be  dropped  from  the  list  of  factors  holding  back  growth.  At  the  same  time,  a  new 
challenge related to financial sector stability has emerged. 

Ensuring  the  long-term  sustainability  of  public  finances  remains  a  challenge  in  view  of  the 
projected above-EU-average increase in age-related expenditure in the long run, particularly 
in  the  areas  of  pensions  and  healthcare.  The  very  low  participation  by  older  workers  and 
women adds to the scope of the challenge. In addition, the non-binding nature of the medium-
term  fiscal  framework  is  likely  to  have  an  adverse  impact  on  the  credibility  of  the  fiscal 
consolidation  strategy  and  the  achievement  of  the  medium-term  objective  for  the  budgetary 
position. This broad public finance challenge is consistent with the policy priorities included 
in the latest Annual Growth Survey adopted by the Commission in November 2011. 

Ensuring that wage growth stays in line with  productivity remains a challenge as wages are 
linked to a mandatory cost-of-living adjustment mechanism. As a result, wages are increased 
to compensate for past inflation developments without distinguishing between skill levels and 
sectors and without regard to the underlying drivers of inflation developments. While this is 
mitigated  by  allowing  individual  firms  to  opt  out  and  by  adjusting  wages  less  than 
proportionally  above  the  so-called  base  wage,4  the  cost-of-living  adjustment  mechanism 
entails  a  risk  for  wage-price  spirals,  particularly  because  imported  prices  are  not  excluded 
from the index, and may hamper competitiveness especially in the labour-intensive sectors. 

Improving  the  utilisation  of  human  capital  remains  a  challenge  because,  in  spite  of  notable 
gains in recent years, the employment rate remains among the lowest in the EU. This reflects 
very low labour market participation rather than unemployment, as the unemployment rate is 
relatively  low  by  EU  standards.  The  employment  gap  relative  to  the  EU  average  is 
particularly  large  for  women  and  older  workers.  An  additional  challenge  is  improving  the 
skills  base  to  better  prepare  the  labour  force  for  the  structural  changes  in  the  economy, 
notably  by  further  strengthening  links  between  the  education  system  and  industry  and  by 
addressing the high rate of early school leaving. 

Features of the energy system continue to pose a challenge to the economy’s growth potential. 
Energy  supply  depends  almost  exclusively  on  imported  oil,  which  renders  the  country 
vulnerable to increases in oil prices and puts pressure on the current account, while the share 
of energy from renewable sources is still marginal and energy efficiency could be improved. 
In addition, electricity tariffs for both households and  industrial consumers are very high in 
comparison  to  other  EU  Member  States.  Progress  in  the  areas  of  energy  efficiency  and  the 
supply  of  energy  from  renewable  sources,  together  with  an  upgrade  of  the  currently 
inadequate  waste  recycling  infrastructure,  would  at  the  same  time  help  to  reduce  carbon 

4   The ‘base wage’ is set to be somewhat higher than the minimum wage, but well below the average wage in 
the  country.  Therefore,  the  wage  increase  resulting  from  the  cost-of-living  adjustment  is  proportionately 
higher at the lower end of the wage spectrum. 

6 

 
                                                 
emissions. Tackling this broad challenge related to resource efficiency is consistent with the 
AGS priorities. 

One new challenge to emerge since the 2011 European Semester is ensuring the robustness of 
the  financial  sector.  This  challenge  also  relates  to  one  of  the  priorities  in  the  2012  Annual 
Growth  Survey.  While  they  maintained  healthy  solvency  and  profitability  ratios  throughout 
the crisis, Malta’s domestic banks were not shielded from the slowdown in economic activity 
and  have  seen  a  concomitant  rise  in  problematic  loans.  This,  however,  has  not  been 
accompanied by an increase in provisioning and therefore the non-performing-loan coverage 
ratio remains low. As a result, banks are vulnerable to a further deterioration in the quality of 
their  loan  portfolio,  especially  as  a  further  correction  in  house  prices  cannot  be  excluded, 
while housing units may currently be in oversupply. Furthermore, the very large size of the 
banking  sector  raises  supervisory  challenges  and  concerns  about  capacity  to  deal  with  a 
banking shock and its impact on the economy. A sound financial system is also important in 
the context of the possible introduction of voluntary funded retirement schemes. 

3.  ASSESSMENT OF POLICY AGENDA 

3.1.  Fiscal policy and taxation 

Budgetary developments and debt dynamics 

After having reported a general government deficit outturn below 3% of GDP in 2011, Malta 
aims  at  reducing  the  deficit  gradually  further  over  the  period  covered  by  the  stability 
programme, to 0.3% of GDP in 2015. This implies gradual progress towards the medium-term 
budgetary  objective  (MTO),  which  is  defined  as  a  balanced  position  in  structural  terms 
(unchanged from the previous programme), although the actual achievement of the medium-
term objective is not planned within the programme period. The MTO adequately reflects the 
requirements of the Stability and Growth Pact.  

Malta  reported  a  deficit  outturn  for  2011  of  2.7%  of  GDP,  down  from  3.7%  in  2010  and 
marginally  better  than  the  target  set  in  the  previous  programme  (2.8%).  The  better-than-
planned  outcome  is  due  mainly  to  higher  current  revenue  (proceeds  from  sales  and  other 
current revenue as well as higher one-off revenue due to the extension of a tax amnesty in the 
area of direct taxes and social contributions) and lower net capital expenditure (also thanks to 
the  one-off  sale  of  land  and  buildings),  partly  offset  by  more  dynamic  current  primary 
expenditure  (especially  compensation  of  employees  and  subsidies).  Without  one-offs,  the 
2011 deficit outturn would be 3.5% of GDP.  

In 2012 the deficit is targeted to decline to 2.2% of GDP, slightly worse than in the previous 
update (2.1%) against the background of a downward revision in real GDP growth (to 1.5% 
from  2.3%  in  the  previous  programme).  Contrary  to  the  expenditure-based  consolidation 
strategy laid down in the previous programme, the planned narrowing of the deficit in 2012 is 
to a large extent based on revenue-increasing measures, most of which are of a one-off nature5 
(see  Box  1  for  an  overview  of  the  main  measures).  The  Commission  services’  2012  spring 
forecast  projects  the  2012  deficit  at  the  higher  level  of  2.6%  of  GDP,  with  the  difference 
explained by lower indirect taxes from a more prudent assessment of the measures targeted at 
increasing  efficiency  in  revenue  collection.  On  the  expenditure  side,  higher  current  primary 

5   The programme does not identify these items as one-offs. Without one-offs as identified by the Commission, 

the deficit target for 2012 would be 3.4% of GDP. 

7 

 
                                                 
expenditure  in  the  Commission  services’  2012  spring  forecast,  from  more  dynamic 
compensation  of  employees  and  social  transfers,  is  basically  offset  by  lower  net  capital 
expenditure given issues with absorption capacity. 

The  consolidation  planned  in  the  programme  is  somewhat  back-loaded,  with  a  reduction  in 
the  headline  deficit  by  0.5  percentage  point  of  GDP  in  both  2012  and  2013  and  a  slightly 
higher pace of consolidation targeted in the remaining years. Given the projected gradual rise 
in the interest burden, the adjustment in primary terms is slightly higher in each year and the 
primary surplus is planned to improve from 0.4% of GDP in 2011 to 3.3% in 2015. Compared 
with the previous programme, the targets are marginally worse in the 2012-14 period (by just 
0.1%  of  GDP)  against  the  background  of  a  downward  revision  in  the  underlying 
macroeconomic scenario. 

When looking at the entire programme period, the revenue and expenditure projections point 
to a consolidation effort that is primarily expenditure-based. In particular, excluding one-offs 
as  identified  by  the  Commission  services,  revenue  is  planned  to  increase  by  1.4  percentage 
points  of  GDP  between  2011  and  2015,  spread  broadly  evenly  between  different  revenue 
categories,  whereas  expenditure  is  to  drop  by  almost  2  percentage  points  of  GDP.  The 
envisaged expenditure restraint mainly falls in the areas of compensation of employees, social 
transfers and intermediate consumption (the planned increase in public investment is broadly 
offset by a decline in ‘other’ expenditure). 

The  planned  consolidation  effort  is  fully  underpinned  by  measures  only  in  2012.  For  the 
remaining years, the programme provides details on the quantification of some specific items 
(see Box 1) and confirms the continuation of policies to achieve expenditure savings (such as 
the tight recruitment policy in place since early 2012  and general efforts to maximise value 
for money and tackle benefit fraud). For 2013, it indicates that an additional effort of 0.2% of 
GDP will come from a structural increase in revenue, which has not been specified further in 
programme. The contribution of net deficit-reducing one-offs as identified by the Commission 
services to the consolidation effort would fall sharply after 2012 (amounting to 0.4% of GDP 
in 2013 and 0.2% in 2014-15). 

8 

 
Box 1. Main measures 
Main budgetary measures 

  Revenue 

Expenditure

2011 

•  Tax  penalty  reduction  scheme  (0.5%;  one-

off) 

•  Increase  in  excise  duty  rates  on  fuel, 

alcohol and tobacco products (0.3%) 

•  Strenghtening of efforts against tax evasion 

and avoidance (0.2%) 

•  Rise  in  the  VAT  rate  on  collective  and 
private  accommodation  from  5  to  7% 
(0.1%) 

•  Annual lease concessions (0.1%) 

•  Incentives  for  industry  and  enterprises, 
innovation, 

tourism, 
employment and labour market (0.1%) 

research 

and 

•  Payments  for  expropriations  of  land  under 
the  Home  Ownership  Schemes  and  other 
expropriations (0.1%) 

•  Measures  supporting  social  cohesion  and 
promoting sustainable environment (0.1%) 

2012 

•  Increased  efficiency  in  revenue  collection 
(0.6%),  mostly  pecuniary  incentives  to 
reduce VAT and car license arrears (0.4%; 
one-off) 

•  Higher  concession  fees  from  the  local 

lottery operator (0.6%; one-off) 

•  Pension reform initiatives and enforcement 

(0.2%) 

•  Increase  in  registration  tax  for  vehicles 

Euro 1 to 3 and older (0.1%) 

•  Increase  in  customs  duty  on  fuel  for 
bunkering of ships outside territorial waters 
(0.1%) 

•  Increase in several excise duty rates (0.1%) 

•  Direct  tax  relief  for  parents  supporting 
children who are not gainfully employed (-
0.2%) 

•  Restraint  in  compensation  of  employees 
(i.a. tightened recruitment policy) (-0.1%) 

•  Net  savings  in  social  transfers  (-0.2%) 
resulting  from  increased  efforts  to  curb 
benefit  fraud  and  the  gradual  impact  from 
the  2006  pension  reform,  partly  offset  by 
measures  targeted  at  supporting  families 
with children and elderly aged over 80 and 
a cost-of-living adjustment) 

•  Subsidy to the energy provider (0.3%) 

•  Increase  in  net  capital  expenditure  (0.6%), 
including restructuring of Air Malta (equity 
acquisition) (0.3%) 

2013 

•  Increased  efficiency  in  revenue  collection 
from  pecuniary  incentives  to  reduce  VAT 
and car license arrears (0.1%; one-off) 

•  Savings in social transfers from the gradual 
impact  from  the  2006  pension  reform  (-
0.3%) 

•  Pension reform initiatives and enforcement 

•  Restructuring  of  Air  Malta 

(equity 

(0.2%) 

acquisition) (0.6%) 

2014 

•  Restructuring  of  Air  Malta 

(equity 

acquisition) (0.2%) 

  Note:  The  budgetary  impact  in  the  table  is  the  impact  reported  in  the  programme,  i.e.  by  the  national 
authorities. A positive sign implies that revenue / expenditure increases as a consequence of this measure. 
The  degree  of  detail  reflects  the  type  of  information  made  available  in  the  stability  programme. 
Identification of one-off measures is according to the Commission services. 

9 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The programme details the budgetary impact of the major structural reforms included in the 
National  Reform  Programme  in  the  areas  of  employment,  education,  energy,  research  and 
development as well as the fight against poverty. They are estimated to increase expenditure 
by 0.7% of GDP in both 2012 and 2013, 0.5% of GDP in 2014 and 0.3% of GDP in 2015. 
Almost 30% of this amount is accounted for by EU funds. 

There  are  risks  that  the  deficit  outcomes  could  be  worse  than  targeted  throughout  the 
programme period. In particular, as also indicated by the difference between the targets and 
the  deficit  projections  in  the  Commission  services’  2012  spring  forecast,  revenue  could  be 
lower than planned in 2012-13 given that economic growth could turn out lower or less tax-
rich than foreseen in the programme and that the structural revenue increase planned for 2013 
is  not  yet  specified.6  This  would  carry  forward  to  the  remaining  years  of  the  programme 
period,  when  the  programme’s  growth  outlook  seems  favourable  compared  to  estimated 
potential  growth.  Furthermore,  expenditure  overruns,  linked  also  to  weaknesses  in  the 
budgetary  framework  at  execution  stage,  have  occurred  in  the  past,  such  as  in  intermediate 
consumption  given  pressures  in  the  health  sector.  Also,  notwithstanding  the  strong 
commitment to restrict recruitment, there is a risk of slippages in the public sector wage bill, 
also in the light of the collective agreement not yet being renewed. On the other hand, as has 
frequently occurred in the past, net capital expenditure could be lower than planned. A final 
deficit-increasing risk factor relates to the ongoing restructuring of Air Malta and the financial 
situation of the energy provider (Enemalta). 

According to the programme, the annual average improvement in the (recalculated) structural 
balance7 is planned to be just above ½% of GDP over the period 2012-2015. This is in line 
with  the  0.5%  benchmark  in  the  Stability  and  Growth  Pact  for  the  annual  pace  of  progress 
towards  the  medium-term  objective.  Using  the  Commission  services’  identification  of  one-
offs, the average pace of adjustment to the medium-term objective is slightly higher (¾%) but 
spread  very  unevenly,  with  no  progress  in  2012  followed  by  an  effort  of  1¼%  in  2013. 
According to the Commission services’ 2012 spring forecast, there would be no improvement 
in  the  structural  balance  in  2012  (and  a  marginal  one  in  2013  assuming  no  further  policy 
changes  are  made).  The  real  growth  rate  of  government  expenditure,  net  of  discretionary 
revenue  measures,  according  to  both  the  information  provided  in  the  programme  and  to  the 
Commission  services’  spring  forecast,  is  planned  to  be  negative  throughout  the  programme 
period and thus will not exceed a rate which is lower than the reference medium-term rate of 
potential  GDP  growth  and  which  ensures  an  annual  structural  adjustment  towards  the 
medium-term objective by 0.5% of GDP (0.24%). Following an overall assessment of Malta’s 
budgetary  plans,  with  the  structural  balance  as  a  reference,  including  an  analysis  of 
expenditure net of discretionary revenue measures, the adjustment path towards the medium-
term objective as planned in the programme seems to be appropriate. However, the risks to 
the  budgetary  targets  highlighted  above  imply  that  the  adjustment  could  be  slower  than 
appropriate. 

6  

In  2013,  the  difference  in  growth  projections  is  marginal  but  the  composition  is  different,  with  the 
programme assuming a stronger pace of job creation. For 2012, as mentioned above, there are also risks to 
the expected yield from the incentive schemes to enhance revenue collection, which is difficult to estimate 
ex ante. Risks to the revenue projections are all the more significant as the different components of revenue 
are planned to gradually rise over the programme period and this is not fully underpinned by measures. 
7   Cyclically  adjusted  balance  net  of  one-off  and  temporary  measures,  recalculated  by  the  Commission 
services  on  the  basis  of  the  information  provided  in  the  programme,  using  the  commonly  agreed 
methodology. 

10 

 
 
 
                                                 
From  72%  of  GDP  in  2011,  the  general  government  gross  debt  ratio  is  planned  in  the 
programme  to  start  decreasing  throughout  the  period,  mainly  driven  by  increasing  primary 
surpluses. The snow-ball effect, which contributed marginally to the debt increase in 2011, is 
expected to continue to add to the debt ratio, whereas the stock-flow-adjustment is planned to 
be a debt-decreasing factor in 2012-2013. According to the Commission services’ 2012 spring 
forecast, the debt ratio is projected to continue increasing, reaching 75.2% of GDP by 2013, 
assuming no further policy changes are made. The difference is due to worse projections for 
the primary surplus and a higher, debt-increasing stock-flow adjustment in both years. 

The  same  risks  highlighted  for  the  budgetary  targets  apply  to  the  programme’s  debt 
projections;  moreover,  as  indicated  by  the  spring  forecast,  the  stock-flow  adjustment  could 
well be higher than projected in the programme. In addition, government-guaranteed debt in 
Malta is high (16.8%  of GDP  in  2011)  compared to other Member States, 60% of which is 
accounted for by the public energy utility corporation (Enemalta).  

With  a  deadline  for  the  correction  of  the  excessive  deficit  of  2011,  Malta  is  in  a  three-year 
transition period as  regards  the applicability of the debt  reduction  benchmark. According to 
the  plans  in  the  stability  programme,  Malta  is  making  sufficient  progress  so  that  the  debt 
benchmark  will  be  met  by  the  end  of  the  transition  period  (2015)  but  this  assessment  is 
subject to risks as the debt ratio could turn out higher than planned for the reasons mentioned 
above. 

Overall,  some  parts  of  the  2011  recommendation  in  the  area  of  fiscal  consolidation  were 
implemented and others were not. In particular, while the deficit was reported to have been 
below 3% of GDP in 2011 and the 2012 target is fully underpinned by measures, the broad 
measures underpinning the strategy from 2013 onwards are not all outlined in the programme. 
While  the  programme  plans  a  broadly  appropriate  pace  of  adjustment  towards  the  medium-
term objective and a gradual decrease in the debt ratio from 2012, there are risks to this, as 
also  highlighted  by  the  Commission  services’  2012  spring  forecast,  which  on  a  no-policy 
change  basis  projects  hardly  any  improvement  in  the  structural  balance  and  a  continued 
upward path for the debt ratio in 2012-13. 

Long-term sustainability 

Under a no-policy change assumption, general government debt would increase to 84.8% of 
GDP by 2020, implying the need for additional fiscal consolidation beyond the short term. To 
improve  sustainability,  it  will  be  important  to  ensure  sufficient  primary  surpluses  over  the 
medium  term  and  to  further  reform  the  Maltese  social  security  system  so  as  to  curb  the 
projected  long-term  increase  in  age-related  expenditure,  which  is  clearly  above  the  EU 
average. The increase in pension expenditure as a share of GDP accounts for more than half 
of  the  total  projected  increase  in  age-related  expenditure  between  2010  and  2060.8  This 
includes  the  impact  of  the  2006  pension  reform.  While  the  very  gradual  increase  in  the 
statutory retirement age (to 65 years by 2027) and the progressive increase in the contribution 
period for full eligibility, as well as changes to the benefit formula, contribute to lowering the 
projected  rise  in  pension  expenditure,9  a  more  dynamic  indexation  of  the  ceiling  on 
pensionable income, statutory changes to indexation for old-age pensions and the introduction 
of  the  guaranteed  national  minimum  pension  for  persons  retiring  from  2027  onwards 

8   Another important contributor to the increase in age-related expenditure is health care. Health and long-term 

care expenditure are projected to increase by 3.7 pps. of GDP over the period 2010-2060. 

9   Although pension expenditure in Malta in 2007 was below the EU27 average, developments in the old-age 

dependency ratio will be much more pronounced in Malta than in the EU27 on average. 

11 

 
                                                 
contribute to increasing it. Although the pension reform prepares for the possible introduction 
of  a  second  and  third  pillar,  nothing  concrete has been done to implement these  provisions. 
No  progress  was  made  on  the  other  elements  raised  in  the  2011  recommendation  on  the 
pension system either. No steps have been taken to accelerate the increase in the retirement 
age  nor  to  establish  a  link  between  the  retirement  age  and  life  expectancy.  Likewise,  no 
comprehensive  active  ageing  strategy  has  been  developed  and  the  use  of  early  retirement 
schemes  is  still  common  practice.  The  Maltese  government  has  also  still  not  announced  its 
position on the proposals for pension reform submitted by an independent Pensions Working 
Group 
this 
in  December  2010.  In  sum,  Malta  has  not  responded  adequately 
recommendation. 

to 

Fiscal framework 

Owing to the small size of the economy, the fiscal framework in Malta is very centralised. It 
is also flexible, which creates risks for expenditure overruns and the achievement of a sound 
fiscal  position.  A  key  weakness  is  the  non-binding  nature  of  the  medium-term  budgetary 
framework,  which  also  implies  a  relatively  short  fiscal  planning  horizon.  Reforms  in  recent 
years have improved the monitoring and reporting tools but the recommendation on the fiscal 
framework was not implemented, although the political debate has started. The 2012 stability 
programme underlines that the Maltese government is considering the following reforms, in 
line with recent changes to the euro area governance framework (as laid down in for instance 
the Stability and Growth Pact, the Directive on fiscal frameworks and the Treaty on Stability, 
Coordination  and  Governance):  (i)  changes  to  the  annual  budgetary  procedure,  including 
timelines, and (ii) a fiscal rule to be embedded in the Constitution, including monitoring and 
corrective mechanisms. 

Tax system 

The increase of excise duties and of environmental taxes in recent budgets is consistent with a 
shift of the tax burden further to taxes less detrimental to growth. In view of the large shadow 
economy in Malta, recent initiatives have aimed at improving tax compliance and curbing tax 
evasion.  One  recent  procedural  measure  is  the  ongoing  merger  of  the  tax  departments 
responsible  for  VAT,  inland  revenues  and  customs.  However,  tax  amnesties  and  other 
pecuniary incentives seem to have become a recurring feature in recent budgets, yielding on 
average around 0.5% of GDP annually in the last four years. The repeated recourse to such 
measures may result in moral hazard and harm tax compliance over the medium term instead 
of  increasing  efficiency  in  revenue  collection.  Such  initiatives  should  be  accompanied  by  a 
clear  commitment  to  a  higher  level  of  enforcement  after  the  amnesty  window  closes.  As 
regards  corporate  taxation,  reviewing  the  tax  treatment  of  equity  versus  debt-financed 
investment could lower incentives for companies to take on debt. 

3.2.  Financial sector 

The banking sector has expanded rapidly in recent years and its total assets currently amount 
to some 800% of GDP according to data from the central bank.10 The sector is characterised 
by large foreign ownership, also thanks to a favourable tax regime. Some two-thirds of total 
assets  belong  to  internationally-oriented  banks that  are  reported  to  have  limited  exposure  to 

10   The stress test conducted by the European Banking Authority in July 2011 revealed that the systemic bank 
in Malta was safely over the 5% core Tier I capital adequacy ratio. In addition, the bank was not required to 
comply with the minimum 9% Core Tier I threshold, following the temporary recapitalisation plan decided 
by the European Council in October 2011. 

12 

 
                                                 
the  domestic  economy  and  therefore  to  be  of  little  relevance  to  Malta’s  macro-financial 
stability. 

Balance  sheet  expansion  has  resulted  in  an  increase  in  private  sector  indebtedness,  which 
stood  at  212%  of  GDP  in  2010,11  although  intra-sector  liabilities  represent  a  significant 
portion  of  this  figure.  Lending  to  the  real  estate  sector  played  an  important  role  in  credit 
expansion in the years before the crisis and as a result total exposure to the real estate market 
(also  including  mortgage  loans)  accounts  for  over  half of gross  credits to the real sector. In 
addition, Malta experienced a significant increase in house prices over the past decade, while 
some correction has taken place in the aftermath of the crisis. Further correction in housing 
prices  cannot  be  excluded  given  that  housing  units  may  be  in  oversupply.  Given  very  low 
levels  of  bank  provisions  to  non-performing  loans,12  the  banking  system  is  vulnerable  to 
negative developments in the property market. 

The  2012  national  reform  programme  reiterates  plans  to  strengthen  macro-prudential 
supervision of the financial sector and set up a mechanism to monitor system risk with a view 
to  minimising  risks  to  the  stability  of  the  sector  and  the  domestic  economy.  However,  no 
timeframe  for  implementation  has  been  provided,  while  the  absence  of  details  makes  the 
assessment of the impact of the measures difficult. 

3.3.  Labour market, education and social policies 

The Maltese labour market is characterised by a very low participation rate. The activity rate 
is  particularly  low  for  women,  reflecting  historical  and  cultural  factors,  and  older  workers, 
reflecting  the  relatively  low  exit  age  and  the  recourse  to  early  retirement  schemes.  The 
intensive industrial restructuring that has taken place in recent years resulted in skills gaps in 
specific  high  value-added  areas,  which  partly  reflects  the  low  rate  of  tertiary  education 
attainment.  These  factors  restrict  expansion  in  the  new  sectors  and  add  upward  pressure  on 
wages;  there  is  also  a  very  high  incidence  of  early  school  leaving.  The  automatic  wage 
indexation  mechanism  that  links  wage  growth  to  past  inflation  also  entails  a  risk  of 
misalignment between wages and productivity and of wage-price spirals. 

Malta has introduced a number of measures in recent years to encourage women to enter the 
labour  market  and  return  to  work  after  childbirth.  These  include:  (i)  tax  breaks  for  women 
who  have  had  a  child  and  choose  to  return  to  work,  (ii)  a  reduction  in  national  insurance 
contributions  for  part-time  employment,  (iii)  measures  targeting  married  female  workers 
within small family businesses and (iv) the setting up of childcare facilities. Notwithstanding 
the  role  of  cultural  factors  in  the  low  female  participation  rate,13  the  Maltese  authorities 
proposed further measures to raise it in their 2011 national reform programme. These include 

11   This is broken down into loans to households (62.7% of GDP), loans to non-financial corporations (136.5% 

of GDP) and securities other than shares issued by non-financial corporations (12.9% of GDP). 

12   The  ratio  of  bank  provisions  to  non-performing  loans  in  Malta  stood  at  11.5%  in  2011,  by  far  the  lowest 
ratio in the euro area. Moreover, the ratio declined from 13.9% in 2008, while the ratio of non-performing 
loans  to  total  loans  increased  from  4.8%  to  7.4%  during  the  same  period  (IMF  2012  Global  Financial 
Stability Report). 

13   The activity rate of young women (aged 15-24) is significantly higher in Malta than in the EU (46.9% in 
2011, versus 39.6%). However, the Maltese female activity rate declines progressively for those older than 
29,  in  contrast  to  the  EU  where  labour  market  participation  remains  constantly  high  until  the  older  age 
groups (aged 55 and above). This indicates the impact of parenthood is particularly high on Maltese women 
and  many  of  them  choose  not  to  return  to  the  labour  market  after  childbearing  (to  take  up  childcare  and 
domestic responsibilities instead), which suggests that the authorities’ attention to reconciliation policies is 
well-placed. 

13 

 
                                                 
changes to means-testing regulations and national insurance contributions for  self-employed 
women  working  part-time,  free  child  care  services  for  women  starting  a  business,  and  the 
opening of new childcare facilities and after-school care centres. At present there are six after-
school centres compared to three in 2009 and the number of children attending has increased 
very  significantly.  In  the  2012  Budget  the  government  announced  investment  in  three  new 
childcare  centres,  bringing  the  total  to  16.  However,  the  number  of  centres  still  appears 
insufficient  and  the  cost  of  childcare  is  relatively  high  for  families  in  Malta  and,  while  a 
campaign  funded  by  the  European  Social  Fund  is  trying  to  gradually  induce  a  change  in 
cultural  attitudes,  the  further  development  of  family-friendly  working  practices  (including 
flexitime and teleworking) could encourage more women to return to the labour market. 

The low employment rate of older workers is the result of early exit from the labour market 
and low participation by older women. The exit age is early partly because there is frequent 
recourse to early retirement schemes as a labour market measure in the face of restructuring, 
particularly by large public-owned companies, and partly because the statutory retirement age 
is still relatively low. The latter is expected to be remedied over time as a result of the 2006 
pension reform, which increases the retirement age to 65 years for both men and women and 
extends the required length of contributions for full pension entitlement, albeit very gradually 
because  the  reform  will  be  fully  implemented  only  in  2027.  Other  measures  that  can 
contribute to prolonging working lives are the legislation introduced in 2008 allowing people 
of pensionable age to continue working without losing their pension entitlements and a stricter 
medical assessment that makes it harder to qualify for invalidity pension. Partly as a result of 
these measures, the effective exit age in Malta has increased by nearly two years since 2007, 
reaching 60.3 years in 2010 against an EU average of 61.5 years. As the younger cohorts of 
women,  who  are  more  active  on  the  labour  market,  approach  pensionable  age,  the 
employment rate of older workers is bound to increase further. As mentioned in section 3.1 
above, however, the changes in pension legislation are not accompanied by a comprehensive 
active ageing strategy of the kind that would achieve synergy between the different initiatives 
being  implemented  by  various  institutions  and  be  complemented  by  lifelong  learning  and 
career guidance policies. The 2012 national reform programme does not provide for limits on 
the recourse to early retirement schemes. 

The  2012  national  reform  programme  largely  extends  the  existing  measures  that  promote 
labour market participation and employment of women and of older workers. A new initiative 
is  the  ‘social  economy  project’,  through  which  the  government  aims  to  strengthen  the 
employability  of  vulnerable  groups  that  currently,  for  different  reasons,  are  likely  to  be 
excluded from the labour market. This measure, which is planned to run until early 2014, can 
be expected to further improve the Maltese employment rate. Additional measures that could 
also contribute are the increase in maternity leave, the introduction of a parent computation 
category in the income tax system and lowering the income tax rate for pensioners working 
part-time for the government. 

Overall,  the  measures  put  in  place  to  promote  female  participation  appear  relevant  and 
effective because the activity rate for women in the 25-49 age bracket increased from 56.5% 
at the end of 2010 to 60.8% at the end of 2011, significantly higher than the increase in the 
ratio for the EU as a whole over the same period. Additional policy efforts to promote family 
friendly measures would improve reconciliation of work and family life and also help reverse 
the decreasing fertility rate. At the same time, policy efforts to tackle the low employment rate 
of  older  workers  are  also  relevant,  but  the  level  of  ambition  appears  insufficient  given  the 
scope of the challenge. 

14 

 
The  significant  size  of  the  illegal  economy,  particularly  in  sectors  such  as  the  hospitality 
industry, construction and general services,14 is a matter of concern in Malta (see also section 
3.1).  The  government  is  taking  policy  action  with  a  mix  of  ‘carrot’  (tax  incentives  and 
information campaigns to promote regular employment) and ‘stick’ (strengthening checks and 
tackling  benefit  fraud)  measures.  With  regard  to  the  latter,  checks  on  and  conditions  for 
remaining  in  the  unemployment  registry  were  tightened,  such  as  by  enrolling  registered 
unemployed  people  in  training  activities  and  other  initiatives.  The  implementation  of  this 
policy,  however,  seems  challenging  because  in  2010  62%  of  those  who  objected  to  being 
struck  off  the  unemployment  registry  were  re-instated.15  Overall,  policy  action  appears 
relevant  and  its  implementation  has  helped  to  raise  the  total  employment  rate  over  2011. 
Judged against the scope of the challenge, however, the policy response lacks ambition. 

In  relation  to  the  country-specific  recommendation  calling  for  improved  links  between 
education  and  the  labour  market  (also  a  priority  in  the  2012  Annual  Growth  Survey)  and 
measures  to  tackle  the  high  rate  of  early  school  leaving,  Malta  made  a  number  of 
commitments in 2011. It is introducing vocational subjects in secondary schools, interesting 
career paths through vocational educational training and higher education in those sectors in 
demand  by  industry,  and  second-chance  learning  opportunities  in  key  competences.  Skill 
shortages  in  high  value-added  areas  have  been  partly  addressed  by  introducing  flexible 
courses in collaboration with industry and higher education institutions, while projects funded 
by  the  European  Social  Fund  are  addressing  sectoral  skills  needs  and  qualifications.  In 
addition, a new 2012 Euro Plus Pact commitment establishes a sector skills committee, which 
is  to  be  tasked  with  examining  occupational  standards  and  validation  of  competences  and 
learning outcomes in order to reduce skill gaps. Efforts are also being made to strengthen the 
vocational system, for instance in tourism studies. 

In  addition  to  the  measures  outlined  in  the  2011  national  reform  programme  to  increase 
tertiary  education  attainment,16  further  actions  are  ongoing  or  planned,  including  (i)  the 
expansion  of  infrastructure  at  the  Malta  College  of  Arts,  Science  and  Technology  and  the 
University  of  Malta,  (ii)  more  information  and  guidance  on  study  opportunities  and 
scholarships for prospective students and (iii) new financial incentives. Students over 25 years 
old  who  lack  the  minimum  qualifications  may  nevertheless  take  a  higher  education  degree 
(through a maturity clause). To improve completion rates, the University of Malta awards a 
Higher Education Certificate to students who have successfully completed the first year but 
do  not  go  for  a  full  bachelor’s  degree,  while  the  Malta  College  of  Arts,  Science  and 
Technology offers Vocational Educational Training degrees at bachelor level as an extension 
of short-cycle vocational degrees. The government set up a working group in 2011 to explore 
new  possibilities  for  learning  in  higher  education.  The  results  are  expected  in  the  course  of 
2012. 

Concerning early school leaving the various measures taken in 2011–12 and initiatives now 
underway demonstrate that the government and the educational institutions are aware of this 
challenge. However, it is the national strategy on early school leaving that is expected by the 
end  of  2012  that  will  determine  the  level  of  ambition  in  this  area.  The  Research  and 
Development  department,  the  National  Commission  for  Higher  Education  and  other 

14   Source: Debono, Manwel, Undeclared work Malta, Update 2012, European Employment Observatory, May 

2012. 

15   Source: Employment and Training Corporation, 2010 Annual Report. 
16   Tertiary education attainment is well below the EU average (at 21.5% of the population in 2010, compared 

with an EU figure of 33.6%). 

15 

 
                                                 
stakeholders set up a working group and discussed improving data collection on early school 
leavers  with  the  National  Statistics  Office,  which  has  launched  a  survey  on  early  school 
leavers  with  results  expected  in  the  course  of  2012.  In  addition,  the  University  of  Malta 
launched  a  project  at  the  beginning  of  2012  to  monitor  disadvantaged  secondary  school 
students and the reasons why they tend not to finish their studies. To date, however, there is 
no comprehensive system for collecting and analysing information on early school leaving to 
underpin targeted policy making and monitoring. 

Overall, the policy efforts in response to the 2011 recommendation on education and training 
can  be  considered  adequate  in  the  areas  of  tertiary  educational  attainment  and  vocational 
training and they need to be maintained in order to ensure lasting results. At the same time, 
the challenge of early school leaving still has not been adequately addressed. 

In response to the Euro Plus Pact, the Maltese authorities committed themselves to developing 
a  national  strategy  for  the  cultural  and  creative  industries,  prioritising  education  and 
professional  development  among  other  issues.  The  newly-created  Malta  Arts  Scholarship 
scheme and the various job training schemes and adult learning opportunities can contribute 
to this strategy. In the 2012 budget, the Maltese government has provided for a tax reduction 
for  parents  who  send  their  children  to  attend  courses  in  cultural  and  creative  teaching 
institutions.  Malta  is  also  providing  financial  incentives  to  promote  the  development  of  a 
digital games industry. There would be advantages in linking up the national strategy for the 
culture  and  creative  industries  to  the  higher  education  strategy  and  the  lifelong  learning 
strategy to ensure coherence and exploit synergies. 

Malta is one of the few EU Member States with a generalised wage indexation mechanism. 
The  cost-of-living  adjustment,  which  consists  of  a  more  (less)  than  proportional  adjustment 
for inflation for wages below (above) the so-called base wage, limits the flexibility of wages 
and may hamper the competitiveness of the labour-intensive sectors. The issue is particularly 
pertinent in view of the recent increases in energy prices, given the fact that the measure of 
inflation used does not exclude imported prices and this could lead to wage-price spirals. The 
indexation arrangement would also in principle give rise to wage compression, especially in 
the private sector (wage  agreements  in the public sector  seem to broadly preserve the wage 
structure), unless higher-paid employees obtain proportional wage increases to those received 
by employees at the lower end of the wage spectrum, in which case the system would operate 
de facto as a full indexation system. 

The Maltese wage indexation mechanism includes opt-out clauses on macro- and micro-level, 
which potentially could mitigate the negative impact of the mechanism on wage flexibility but 
their  existence  has  not  prevented  a  gradual  erosion  of  cost  competitiveness  of  the  Maltese 
economy  against  the  euro  area.17  The  operation  of  the  escape  clauses  is  not  clear  and  the 
macro-level  escape  clause  has  never  been  used  even  though  the  Maltese  economy  has 
contracted three times on an annual basis over the past decade. 

The 2011 recommendation on this issue called for a review and, if necessary, reform of the 
wage  indexation  mechanism.  The  government  has  undertaken  a  study  of  the  impact  of  the 
automatic  wage  indexation  mechanism  on  the  labour  market  and  the  competitiveness  of  the 
economy in general. The results of the study are expected to be available by end-May. Apart 
from this study, the government has taken no other initiative on this issue. 

17   Nominal unit labour costs for the Maltese economy have increased by 15.1% since 2005, as opposed to a 

10.5% increase for the euro area. 

16 

 
                                                 
In 2010, 20.6% of the population were at risk of poverty or social exclusion, which was the 
highest  figure  since  2005  but  still  below  the  EU  average,  due  to  the  good  social  protection 
system  in  Malta  combined  with  the  role  played  by  NGOs  and  family  and  community  ties. 
Poverty and social exclusion are mainly being tackled by increasing the overall employment 
rate,  particularly  through  the  inclusion,  mostly  through  projects  funded  by  the  European 
Social Fund, of disadvantaged groups into the labour market, such as older workers, people 
with  disabilities,  the  long-term  unemployed  and  immigrant  workers.  Apart  from  these 
projects, the government has also set up the Agency for the Welfare of Asylum Seekers and 
the  Foundation  for  Shelter  and  Support  of  Migrants,  which  aim  to  ease  the  integration  of 
asylum-seekers and refugees into the labour market. 

3.4.  Growth and competitiveness structural measures 

Labour productivity growth in Malta has lagged behind the average for the euro area Member 
States over the past decade. Shortcomings particularly in energy and the business environment 
have weighed on the economy’s growth potential and overall competitiveness. 

Energy, transport and environment 

Energy supply in Malta is almost entirely dependent on imported oil, as there is practically no 
domestic fossil fuel production, while the share of energy produced from renewable sources 
in final consumption remains marginal. Moreover, Malta is an ‘energy island’ as its electricity 
network is still not connected to that of any other country. This hampers security of supply to 
the end-user and expansion of the renewable energy supply. All these factors have contributed 
to  electricity  prices  being  among  the  highest  in  the  EU.  Together  with  the  inadequacy  of 
Malta’s  electricity  transmission  system,  this  adversely  affects  competitiveness,  in  particular 
that of small and medium-sized enterprises. 

Malta has committed itself to reaching a target of 10% of renewable energy sources in final 
energy consumption and a 10% share of renewable energy in the transport sector by 2020. In 
July 2010, Malta submitted its National Renewable Energy Action Plan, which sets sectoral 
targets and proposes measures to reach them, but implementation is still at a very early stage, 
making a comprehensive assessment of their impact impossible. 

In response to the energy-related 2011 recommendation, Malta has recently developed several 
initiatives to reduce its dependency on oil and increase the share of renewable energy. These 
include  a  grant  scheme  for  small-scale  solar  water  heating  and  a  feed-in  tariff  for  solar 
photovoltaic power which is guaranteed for seven years. Plans are being developed for wind 
farms at several locations across Malta. However, these schemes are still at a relatively early 
stage of development, so progress should be closely monitored. This is especially important 
for the large scale off-shore wind farms, which should contribute about one-third of the target. 
The  current  European  Energy  Programme  for  Recovery  Project  for  an  electricity 
interconnection linking Sicily to Malta will also allow variations in electricity supply from the 
different  sources  to  be  smoothed  and  hence  support  the  development  of  energy  from 
renewable sources and reduce Malta’s reliance on oil. This project is progressing well and is 
expected  to  be  operational  by  mid-2013.  In  addition,  the  national  electricity  company 
(Enemalta) is investing in upgrading the transmission and distribution system in the island to 
accommodate the grid to the new connection. 

17 

 
According  to  the  Energy  Efficiency  Action  Plan  of  summer  2011,  EUR  15  million  from 
structural  funds  will  be  allocated  to  energy  efficiency18  and  EUR  10  million  to  renewable 
sources  of  energy  over  the  period  2011–13  (altogether  0.4%  of  GDP).  In  March  2012,  the 
government asked the Commission to increase the share of resources going to the latter from 
2.53% to 11.98% (EUR 87.2 million) as resources have become available due to savings in 
the  transport  sector  and  solid  waste  projects.  The  increased  allocation  is  to  be  used,  for 
instance,  on  pilot  actions  to  explore  the  potential  of  large  off-shore  wind  farms,  including 
studies  to  promote  a  better  understanding  of  the  potential  exploitation  of  renewable  energy 
sources,  and  on  the  generation  of  renewable  energy  from  natural  sources  including  animal 
manure.  Overall,  government  efforts  to  utilise  EU  funding  in  order  to  bring  forward 
investments in energy efficiency and energy from renewable sources have been adequate as 
81%  of  available  European  Regional  Development  Funds  for  the  2007-13  programming 
period has already been allocated to various projects. 

Overall, the response to the energy-related recommendation can be considered relevant and, 
given the scope of the challenge, relatively ambitious. However, many measures, particularly 
those aimed at boosting the share of energy produced from renewable sources, are in a very 
early stage of implementation and their full impact will only be seen in the medium term. 

Malta has committed itself to limiting the increase in greenhouse gas emissions for the sectors 
not  falling  under  the  Emissions  Trading  Scheme  to  5%  by  2020  (compared  to  2005). 
However,  projections  submitted  by  Malta  based  on  existing  measures  show  an  increase  by 
35.5%  by  2020.  Even  after  taking  into  account  the  impact  of  planned  additional  measures, 
emissions growth would still be far above the target (by about 11 percentage points). 

The climate policy framework in Malta is not an adequate response to the challenges in this 
area,  particularly  in  road  transport:  in  Malta,  high  population  density  and  car  ownership 
together with an ageing vehicles fleet and a rather limited road network combine to produce 
significant  congestion.  Transport  emissions  are  expected  to  rise  by  23%  between  2005  and 
2020,  based  on  projections  by  the  European  Environment  Agency.  New  measures  to  curb 
these emissions are: the reopening of policies to promote the use of more fuel efficient cars (a 
car  scrapping  scheme,  introduced  in  2010  and  re-launched  in  December  2011),  setting 
minimum  contributions  from  biofuels  in  petroleum  fuel  in  all  transport  modes  (a  vital 
requirement  as  Malta  is  nowhere  near  meeting  its  renewable  energy  target  for  transport), 
continued  financial  support  for  electric  vehicles  and  an  increase  in  registration  tax  on  older 
imported  cars.  The  policy  document  ‘Promotion  of  Transport  Modal  Shift  towards  Public 
Transport’  outlined  a  number  of  actions  to  promote  public  transport,  including  park  &  ride 
schemes  restricting  car  use,  liberalising  the  public  transport  sector  and  encouraging 
alternatives to private car use. The national reform programme outlines a limited number of 
additional  measures.  Overall,  while  the  measures  are  relevant,  they  are  insufficiently 
ambitious when judged against the scale of the challenge, especially as regards the transport 
sector. They do not represent the decisive shift that would bring about a move to a low-carbon 
economy and achievement of the greenhouse gas emissions target. 

In  the waste sector, progress has been  made  towards  emission reductions, partly through an 
upgrade to the Sant’ Antnin Mechanical and Biological Treatment Plant and the capping and 
extraction of gases from landfills since early 2011, both financed by structural funds. Further 
progress  could  be  achieved  especially  by  tackling  municipal  waste  generation  and  waste 

18   For  example  schemes  subsidising  the  purchase  of  energy-efficient  technologies,  including  heating  and 

cooling systems, insulation and ventilation, hot water, lighting, and heat recovery systems. 

18 

 
                                                 
recycling.  It  is  unlikely,  however,  that  Malta  will  reach  the  2020  recycling  target  and  the 
objectives  of  the  Resource  Efficiency  Roadmap  (virtually  eliminating  landfill)  without 
significant  additional  efforts, including  incentive  systems  favouring  prevention  and  separate 
collection.  The  2012  national  reform  programme  outlines  several  initiatives  in  the  area  of 
resource efficiency but the level of detail provided does not allow for an assessment of their 
impact at this stage. 

Research and innovation 

Malta increased its research and development intensity from 0.54% in 2009 to 0.63% in 2010 
and,  if  this  trend  continues,  will  achieve  its  Europe  2020  target  (set  at  0.67%)  well  before 
2020.  The  large  increase  between  2009  and  2010  was  mainly  due  to  the  41%  increase 
achieved by the higher education sector. Malta’s innovation performance is weakest in human 
resources  and  finance  and  support,  but  strongest  in  economic  effects  and  intellectual  assets. 
Given that Malta’s economic system revolves around the services sector and is dominated by 
enterprises with less than 10 employees, most private sector research and innovation is carried 
out  by  foreign-owned  companies  (instead  of  having  indigenous  private-sector  research  and 
innovation). 

Malta’s  draft  National  Strategic  Plan  for  Research  and  Innovation  2011-2020  aims  to 
stimulate 
indigenous  private  sector  research  and  development,  build  up  research 
infrastructures, increase human resources for research and development, create links between 
knowledge  institutions  and  business  enterprise  and  increase  international  cooperation  in 
research  and  innovation.  The  strategy  takes  a  broad  view  of  innovation,  i.e.  an  ‘ideas-to-
market’ approach that looks at the whole of the innovation cycle. A new commercialisation 
programme,  resource  concentration  and  smart  specialisation  form  key  elements  of  the 
strategy, with more support being provided for target groups such as small and medium-sized 
enterprises  and  start-ups.  Specific  measures  include:  innovation  vouchers,  the  creation  of  a 
risk fund, the development of an investment-readiness programme, the setting up of research 
and innovation-driven clusters, the provision of financial support to facilitate the registration 
and  validation  of  patents  and  the  setting  up  of  an  innovation  awards  scheme.  Given  that 
several  measures  are  still  being  rolled  out  and  that  a  systematic  evaluation  of  the  different 
initiatives  is  not  part  of  the  strategy,  it  is  too  early  to  make  an  assessment  of  the  policy 
measures in the area of research and innovation. 

Functioning of the internal market 

In order to transpose the Services Directive into legislation, in 2009 Malta adopted a mix of 
general  and  sector-specific  measures,  i.e.  a  so-called  ‘omnibus  law’  and  amendments  to  a 
number  of  sector-specific  pieces  of  legislation.  In  particular,  Malta  changed  its  general 
licensing  system  by  introducing  a  system  requiring  notification  within  60  days  of  starting 
operations, which should make it simpler for businesses to start operating on its territory. The 
changes include new provisions to cater specifically for situations of cross-border provision of 
services,  which  in  many  cases  was  not  covered  in  existing  laws.  This  should  ensure  easier 
access for service providers from other Member States. 

However, some restrictions in the services sector still remain. In areas where the Directive left 
Member  States  some  discretion  in  how  to  streamline  the  regulatory  environment  for  the 
establishment of incoming service providers, it seems questionable whether some of Malta’s 
measures  concerning  cross-border  trade,  e.g.  authorisations,  registration  or  licensing 
requirements,  are  justified  under  the  Directive  and  whether  they  are  proportionate.  These 

19 

 
include authorisation requirements in the tourism sector (such as requiring a licence for travel 
operators, restricting certain tourist guide services to holders of a specific licence). 

The  enactment  and  implementation  of  the  Small  Business  Act  is  among  Malta’s  Euro  Plus 
Pact commitments. The Small Business Act, which came into force in October 2011, aims to 
enhance  the  operational  environment  for  small  and  medium-sized  enterprises  in  order  to 
facilitate both start-ups and further development, by identifying areas for improvement in the 
existing regulatory environment. This is expected to promote entrepreneurship, which seems 
weak  in  Malta  (only  19%  of  Maltese  adults  see  themselves  as  possible  entrepreneurs, 
compared  to  an  EU  average  of  28%19).  The  Small  Business  Act  also  provides  that  all  new 
laws will be subject to an ‘SME test’ before coming into force. 

Another commitment under the Euro Plus Pact, to facilitate access to financing for business 
activities,  was  the  Micro  Credit  Scheme.  It  facilitates  the  financing  of  new  start-ups  by 
providing a government guarantee of up to 90% of the total loan value. In addition, through 
the MicroInvest tax credit scheme, enterprises benefit from a tax credit of up to 40% (with a 
limit  of  EUR  25 000)  when  investing  in  innovation  to  comply  with  regulations  and/or  to 
expand,  including  through  recruitment.  The  take-up  of  the  scheme  so  far  has  exceeded 
expectations and this has been linked to the low level of bureaucracy. The scheme is flanked 
by a number of other financial instruments including a micro-guarantee scheme. As a result, 
SMEs in Malta can be considered to have adequate access to finance. 

The  government  aims  to  promote  entrepreneurship  also  with  the  social  economy  initiative, 
included in the 2012 national reform programme. In addition to boosting employment, it aims 
to strengthen the legal personality of social enterprises and give them privileged access to a 
number of incentives and opportunities. As a result, this measure has the potential to unlock 
additional sources of growth. The Point of Single Contact required by the Services Directive 
is  operational.20  In  January  2012  a  one-stop  shop  for  businesses  covering  50  government 
services (‘Business First’), managed by Malta Enterprise, was launched. It is to be followed 
by  smaller  offices  in  Gozo  and  at  Smart  City,  which  should  significantly  improve  the 
performance of the Maltese Point of Single Contact. While it is still too early for a detailed 
assessment  of  this  new  website,  at  first  glance  a  decisive  improvement  has  been  made 
although further improvements might still be needed to make procedures available online. 

Another of Malta’s Euro Plus Pact commitments was to improve competition in the sheltered 
sectors,  especially  the  postal  and  telecommunications  sectors.  Malta  has  complied  with  its 
deadline to transpose the Third Postal Directive21 by the end of 2012. The series of measures 
adopted in 2010 and early 2012 reflect the requirements of the Directive but are not expected 
to bring about any significant changes to the composition and structure of the national postal 
market,  which  remains  dominated  by 
the  public  postal  operator.  The  Electronic 
Communications  Act  was  amended,  transposing  the  revised  electronic  communications 
framework, and the Malta Communications Authority lowered the inter-operator termination 

19  See  SBA 

fact 

sheet, 

available 

from: 

http://ec.europa.eu/enterprise/policies/sme/facts-figures-

analysis/performance-review/files/countries-sheets/2010-2011/malta_en.pdf 

20   See http://www.businessfirst.com.mt/en 
21   The objective of the EU Postal Directives was to complete the Single Market for postal services and ensure 
a  high  quality  universal  postal  service  by  opening  up  the  sector  to  competition.  Under  the  Third  Postal 
Directive  (Directive  2008/06/EC),  the  deadline  for  full  market  opening  was  31  December  2010  with  a 
further two years allowed for Malta and 10 other Member States. 

20 

 
                                                 
rates.22  In  addition,  the  regulatory  authority  reassigned  the  rights  of  use  of  GSM  bands  and 
took  action  to  ensure  that  citizens  have  guaranteed  high-speed  internet  access  and  that 
competition  is  maintained  in  the  transition  to  Next  Generation  Access  networks.  Overall, 
these  measures  address  Malta’s  2011  concerned  Euro  Plus  Pact  commitments  but  close 
monitoring and further efforts might be needed to ensure an effective increase in competition. 

3.5  Modernisation of public administration 

In terms of administrative and regulatory burdens, progress has been made in recent years, in 
particular  under  the  leadership  of  the  Better  Regulation  Unit.  With  regard  to  the  2011  Euro 
Plus  Pact  commitment  to  cut  the  administrative  burden  on  businesses  by  15%  by  2012, 
implementation appears to be on track. Achieved savings so far account for a 6% reduction 
while  cumulative  savings  could  according  to  the  programme  exceed  the  target  due  to  a 
number  of  additional  initiatives  that  have  been  identified.  Still,  inefficiencies  in  the 
administration  of  support  programmes  and  the  non-transparency  of  some  of  the  existing 
regulation  are  weaknesses  that  affect  Malta’s  business  environment.  The  ‘SME  envoy’  and 
the  newly  created  Enterprise  Consultative  Council  are  regarded  as  promising  tools  by 
business representatives. 

The value of public procurement in Malta is estimated at 4 to 6% of GDP. The Maltese public 
procurement  market  for  contract  values  exceeding  the  EU  public  procurement  directives 
thresholds  is  less  competitive  than  those  of  most  other  Member  States  and  procedures 
typically  last  longer.  This  may  suggest  less  efficient  implementation  of  the  public 
procurement rules in Malta than in other parts of the EU. An e-procurement system covering 
the full public procurement lifecycle was launched in mid-2011. However, it is too early for a 
detailed assessment of the measure at this stage. 

EU Member States differ in their ability to control State aid enforcement from an institutional 
(coordination  functions)  and  performance  (quality  of  notifications,  administrative  capacity, 
length of delays etc.) perspective and as regards compliance with State aid rules. Malta faces 
the  challenge  to  reduce  its  spending  on  sectoral  State  aid,  which  is  among  the  highest  non-
crisis related aid in the EU. 

22   This  complies  with  the  Commission  Recommendation  on  the  Regulatory  Treatment  of  Fixed  and  Mobile 

Termination Rates. 

21 

 
                                                 
4.  OVERVIEW TABLE 

2011 commitments 

Summary assessment 

Country specific recommendations (CSRs) 

CSR1: Ensure correction of the excessive deficit in 
2011, in line with the EDP recommendations, 
standing ready to take additional measures so as to 
prevent possible slippages, and adopt concrete 
measures to back up the 2012 deficit target. Bring the 
high public debt ratio on a downward path and ensure 
adequate progress towards the MTO. With a view to 
strengthening the credibility of the medium-term 
consolidation strategy, define the required broad 
measures from 2013 onwards, embed the fiscal 
targets in a binding, rule-based multi-annual fiscal 
framework and improve the monitoring of budgetary 
execution. 
CSR2: Take action to ensure the sustainability of the 
pension system such as by accelerating the 
progressive increase in the retirement age and by 
linking it to life expectancy. Accompany the higher 
statutory retirement age with a comprehensive active 
ageing strategy, discourage the use of early 
retirement schemes and encourage private pension 
savings. 
CSR3: Focus education outcomes more on labour 
market needs, notably by making additional efforts to 
improve access to higher education and by 
strengthening the effectiveness of the vocational 
training system. Take further measures to reduce 
early school-leaving by identifying, analysing and 
measuring its causes by 2012 and by setting up a 
regular monitoring and reporting mechanism on the 
success rate of the measures. 
CSR4: Review and take the necessary steps to 
reform, in consultation with social partners and in 
accordance with national practices, the system of 
wage bargaining and wage indexation to ensure that 
wage growth better reflects developments in labour 
productivity and competitiveness. 
CSR5: Strengthen efforts to reduce Malta’s 
dependence on imported oil, by bringing forward 
investments in renewable energies and making full 
use of available EU funds to upgrade infrastructure 
and promote energy efficiency. 

The CSR has been partially implemented. The 
deficit is reported to have been below 3% of GDP 
in 2011 and the 2012 target is fully underpinned by 
measures but the broad measures underpinning the 
strategy from 2013 onwards are not all outlined in 
the programme. There are risks to the stability 
programme plans for a broadly appropriate pace of 
adjustment towards the medium-term objective and 
a gradual decrease in the debt ratio from 2012. No 
improvements were made to the budgetary 
framework but the political debate has started.  

The CSR has not been implemented. The 
government has still not announced its position on 
the proposals for pension reform submitted by an 
independent Pensions Working Group in December 
2010. In addition, there is still no comprehensive 
active ageing strategy in place. 

The CSR has been partially implemented. The 
policy response has been adequate only in the areas 
of tertiary educational attainment and vocational 
training. The challenge of early school leaving has 
still to be adequately addressed. 

The CSR has not been implemented yet. The 
government has undertaken a study of the impact of 
the wage indexation mechanism, but the results are 
not available yet. 

The CSR has been partially implemented. The 
government has taken relevant and ambitious 
measures to promote the use of energy from 
renewable sources and improve energy efficiency 
but their impact cannot be assessed at this stage 
because they are still in an early phase of 
implementation. 

Euro Plus Pact (national commitments and progress) 

The Maltese government is considering the 
introduction of numerical budgetary rules, in 
particular an expenditure rule, to complement efforts 
to enhance the accountability and transparency of the 
budgetary framework. 
The government committed itself to taking measures 
to improve competition in sheltered sectors (postal 
and telecommunication sectors), make the business 
environment more attractive and support education, 
R&D and innovation. 

The commitment has not been implemented as 
there is no concrete progress on reforming the 
budgetary framework. 

The structural policy commitments have been 
partially implemented. Progress has been made in 
many areas but the commitments are not yet fully 
implemented. 

Europe 2020 (national targets and progress) 

22 

 
Employment rate target (in %):62.9%. 

R&D target (in %):0.67%  

Greenhouse gas emissions target: +5% (compared to 
2005 emissions; emissions in the emissions trading 
scheme are not covered by this national target) 

Renewable energy target: 10% 

Energy efficiency — reduction in primary energy 
consumption by 2020 (in Mtoe): 0.24 Mtoe 

Early school leaving target (in %): 29% 

Tertiary education target (in %): 33% 

Target on the reduction of population at risk of 
poverty or social exclusion (number of people): 6 560 

Employment rate (%): 58.8% in 2009 and 60.1% in 
2010. Notable progress has been made towards 
reaching the target. 
Gross domestic expenditure on R&D (in % of 
GDP): 0.54% in 2009 and 0.63% in 2010. Notable 
progress has been made towards reaching the 
target. 
Change in greenhouse gas emissions between 2005 
and  2010:  +11%  (Non-ETS  sectors  currently 
amount to 34% of total greenhouse gas emissions) 

Share of renewable energy in gross final energy 
consumption (in %): 0.2% in 2009. DG ENER 
(Eurostat) and 0.9% in 2010 (National RES 
progress report). Based on 2010 data, Malta is not 
only very far from its 2020 target but also from its 
2011/12 interim target of 2%  
n.a. 
The energy efficiency objectives are set according 
to national circumstances and national 
formulations. As the methodology to express the 
2020 energy consumption impact of these 
objectives in the same format was agreed only 
recently, the Commission is not yet able to present 
an overview. 
Early leavers from education and training 
(percentage of the population aged 18-24 with at 
most lower secondary education and not in further 
education or training): 36.8% in 2009 and 36.9% in 
2010. No progress has been made towards 
reaching the target. 
Tertiary educational attainment: 21% in 2009 and 
21.5% in 2010. No notable progress has been 
made towards reaching the target. 
Population at-risk-of-poverty or social exclusion in 
1 000 persons attainment: 82000 in 2009 and 84000 
in 2010. No progress has been made towards 
reaching the target. 

23 

 
 
 
 
ANNEX 

Table I. Macroeconomic indicators 

Core indicators
GDP growth rate
Output gap 1
HICP (annual % change)
Domestic demand (annual % change) 2
Unemployment rate (% of labour force) 3
Gross fixed capital formation (% of GDP)
Gross national saving (% of GDP)

General government (%  of GDP)

Net lending (+) or net borrowing (-)

Gross debt

Net financial assets 

Total revenue 

Total expenditure
  of which: Interest

Corporations (%  of GDP)

Net lending (+) or net borrowing (-)

Net financial assets non-financial corporations

Net financial assets financial corporations

Gross capital formation
Gross operating surplus

Households and NPISH (%  of GDP)

Net lending (+) or net borrowing (-)

Net financial assets

Gross wages and salaries

Net property income

Current transfers received
Gross saving

Rest of the world (%  of GDP)

Net lending (+) or net borrowing (-)

Net financial assets

Net exports of goods and services

Net primary income from the rest of the world

Net capital transactions 

Tradable sector

Non tradable sector
  of which: Building and construction sector

1995-
1999

2000-
2004

2005-
2008

2009

2010 2011 2012 2013

4.5

0.3

3.3

1.9

6.0

1.5

1.0

2.6

1.6

7.3

22.5

15.5

19.5

12.8

3.7

-0.7

2.6

3.4

6.7

20.9

11.4

-2.7

-2.4

1.8

-3.7

6.9

15.9

7.5

2.3

-1.3

2.0

-1.4

6.9

17.7

9.5

2.1

-0.4

2.4

-0.1

6.5

1.2

-0.2

2.0

0.7

6.6

1.9

0.4

2.2

1.3

6.3

15.0

15.2

9.3

9.4

16.0

10.5

-7.5

46.9

n.a

34.7

42.3

2.8

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

-6.8

n.a

-9.0

0.2

0.7

54.1

37.2

4.4

-6.4

62.8

-3.2

64.6

-3.8

68.1

-3.7

-2.7

-2.6

-2.9

69.4

72.0 74.8 75.2

-45.9

-47.0

-51.8

-51.9

37.0

43.4

3.5

40.8

44.0

3.4

39.7

43.5

3.2

39.5

43.3

3.0

n.a

40.2

43.0

3.1

n.a

41.9

44.4

3.3

n.a

40.8

43.8

3.4

n.a

n.a

n.a

n.a

n.a

-96.3 -106.2 -109.3 -110.5 n.a

-8.1

n.a

25.8

-18.0

n.a

26.4

-7.7

n.a

25.6

-9.9

n.a

27.5

n.a

n.a

n.a

n.a

193.9 190.5 176.2 175.6

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

-4.0

-5.3

-39.5

-18.5

-1.6

-0.5

0.5

48.7

39.3

4.1

-2.7

-4.0

2.0

43.1

43.4

4.2

n.a

n.a

n.a

n.a

-6.6

-5.4

-1.2

-8.0

1.7

38.6

48.1

3.9

n.a

n.a

n.a

n.a

-4.7

-1.3

1.4

-8.3

1.7

38.3

48.5

3.6

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

-2.3

-1.3

-1.0

n.a

4.9

-8.8

0.9

37.3

49.1

3.4

n.a

5.0

n.a

5.5

-8.9

-9.2

1.9

n.a

n.a

n.a

1.8

n.a

n.a

n.a

Real effective exchange rate (index, 2000=100)

103.4 110.5 123.0

129.3

124.7 124.0 119.7 120.1

Terms of trade in goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)

97.3

100.7 101.1

99.6

99.0

100.8 100.2 100.2

111.2

95.2

92.9

100.2

106.8 103.3 103.5 103.7

Notes:
1 The output gap constitutes the gap between actual and potential gross domestic product at 2000 market prices.
2 The indicator for domestic demand includes stocks.
3  Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working 
immediately or within two weeks. The labour force is the total number of people employed and unemployed. The unemployment rate 
covers the age group 15-74.

Source :

Commission services' spring 2012 forecast

24 

 
 
Table II. Comparison of macroeconomic developments and forecasts 

Real GDP (% change)

Private consumption (% change)

Gross fixed capital formation (% change)

Exports of goods and services (% change)

Imports of goods and services (% change)

Contributions to real GDP growth:

- Final domestic demand

- Change in inventories

- Net exports
Output gap1
Employment (% change)

Unemployment rate (%)

Labour productivity (% change)

HICP inflation (%)

GDP deflator (% change)

Comp. of employees (per head, % change)

Net lending/borrowing vis-à-vis the rest of the 
world (% of GDP)

Note:

2011

COM

2.1

3.1

-13.4

1.0

-1.0

0.8

-0.9

2.2

-0.4
2.4

6.5

-0.3

2.4

2.3

0.4

-2.3

SP

2.1

3.1

-13.4

1.0

-1.0

0.8

-0.9

2.2

-0.4
2.4

6.5

-0.3

2.4

2.3

0.4

-2.3

2012

COM

1.2

0.3

0.0

2.4

2.0

0.6

0.1

0.6

-0.2
0.6

6.6

0.6

2.0

1.7

1.5

-1.3

2013

2014

2015

SP

1.5

0.9

0.4

1.2

0.7

0.9

0.0

0.6

-0.5
1.0

6.4

0.5

2.3

2.1

0.9

-2.6

COM

1.9

1.0

4.5

4.4

4.0

1.2

0.0

0.7

0.4
1.1

6.3

0.8

2.2

2.6

2.4

-1.0

SP

2.0

1.4

1.6

2.1

1.3

1.1

0.0

0.9

-0.3
1.6

6.3

0.4

2.4

2.4

0.5

-1.8

SP

2.0

1.2

4.0

3.6

3.0

1.2

0.0

0.8

0.0
1.6

6.3

0.4

2.2

2.4

0.6

-1.0

SP

2.1

1.2

3.8

3.8

3.1

1.1

0.0

1.0

0.2
1.6

6.3

0.4

2.2

2.5

0.6

0.2

1In percent of potential GDP, with potential GDP growth according to the programme as recalculated by the Commission.

Source :

Commission services' spring 2012 forecasts (COM); Stability programme (SP).

25 

 
 
Table III. Composition of the budgetary adjustment 

(% of GDP)

Revenue

of which:

- Taxes on production and imports

- Current taxes on income, wealth, etc.

- Social contributions

- Other (residual)

Expenditure

of which:

- Primary expenditure

of which:

Compensation of employees

Intermediate consumption

Social payments

Subsidies

Gross fixed capital formation

Other (residual)

- Interest expenditure

General government balance (GGB)

Primary balance

One-off and other temporary measures

GGB excl. one-offs
Output gap2
Cyclically adjusted balance2
Structural balance
Change in structural balance 8

3

3

Structural primary balance
Change in structural primary balance 8
Expenditure benchmark
Public expenditure growth4 (real)
Reference rate5,6
Lower reference rate5,7
Deviation in % of GDP 
   from applicable reference rate
Two-year average deviation in % of GDP 
   from applicable reference rate
Notes:

2011

2012

2013

2014

2015

COM

40.2

COM

41.9

14.2

13.3

7.6

5.2

43.0

15.3

13.1

7.7

5.8

44.4

SP

43.1

15.6

13.2

7.7

6.6

45.3

COM

40.8

14.2

13.3

7.6

5.7

43.8

SP

42.4

14.7

13.3

7.7

6.7

44.1

SP

41.6

14.5

13.4

7.7

6.0

42.7

SP

41.1

14.5

13.3

7.7

5.6

41.4

39.8

41.1

42.0

40.3

40.7

39.2

37.8

13.6

6.6

13.8

1.0

2.5

2.4

3.1

-2.7

0.4

0.7

-3.5

-0.4

-2.6

-3.3

-0.2

13.4

6.7

13.9

1.2

2.6

3.2

3.3

-2.6

0.8

1.0

-3.5

-0.2

-2.5

-3.5

-0.1

-0.2

0.0

-1.69

1.51

0.24
-0.73

13.3

6.6

13.7

1.2

4.1

3.2

3.3

-2.2

1.0

0.2

-2.4

-0.5

-2.0

-2.2

0.7

1.1

0.9

-4.36

1.51

0.24
-1.73

13.2

6.5

13.7

1.2

2.6

3.1

3.4

-2.9

0.5

0.3

-3.2

0.4

-3.1

-3.3

0.1

0.1

0.2

-1.80

1.51

0.24
-0.77

13.0

64.0

13.5

1.2

3.6

3.1

3.4

-1.7

1.7

0.2

-1.9

-0.3

-1.6

-1.8

0.5

1.6

0.6

-0.98

1.51

0.24
-0.45

12.7

6.2

13.1

1.2

3.5

2.5

3.5

-1.1

2.4

0.2

-1.3

0.0

-1.1

-1.3

0.5

2.2

0.6

12.3

6.0

12.8

1.1

3.3

2.3

3.6

-0.3

3.3

0.2

-0.5

0.2

-0.4

-0.6

0.7

3.0

0.8

-0.54

1.51

0.24
-0.28

-0.70

1.51

0.24
-0.33

n.a.

n.a.

-0.75

-1.09

-0.36

-0.31

Change: 
2011-
2015
SP

0.9

0.3

0.0

0.1

0.4

-1.6

-2.0

-1.3

-0.6

-1.0

0.1

0.8

-0.1

0.5

2.4

2.9

-0.5

3.0

0.6

2.2

2.7

3.2

-

-

-
-

-

1On a no-policy-change basis.
2Output gap (in % of potential GDP) and cyclically adjusted balance according to the programme as recalculated by the Commission on the basis of the information in the 
3Structural (primary) balance = cyclically adjusted (primary) balance excluding one-off and other temporary measures.
4M odified expenditure aggregate used for the expenditure benchmark, growth rates net of non-discretionary changes in unemployment benefit and of discretionary 
5The reference rates applicable to 2014 onwards will be available from mid-2012. For illustrative purposes, the current reference rates have also been applied to the years 
6The (standard) reference rate applies starting in the year following the one in which the country reaches its M TO.
7The lower reference rate applies as long as the country is adjusting towards its M TO, including the year in which it reaches the M TO.
8The figure for SP uses one-offs for 2011 as estimated in the programme (0.3% of GDP), not as estimated by the Commission.

Source :

Stability programme (SP); Commission services' spring 2012 forecasts (COM); Commission services' calculations.

26 

 
 
2015
SP

65.3
-2.1

-3.3
0.7

3.6
-1.4
-1.5
0.5

2015
4

SP

-2.6

Table IV. Debt dynamics 

Average 
2006-10

65.3
0.0

0.2
0.2

3.3
-1.3
-1.7
-0.4

2011

72.0
2.5

-0.4
0.2

3.1
-1.4
-1.5
2.7

2012

2013

COM

74.8
2.9

-0.8
1.3

3.3
-0.9
-1.2
2.4

SP

70.3
-1.7

-1.0
0.7

3.2
-1.0
-1.4
-1.4

COM

75.2
0.3

-0.5
0.2

3.4
-1.4
-1.9
0.6

SP

68.7
-1.6

-1.7
0.5

3.4
-1.3
-1.6
-0.3

2014
SP

67.4
-1.3

-2.4
0.6

3.5
-1.3
-1.5
0.5

(% of GDP)

Gross debt ratio1
Change in the ratio
Contributions 2 :

1. Primary balance
2. “S now-ball” effect

Of which:
Interest expenditure
Growth effect
Inflation effect

3. S tock-flow adjustment

Of which:
Cash/accruals diff.
Acc. financial assets
Privatisation

Val. effect & residual

(% of GDP)

Gap to the debt benchmark5,6

S tructural adjustment7

To be compared to:
Required adjustment8

-

-
-

2011

2012
3

COM/SP

4

SP

2013
3

COM/SP

4

SP

2014
4

SP

0.7

0.4

0.7

0.2

0.5

0.3

0.5

0.0

0.5

0.0

Notes:
1End of period.
2The snow-ball effect captures the impact of interest expenditure on accumulated debt, as well as the impact of real GDP 
growth and inflation on the debt ratio (through the denominator). The stock-flow adjustment includes differences in cash and 
accrual accounting, accumulation of financial assets and valuation and other residual effects. 
3Assessment of the consolidation path set in the SP assuming growth follows the COM  forecasts.
4Assessment of the consolidation path set in the SP assuming growth follows the SP projections.
5 Not relevant during EDP that were ongoing in November 2011 and in the three years following the correction of the excessive 
deficit.
6Shows the difference between the debt-to-GDP ratio and the debt benchmark. If positive, projected gross debt-to-GDP ratio 
does not comply with the debt reduction benchmark.
7Applicable only during the transition period of three years from the correction of the excessive deficit for EDP that were 
ongoing in November 2011.
8Defines the remaining annual structural adjustment over the transition period which ensures that - if followed – M ember State 
will comply with the debt reduction benchmark at the end of the transition period, assuming that COM  (SP) budgetary 
projections are achieved.
Source :
Stability programme (SP); Commission services’ spring 2012 forecasts (COM); Commission services’ calculations.

27 

 
 
Table V. Sustainability indicators 

MT

EU27

No-policy-
change 
scenario 

Stability 
programme 
scenario

No-policy-
change 
scenario 

SCPs 
scenario

S2

of which:

Initial budgetary position (IBP)

Long-term change in the primary balance (LTC)

 of which:

pensions

health care and long-term care

other

S1 (required adjustment)*

Debt, % of GDP (2011)

Age-related expenditure, % of GDP (2011)

Notes:

6.1

1.3

4.8

3.0

2.4

-0.6

2.9

3.2

-1.4

4.6

2.7

2.3

-0.4

-1.4

2.9

0.7

2.3

1.1

1.5

-0.3

2.2

0.7

-1.6

2.4

1.2

1.5

-0.3

-0.1

72.0

21.5

82.8

25.8

The ‘no-policy-change’ scenario depicts the sustainability gap under the assumption that the budgetary position evolves 
according to the spring 2012 forecast until 2013. The ‘stability programme’ scenario depicts the sustainability gap under the 
assumption that the budgetary plans in the programme are fully implemented.     
* The required adjustment of the primary balance until 2020 to reach a public debt of 60% of GDP by 2030.
Source :

Commission services, 2012 stability and convergence programmes. 

(% of  GDP)

100

Graph – Medium-term debt projections 

90

80

70

60

50

40

30

20

10

0

0
0
0
2

2
0
0
2

4
0
0
2

6
0
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

6
1
0
2

8
1
0
2

0
2
0
2

COM no-policy change scenario
COM + Shock ( -1p.p. in the short-term/long-term interest rate on maturing and new debt from 2014)
COM + Shock (+1p.p. in the short-term/long-term interest rate on maturing and new debt from 2014)
COM consolidation scenario (0.5% per year on SB) in order to achieve MTO
COM consolidation scenario (1% per year on SB) in order to achieve MTO
SP scenario

Source: Commission, 2012 stability and convergence programmes. 

28 

 
 
 
 
Table VI. Taxation indicators 

Total tax revenues (incl. actual compulsory social contributions, % of GDP)
Breakdown by economic function (% of GDP)1
     Consumption

              of which:

              - VAT

             - excise duties on tobacco and alcohol

             - energy

             - other (residual)

     Labour employed

     Labour non-employed

     Capital and business income

     Stocks of capital/wealth
     p.m.  Environmental taxes2
3
VAT efficiency
     Actual VAT revenues as % of theoretical revenues at standard rate

2001

29.7

2005

33.7

2007

34.8

2008

33.8

2009

34.3

2010

33.3

12.5

14.4

14.0

13.7

13.5

13.2

6.3

1.3

1.5

3.5

8.3

1.5

1.3

3.3

10.3

10.1

0.9

4.8

1.2

3.6

1.0

6.1

2.2

3.3

7.7

1.3

1.8

3.2

9.5

0.9

8.3

2.1

3.8

7.9

1.3

1.5

3.0

9.4

0.9

8.1

1.8

3.4

7.9

1.3

1.5

2.9

9.6

1.0

8.5

1.7

3.4

7.8

1.3

1.5

2.6

9.7

1.0

7.8

1.6

3.1

53.4

59.7

58.2

57.5

56.5

57.7

Note: 
1 T ax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission (2012), 

T axation trends in the European Union, for a more detailed explanation.

2 T his category comprises taxes on energy, transport and pollution and resources included in taxes on consumption and capital.

3 T he VAT  efficiency is measured via the VAT  revenue ratio. T he VAT  revenue ratio is defined as the ratio between the actual VAT  revenue collected and the revenue 

that would theoretically be raised if VAT  was applied at the standard rate to all final consumption. A low ratio can indicate a reduction of the tax base due to large 

exemptions or the application of reduced rates to a wide range of goods and services ('policy gap') or a failure to collect all tax due to e.g. fraud ('collection gap'). See 

European Commission (2011), T ax reforms in EU Member States, European Economy 5/2011, for a more detailed explanation.

Source: Commission

29 

 
 
 
Table VII. Macrofinancial stability indicators 

Total assets of the banking sector (% of GDP)
Share of assets of the five largest banks (% of total assets)
Foreign ownership of banking system (% of total assets)
Financial soundness indicators:
              - non-performing loans (% of total loans) 1)
              - capital adequacy ratio (%) 1), 2)
              - return on equity (%) 1), 3)
Bank loans to the private sector (year-on-year % change)
Lending for house purchase (year-on-year % change)
Loan to deposit ratio
CB liquidity as % of liabilities
Banks' exposure to countries receiving official financial assistance  (% of GDP)4)
Private debt (% of GDP)

2007

2008

2009

2010

2011

695.6
70.2
0.0

5.1
14.7
14.1
12.1
12.1
89.4
0.0
…
151.4

730.9
72.8
40.7

4.8
14.6
-3.4
20.0
9.4
108.0
2.0
…
173.1

714.0
72.8
36.3

5.6
15.9
20.3
-2.8
10.0
105.7
3.5
…
171.5

815.7
71.2
…

7.3
15.3
12.8
2.9
8.6
103.2
2.8
…
169.7

796.6
…
…

7.7
15.8
-1.2
3.0
8.6
94.3
1.3
…
166.9

4)

Gross external debt (% of GDP) 
            - Public
            - Private
Long term interest rates spread versus Bund (basis points)*
Credit default swap spreads for sovereign securities (5-year)*
Notes: 
1) Latest available September 2011. 
2) The capital adequacy ratio is defined as total capital divided by risk weighted assets.   
3) Net income to equity ratio. Domestic banks dealing only with residents.
4) Latest data 2011Q3.
* M easured in basis points.
Source :
Bank for International Settlements and Eurostat (exposure to macro-financially vulnerable countries), IMF (financial soundness indicators), 
Commission (long-term interest rates), World Bank (gross external debt) and ECB (all other indicators).

4.4
47.8
131.9
…

3.6
53.8
144.4
…

…
…
50.8
…

5.3
47.0
82.3
…

…
…
188.1
…

30 

 
 
Table VIII. Labour market indicators 
2008
2006

2007

2009

2010

2011

Labour market indicators
Employment rate 
(% of population aged 20-64)
Employment growth 
(% change from previous year)
Employment rate of women 
(% of female population aged 20-64)
Employment rate of men 
(% of male population aged 20-64)
Employment rate of older workers 
(% of population aged 55-64)
Part-time employment 
(% of total employment)
Part-time employment of women  
(% of women employment)
Part-time employment of men  
(% of men employment)
Fixed term employment 
(% of employees with a fixed term contract)
Unemployment rate1 (% of labour force)
Long-term unemployment2  (% of labour force)
Youth unemployment rate 
(% of youth labour force aged 15-24)

57.6

58.5

59.1

58.8

60.1

61.5

2.2

3.0

2.4

0.5

2.1

2.7

35.4

37.4

39.3

39.8

41.6

43.4

79.2

78.7

78.2

77.1

77.8

78.8

29.8

28.5

29.2

27.8

30.2

31.7

10.0

10.9

11.5

11.4

12.7

13.4

21.4

24.6

25.5

23.8

25.2

25.8

5.0

3.7

6.9

2.9

4.4

5.1

6.5

2.7

4.5

4.3

6.0

2.5

5.2

4.9

6.9

3.0

6.1

5.7

6.9

3.2

6.8

6.6

6.5

3.0

15.9

13.9

12.2

14.4

13.1

13.7

Youth NEET3 rate (% of population aged 15-24)

10.3

11.7

9.5

9.8

9.6

Early leavers from education and training (% of 
pop. 18-24 with at most lower sec. educ. and not 
in further education or training)
Tertiary educational attainment (% of population 
30-34 having successfully completed tertiary 
education)
Labour productivity per person employed 
(annual % change )
Hours worked per person employed  (annual % 
change)
Labour productivity per hour worked (annual % 
change; constant prices)
Compensation per employee (annual % change; 
constant prices)
Nominal unit labour cost growth (annual % 
change)

1.5

-1.5

3.0

3.6

4.1

Real unit labour cost growth (annual % change)

2.0

Notes:

39.9

38.3

38.1

36.8

36.9

21.4

22.5

22.5

22.0

22.9

1.1

1.0

0.1

-1.2

0.7

-2.3

1.5

0.3

1.2

1.7

3.2

0.2

-2.4

-3.1

0.7

0.8

5.9

3.3

0.0

-1.3

1.3

-3.3

-0.4

-3.3

:

:

:

-0.3

-1.8

1.5

-1.8

0.8

-1.5

1 According to ILO definition, age group 15-74)
2 Share of persons in the labour force who have been unemployed for at least 12 months.
3 NEET are persons that are neither in employment nor in any education or training.

Sources: 
Commission (EU Labour Force Survey and European National Accounts) 

31 

 
Expenditure on social protection 
benefits (% of GDP)
Sickness/Health care
Invalidity
Old age and survivors
Family/Children
Unemployment
Housing and Social exclusion n.e.c.
Total
of which:  Means tested benefits
Social inclusion indicators
Risk-of-poverty or exclusion1 (% of total 
population)
Risk-of-poverty or exclusion of children (% of 
people aged 0-17)
Risk-of-poverty or exclusion of elderly (% of 
people aged 65+)
At-risk-of-poverty rate2 (% of total population)
Value of relative poverty threshold (single 
household per year) - in PPS
Severe material deprivation3  (% of total 
population)
Share of people living in low work intensity 
households 4 (% of people aged 0-59 not 
student)
In-work at-risk-of poverty rate (% of persons 
employed)

Notes:

2005

2006

2007

2008

2009

5.43
1.19
7.47
1.17
0.63
0.16
18.4
3.22

5.26
1.13
7.63
1.13
0.61
0.18
18.3
3.21

5.22
1.07
7.55
1.07
0.51
0.24
18.0
3.14

5.43
0.98
7.75
1.23
0.50
0.23
18.5
2.51

6.09
0.93
8.48
1.26
0.59
0.16
20.0
2.67

2006

2007

2008

2009

2010

19.1

19.4

19.6

20.2

20.6

20.8

23.1

23.5

25.5

24.4

26.3

14.0

23.1

14.8

26.4

15.0

23.2

15.3

21.9

15.5

7253

7464

7994

8270

8007

3.7

4.2

4.0

4.7

5.7

9.2

4.1

9.2

4.5

8.2

5.0

8.4

5.7

8.4

5.9

1 People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) 
and/or suffering from severe material deprivation (SM D) and/or living in households with zero or very low 
work intensity (LWI).

2 At-risk-of poverty rate: share of people with an equivalised disposable income below 60% of the national 
equivalised median income. 

3 Share of people who experience at least 4 out of 9 deprivations: people cannot afford to i) pay their rent or 
utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish, or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have 
a washing machine, viii) have a colour TV, or ix) have a telephone.

4 People living in households with very low work intensity: share of people aged 0-59 living in households 
where the adults work less than 20% of their total work-time potential during the previous 12 months.

Sources: 
For expenditure on social protection benefits ESSPROS; for social inclusion EU-SILC.

32 

 
 
 
Performance indicators

Table IX. Product market indicators 
2002-
2006

2007

2008

2009

2010

2011

Labour productivity1 total economy (annual 
growth in %)
Labour productivity1 in manufacturing (annual 
growth in %)

Labour productivity

1

 in electricity, gas, water 

(annual growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Patent intensity in manufacturing2 (patents of the 
EPO divided by gross value added of the sector)

0.9

1.1

1.7

-2.3

0.4

0.7

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

1.0

0.9

0.6

n.a.

n.a.

n.a.

Policy indicators

Enforcing contracts

3

 (days)

Time to start a business 3 (days)
R&D expenditure (% of GDP)
Tertiary educational attainment 
(% of 30-34 years old population)
Total public expenditure on education 
(% of GDP)

2002-
2006

n.a.

n.a.
0.4

2007

2008

2009

2010

2011

n.a.

n.a.
0.6

n.a.

n.a.
0.6

n.a.

n.a.
0.5

n.a.

n.a.
0.6

16.1

21.5

20.9

21.0

18.6

5.5

6.3

6.0

n.a.

n.a.

n.a.

n.a.
n.a.

n.a.

n.a.

Product market regulation4, Overall
(Index; 0=not regulated; 6=most regulated)

Product market regulation

4

, Retail

(Index; 0=not regulated; 6=most regulated)

Product market regulation

4

, Network Industries

5

(Index; 0=not regulated; 6=most regulated)

2005

2006

2008

2009

2010

2011

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Notes:
1Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2 Patent data refer to applications to the European Patent Office (EPO). They are counted according to the year in which 
they were filed at the EPO. They are broken down according to the inventor's place of residence, using fractional counting if 
multiple inventors or IPC classes are provided to avoid double counting. 
3 The methodologies, including the assumptions, for this indicator are presented in detail on the website 
http://www.doingbusiness.org/methodology. 
4 The methodologies for the product market regulation indicators are presented in detail on the website 
http://www.oecd.org/document/1/0,3746,en_2649_34323_2367297_1_1_1_1,00.html. The latest available product market 
regulation indicators refer to 2003 and 2008, except for Network Industries.

5 Aggregate ET CR.
*figure for 2007.

Source :

Commission, World Bank - Doing Business  (for enforcing contracts and time to start a business) and OECD (for the 
product market regulation indicators). 

33 

 
 
Table X. Green growth performance 

M alta

Green Growth performance

Macroeconomic
Energy intensity 
Carbon intensity 
Resource intensity (reciprocal of resource productivity)
Waste intensity 
Energy balance of trade 
Energy weight in HICP
Difference between change energy price and inflation 
Environmental taxes over labour taxes
Environmental taxes over total taxes

Sectoral 

Industry energy intensity 
Share of energy-intensive industries in the economy
Electricity prices for medium-sized industrial users 
Public R&D for energy 
Public R&D for the environment
Recycling rate of municipal waste
Share of GHG emissions covered by ETS
Transport energy intensity
Transport carbon intensity
Change in the ratio of passenger transport and GDP

Security of energy supply
Energy import dependency
Diversification of oil import sources 
Diversification of energy mix
Share of renewable energy in energy mix

kgoe / €
kg / €
kg / €
kg / €
% GDP
%
%
ratio
ratio

kgoe / € 
% GDP
€ / kWh
% GDP
% GDP
ratio
%
kgoe / €
kg / €
%

%
HHI
HHI
%

2001-
2005

0.21
0.66
0.36
n.a.
-3.2%
5
4.02
32.5%
10.6%

0.06
5.6
0.07
n.a.
n.a.
12.5%
n.a.
0.65
1.27
n.a.

99.9%
n.a.
1.00
0.0%

2006

2007

2008

2009

2010

0.20
0.64
0.46
0.62
-4.8%
6
22.9
33.1%
10.0%

0.06
6.7
0.07
0.00%
0.00%
19.0%
67.0%
0.55
1.14
n.a.

0.20
0.63
0.27
0.45
-5.8%
6
-7.2
38.3%
10.9%

0.05
7.3
0.09
0.00%
0.00%
6.8%
66.5%
0.53
1.07
n.a.

0.19
0.60
0.19
0.30
-7.0%
6
14.3
36.9%
10.2%

0.05
6.6
0.12
0.00%
0.00%
3.3%
67.1%
0.60
1.03
n.a.

0.18
0.59
0.32
n.a.
-4.0%
6
9.9
34.1%
9.8%

0.09
6.8
0.15
0.00%
0.00%
4.1%
66.2%
0.52
1.16
n.a.

100.0% 100.1% 100.0% 101.8%

0.00
1.00
0.0%

0.00
1.00
0.0%

0.00
1.00
0.0%

0.00
1.00
0.0%

0.18
n.a.
n.a.
n.a.
-2.2%
6
27.1
n.a.
n.a.

n.a.

n.a.
0.18
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

n.a.

n.a.
n.a.
n.a.
n.a.

Country-specific notes: 
The year 2011 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN explanations given below
All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2000 prices)
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)
          Carbon intensity: Greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)
          Resource intensity: Domestic M aterial Consumption (in kg) divided by GDP (in EUR)
          Waste intensity: waste (in kg) divided by GDP (in EUR)
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP  
Energy weight in HICP: the share of the "energy" items in the consumption basket used in the construction of the HICP
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual %-change)
Environmental taxes over labour or total taxes: from DG TAXUD's database "Taxation trends in the European Union"
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Recycling rate of municipal waste: ratio of municipal waste recycled over total municipal waste
Public R&D for energy or for the environment: government spending on R&D (GBAORD) for these categories as % of GDP
Share of GHG emissions covered by ETS: based on greenhouse gas emissions as reported by M ember States to EEA (excl LULUCF)
Transport energy intensity: final energy consumption of transport (in kgoe) divided by gross value added of industry (in EUR) 
Transport carbon intensity:  greenhouse gas emissions in transport divided by gross value added of the transport sector
Passenger transport growth : measured in %-change in passenger kilometres
Energy import dependency: net energy imports divided by gross inland energy consumption incl. of international bunkers

Diversification of oil import sources: Herfindahl index (HHI), calculated as the sum of the squared market shares of countries of origin 

Diversification of the energy mix: Herfindahl Index over natural gas, total petrol products, nuclear heat, renewable energies and solid fuels

Share of renewable energy in energy mix: percentage-share in  gross inland energy consumption, expressed in tonne oil equivalents

34