Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Malta and delivering a Council opinion on the 2022 Stability Programme of Malta
Date: 2022-05-23
Institutions: European Commission, Secretariat-General
Subjects: Malta, economic policy, economic recovery, economic reform, energy policy, public finance, renewable energy, road transport, stability pact, stability programme, tax system

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   EUROPEAN COMMISSION  Brussels, 23.5.2022  COM(2022) 620 final  Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Malta and delivering a Council opinion on the 2022 Stability Programme of Malta {SWD(2022) 620 final} - {SWD(2022) 640 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2022 National Reform Programme of Malta and delivering a Council opinion on 
the 2022 Stability Programme of Malta 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 5(2) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

(2) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council2,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021.  The  Recovery  and  Resilience  Facility  provides  financial  support  for  the 
implementation of reforms and investment, entailing a fiscal impulse financed by the 
Union.  It  contributes  to  the  economic  recovery  and  to  the  implementation  of 
sustainable and growth-enhancing reforms and investment, in particular to promote the 
green and digital transition, while strengthening the resilience and potential growth of 
the Member States’ economies. It also helps strengthen sustainable public finances and 
boost growth and job creation in the medium and long term. The maximum financial 
contribution  per  Member  State  under  the  Recovery  and  Resilience  Facility  [was] 
updated on [XX] June 2022, in line with Article 11(2) of Regulation (EU) 2021/241. 

On  24  November  2021,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Survey,  marking  the  start  of  the  2022  European  Semester  for  economic  policy 
coordination.  It  took  due  account  of  the  reaffirmed  joint  commitment  of  the  Porto 
Social Summit of May 2021 to further implement the European Pillar of Social Rights 
proclaimed  by  the  European  Parliament,  the  Council  and  the  Commission  on  17 
November  2017.  The  European  Council  endorsed  the  priorities  of  the  2022  Annual 

1 
2 
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 

OJ L 209, 2.8.1997, p. 1. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 

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Sustainable Growth Survey on 25 March 2022. On 24 November 2021, on the basis of 
Regulation  (EU)  No  1176/2011,  the  Commission  also  adopted  the  Alert  Mechanism 
Report, in which it did not identify Malta as one of the Member States for which an in-
depth  review3  would  be  needed.  On  the  same  date,  the  Commission  also  adopted  a 
recommendation  for  a  Council  recommendation  on  the  economic  policy  of  the  euro 
area, which was adopted on 5 April 2022 by the Council, as well as the proposal for 
the 2022 Joint Employment Report analysing the implementation of the Employment 
Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights,  which  was 
adopted by the Council on 14 March 2022.  

Russia’s  invasion  of  Ukraine,  in  the  wake  of  the  global  pandemic,  has  significantly 
altered the geopolitical and economic context. The impact of the invasion on Member 
States’ economies has been felt for example through higher energy and food prices and 
weaker  growth  prospects.  The  higher  energy  prices  weigh  particularly  on  the  most 
vulnerable households experiencing or at risk of energy poverty. The EU is also seeing 
an unprecedented inflow of people fleeing Ukraine. In this context, on 4 March 2022, 
the  Temporary  Protection  Directive  was  triggered4  for  the  first  time,  granting 
displaced persons from Ukraine the right to legally stay in the EU, as well as access to 
education and training, the labour market, healthcare, housing and social welfare. 

Taking  account  of  the  rapidly  changing  economic  and  geopolitical  situation,  the 
European Semester resumes its broad economic and employment policy coordination 
in 2022, while evolving in line with the implementation requirements of the Recovery 
and  Resilience  Facility,  as  outlined  in  the  2022  Annual  Sustainable  Growth  Survey. 
The  implementation  of  the  adopted  recovery  and  resilience  plans  is  essential  for  the 
delivery of the policy priorities under the European Semester, as the plans address all 
or a significant subset of the relevant country-specific recommendations issued in the 
2019  and  2020  Semester  cycles.  The  2019  and  2020  country-specific 
recommendations  remain  equally  relevant  also  for  recovery  and  resilience  plans 
revised, updated or amended in accordance with Articles 14, 18 and 21 of Regulation 
(EU) 2021/241, in addition to any country-specific recommendations issued up to the 
date of submission of the modified plan.  
The General Escape Clause has been active since March 20205. In its Communication 
of  3  March  20216,  the  Commission  set  out  its  view  that  the  decision  on  the 
deactivation or continued application of the general escape clause should be taken as 
an overall assessment of the state of the economy, with the level of economic activity 
in the EU or euro area compared to pre-crisis levels (end-2019) as a key quantitative 
criterion. Heightened uncertainty and strong downside risks  to  the economic outlook 
in  the  context  of  war  in  Europe,  unprecedented  energy  price  hikes  and  continued 
supply  chain  disturbances  warrant  the  extension  of  the  general  escape  clause  of  the 
Stability and Growth Pact through 2023. 

(3) 

(4) 

(5) 

Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16  November 2011 

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on the prevention and correction of macroeconomic imbalances, OJ L 306, 23.11.2011, p. 25. 
4 
Council Implementing Decision (EU) 2022/382 of 4 March 2022 establishing the existence of a mass 
influx of displaced persons from Ukraine within the meaning of Article 5 of Directive 2001/55/EC, and having 
the effect of introducing temporary protection, OJ L 71, 4.3.2022, p. 1.  
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Communication from the Commission to the Council on the activation of the general escape clause of 
the Stability and Growth Pact, Brussels, 20.3.2020, COM(2020) 123 final. 

6 

Communication  from  the  Commission  to  the  Council  on  one  year  since  the  outbreak  of  COVID-19: 
fiscal policy response, Brussels, 3.3.2021, COM(2021) 105 final. 

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(6) 

(7) 

Following the approach in the Council opinion of 18 June 2021 on the 2021 Stability / 
Convergence Programme, the fiscal stance is currently best measured as the change in 
primary  expenditure  (net  of  discretionary  revenue  measures),  excluding  COVID-19 
crisis-related  temporary  emergency  measures  but  including  expenditure  financed  by 
non-repayable  support  (grants)  from  the  Recovery  and  Resilience  Facility  and  other 
EU funds, relative to medium-term potential growth7. Going beyond the overall fiscal 
stance, in order to assess whether national fiscal policy is prudent and its composition 
is conducive to a sustainable recovery consistent with the green and digital transitions, 
attention  is  also  paid  to  the  evolution  of  nationally-financed8  primary  current 
expenditure  (net  of  discretionary  revenue  measures  and  excluding  COVID-19  crisis-
related temporary emergency measures) and investment. 

On  2  March  2022,  the  Commission  adopted  a  Communication  providing  broad 
guidance  for  fiscal  policy  in  2023,  aiming  at  supporting  the  preparation  of  Member 
States’  Stability  and  Convergence  Programmes  and  thereby  strengthening  policy 
coordination9.  The  Commission  noted  that,  based  on  the  macroeconomic  outlook  of 
the  2022  winter  forecast,  transitioning  from  an  aggregate  supportive  fiscal  stance  in 
2020-2022  to  a  broadly  neutral  aggregate  fiscal  stance  would  appear  appropriate  in 
2023,  while  standing  ready  to  react  to  the  evolving  economic  situation.  The 
Commission announced that the fiscal recommendations for 2023 should continue to 
differentiate  across  Member  States  and  take  into  account  possible  cross-country 
spillovers. The Commission invited the Member States to reflect the guidance in their 
Stability  and  Convergence  Programmes.  The  Commission  committed  to  closely 
monitor  the  economic  developments  and  adjust  its  policy  guidance  as  needed  and  at 
the latest in its Semester spring package of late May 2022. 

(8)  With  respect  to  the  fiscal  guidance  provided  on  2  March  2022,  the  fiscal 
recommendations  for  2023  take  into  account  the  worsened  economic  outlook,  the 
heightened uncertainty and further downside risks, and the higher inflation compared 
to the winter forecast. Against these considerations, the fiscal response has to expand 
public investment for the green and digital transition and energy security, and sustain 
the purchasing power of the most vulnerable households so as to cushion the impact of 
the energy price hike and help limit inflationary pressures from second round effects 
via targeted and temporary measures; fiscal policy has to remain agile so as to adjust 
to the rapidly evolving circumstances, and be differentiated across countries depending 
on their fiscal and economic situation, including as regards the exposure to the crisis 
and the inflow of displaced persons from Ukraine. 

(9) 

On  13  July  2021,  Malta  submitted  its  national  recovery  and  resilience  plan  to  the 
Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. Pursuant 
to  Article  19  of  Regulation  (EU)  2021/241,  the  Commission  assessed  the  relevance, 
effectiveness,  efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in 
accordance  with  the  assessment  guidelines  of  Annex  V  to  that  Regulation.  On  5 

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The  estimates  on  the  fiscal  stance  and  its  components  in  this  recommendation  are  Commission 
estimates  based  on  the  assumptions  underlying  the  Commission  2022  spring  forecast.  The 
Commission’s estimates of medium-term potential growth do not include the positive impact of reforms 
that are part of the Recovery and Resilience Plan and that can boost potential growth.  

Not financed by grants from the Recovery and Resilience Facility and other EU funds. 

Communication  from  the  Commission  to  the  Council:  Fiscal  policy  guidance  for  2023,  Brussels, 
2.3.2022, COM(2022) 85 final. 

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October 2021, the Council adopted its Decision on the approval of the assessment of 
the recovery and resilience plan for Malta10. The release of instalments is conditional 
on  a  decision  by  the  Commission,  taken  in  accordance  with  Article  24(5)  of 
Regulation  (EU)  2021/241,  that  Malta  has  satisfactorily  fulfilled  the  relevant 
milestones  and  targets  set  out  in  the  Council  Implementing  Decision.  Satisfactory 
fulfilment  presupposes  that  the  achievement  of  preceding  milestones  and  targets  has 
not been reversed. 

(10)  On  15  April  2022,  Malta  submitted  its  2022  National  Reform  Programme  and,  on  2 
May 2022, its 2022 Stability Programme, in line with Article 4 of Regulation (EC) No 
1466/97.  To  take  account  of  their  interlinkages,  the  two  programmes  have  been 
assessed  together.  In  accordance  with  Article  27  of  Regulation  (EU)  2021/241,  the 
2022  National  Reform  Programme  also  reflects  Malta’s  bi-annual  reporting  on  the 
progress made in achieving its recovery and resilience plan.  

in 

the 

relevant 

progress 

(11)  The  Commission  published  the  2022  country  report  for  Malta11  on  23  May  2022.  It 
assessed  Malta’s 
country-specific 
addressing 
recommendations adopted by the Council in 2019, 2020 and 2021, and took stock of 
Malta’s implementation of the recovery and resilience plan, building on the Recovery 
and Resilience Scoreboard. Based on this analysis, the country report identified gaps 
with respect to those challenges that are not addressed or only partially addressed by 
the  recovery  and  resilience  plan,  as  well  as  new  and  emerging  challenges,  including 
those emerging  from  Russia’s invasion  of  Ukraine.  It  also  assessed Malta’s progress 
on  implementing  the  European  Pillar  of  Social  Rights  and  on  achieving  the  EU 
headline  targets  on  employment,  skills  and  poverty  reduction,  as  well  as  progress  in 
achieving the UN’s Sustainable Development Goals.  

(12)  On  23  May  2022,  the  Commission  issued  a  report  under  Article  126(3)  TFEU.  This 
report discussed the budgetary situation of Malta, as its general government deficit in 
2021 exceeded the 3% of GDP Treaty reference value. The report concluded that the 
deficit  criterion  was  not  fulfilled.  In  line  with  the  Communication  of  2  March  2022, 
the  Commission  did  not  propose  to  open  new  excessive  deficit  procedures  in  spring 
2022  and  it  will  reassess  the  relevance  of  proposing  to  open  excessive  deficit 
procedures in autumn 2022. 

the  economy  and  support 

(13)  On  20  July  2020,  the  Council  recommended  Malta  to  take  in  2020  and  2021  all 
necessary measures, in line with the general escape clause, to  effectively address the 
pandemic,  sustain 
the  ensuing  recovery.  It  also 
recommended Malta to pursue, when economic conditions allow, fiscal policies aimed 
at  achieving  prudent  medium-term  fiscal  positions  and  ensuring  debt  sustainability, 
while  enhancing  investment.  In  2021,  based  on  data  validated  by  Eurostat,  Malta’s 
general government deficit fell from 9.5% of GDP in 2020 to 8.0% in 2021. The fiscal 
policy response by Malta supported the economic recovery in 2021, while temporary 
emergency  support  measures  declined  from  6.3%  of  GDP  in  2020  to  4.7%  in  2021. 
The  measures  taken  by  Malta  in  2021  have  been  in  line  with  the  Council 
Recommendation of 20 July 2020. The discretionary budgetary measures adopted by 
the government in 2020 and 2021 were temporary or matched by offsetting measures. 

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Council Implementing Decision of 5 October 2021 on the approval of the assessment of the recovery and 
resilience plan for Malta (ST 11941/2021 INIT; ST 11941/2021 ADD 1). 

SWD(2022) 620 final. 

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Based on data validated by Eurostat, general government debt stood at 57.0% of GDP 
in 2021. 

(14)  The  macroeconomic  scenario  underpinning  the  budgetary  projections  in  the  2022 
Stability Programme is realistic. The government projects real GDP to grow by 4.4% 
in  2022  and  3.9%  in  2023.  By  comparison,  the  Commission’s  2022  spring  forecast 
projects  a  lower  real  GDP  growth  of  4.2%  in  2022  and  a  higher  growth  of  4.0%  in 
2023.  In  its  2022  Stability  Programme,  the  Government  expects  that  the  headline 
deficit will decrease to 5.4 % of GDP in 2022 and to 4.6 % in 2023. The decrease in 
2022 mainly reflects the growth in economic activity and the net effect of the partial 
unwinding  of  support  emergency  measures,  while  new  measures  were  introduced  in 
response  to  the  high  energy  prices.  According  to  the  Programme,  the  general 
government  debt-to-GDP  ratio  is  expected  to  increase  to  58.6%  in  2022  and  to  rise 
further to 59.4% in 2023. Based on policy measures known at the cut-off date of the 
forecast, the Commission 2022 spring forecast projects a government deficit for 2022 
and  2023  of  5.6%  of  GDP  and  4.6%  respectively.  This  is  in  line  with  the  deficit 
projected  in  the  2022  Stability  Programme.  The  Commission  2022  spring  forecast 
projects a similar general government debt-to-GDP ratio, of 58.5% in 2022 and 59.5% 
in 2023.  

Based  on  the  Commission  spring  2022  forecast,  the  medium-term  (10-year  average) 
potential output growth is estimated at 4.5 %. However, this estimate does not include 
the  impact  of  the  reforms  that  are  part  of  the  Recovery  and  Resilience  Plan  and  can 
boost Malta’s potential growth. 

(15) 

In 2022, the government phased out the majority of measures taken in response to the 
COVID-19 crisis, such that the temporary emergency support measures are projected 
to  decline  from  4.7%  of  GDP  in  2021  to  1.3%  in  2022.  The  government  deficit  is 
impacted  by  the  measures  adopted  to  counter  the  economic  and  social  impact  of  the 
increase in energy prices, which in the Commission spring 2022 forecast are estimated 
at 1.0% of GDP in 2022 and 0.6% of GDP in 2023.12   These measures mainly consist 
of cuts to indirect taxes on energy consumption and subsidies to energy production to 
compensate for the price increase of imported electricity and carbon emissions. These 
measures have been announced as temporary. However, in case energy prices remain 
elevated  also  in  2023,  some  of  these  measures  could  be  continued.  Some  of  these 
measures are not targeted, notably the subsidies to energy production and the cuts in 
fuel  excise  duties.  The  government  deficit  is  also  impacted  by  the  costs  to  offer 
temporary  protection  to  displaced  persons  from  Ukraine,  which  in  the  Commission 
2022 spring forecast are projected at 0.1% of GDP in 2022 and 0.1% in 2023.13   
(16)  On  18  June  2021,  the  Council  recommended  that  in  2022  Malta14  maintains  a 
supportive  fiscal  stance,  including  from  the  impulse  provided  by  the  Recovery  and 

12 

13 

14 

The figures represent the level of annual budgetary costs of those measures taken since autumn 2021, 
including current revenue and expenditure as well as – where relevant – capital expenditure measures. 
The total number of displaced persons from Ukraine to the EU is assumed to gradually reach 6 million 
by  the  end  of  2022,  and  their  geographical  distribution  is  estimated  based  on  the  size  of  the  existing 
diaspora, the relative population of the receiving Member State, and the actual distribution of displaced 
persons from Ukraine across the EU as of March 2022. For budgetary costs per person, estimates are 
based on the Euromod microsimulation model of the Commission’s Joint Research Centre, taking into 
account both cash transfers people may be eligible for as well as in-kind benefits such as education and 
healthcare. 
Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Stability 
Programme of Malta, OJ C 304, 29.07.2021, p. 83.  

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(17) 

(18) 

Resilience  Facility,  and  preserves  nationally-financed 
It  also 
recommended Malta to pursue, when economic conditions allow, a fiscal policy aimed 
at achieving prudent medium-term fiscal positions and ensuring fiscal sustainability in 
the  medium  term,  and  at  the  same  time,  to  enhance  investment  to  boost  growth 
potential. 

investment. 

In  2022,  based  on  the  Commission’s  2022  spring  forecast  and  including  the 
information  incorporated  in  Malta’s  2022  Stability  Programme,  the  fiscal  stance  is 
projected  to be supportive at -1.5% of GDP as recommended by the Council.15  Malta 
plans to provide continued support to the recovery by making use of the Recovery and 
Resilience Facility to finance additional investment as recommended by the Council. 
The  positive  contribution  to  economic  activity  of  expenditure  financed  by  Recovery 
and  Resilience  Facility  grants  and  other  EU  funds  is  projected  to  increase  by  0.2 
percentage  points  of  GDP  compared  to  2021.  Nationally-financed  investment  is 
projected to provide a contractionary contribution to the fiscal stance of 0.3 percentage 
points  in  2022.16  Therefore,  Malta  does  not  plan  to  preserve  nationally  financed 
investment.  At  the  same  time,  the  growth  in  nationally-financed  primary  current 
expenditure  (net  of  new  revenue  measures)  in  2022  is  projected  to  provide  an 
expansionary  contribution  of  1.6  percentage  points  to  the  overall  fiscal  stance.  This 
significant expansionary contribution includes the additional impact of the measures to 
address  the  economic  and  social  impact  of  the  increase  in  energy  prices  (0.5%  of 
GDP),  as  well  as  the  costs  to  offer  temporary  protection  to  displaced  persons  from 
Ukraine  (0.1%  of  GDP).  Moreover,  the  government  granted  financial  support  to 
households  (0.3%  of  GDP),  increased  contributory  and  non-contributory  pension 
benefits in excess of the cost of living adjustment (0.2% of GDP), while the  growth 
rate  of  the  intermediate  consumption  (net  of  measures)  remained  strong  (0.4%  of 
GDP).     

In 2023, the fiscal stance is projected in the Commission 2022 spring forecast at 1.1% 
of GDP on a no-policy change assumption.17 Malta is projected to continue using the 
grants  from  the  Recovery  and  Resilience  Facility  in  2023  to  finance  additional 
investment in support of the recovery. The positive contribution to economic activity 
of  expenditure  financed  by  Recovery  and  Resilience  Facility  grants  and  other  EU 
funds  is  projected  to  increase  by  0.2  percentage  points  of  GDP  compared  to  2022. 
Nationally-financed investment is projected to provide a contractionary contribution to 
the fiscal stance of 0.1 percentage points in 2023.18  At the same time, the growth in 
nationally-financed  primary  current  expenditure  (net  of  new  revenue  measures)  in 
2023 is projected to provide a contractionary contribution of 1.3 percentage points to 
the overall fiscal stance. This includes the impact from the phasing out of the measures 
addressing  the  increased  energy  prices  (0.4%  of  GDP),  of  the  temporary  financial 

15 

16 

17 

18 

A negative (positive) sign of the indicator corresponds to an excess (shortfall) of primary expenditure 
growth  compared  with  medium-term  economic  growth,  indicating  an  expansionary  (contractionary) 
fiscal policy. 
Other  nationally-financed  capital  expenditure  is  projected  to  provide  a  neutral  contribution  of  0.0 
percentage points of GDP.  

A negative (positive) sign of the indicator corresponds to an excess  (shortfall) of primary expenditure 
growth  compared  with  medium-term  economic  growth,  indicating  an  expansionary  (contractionary) 
fiscal policy. 

Other  nationally-financed  capital  expenditure  is  projected  to  provide  an  expansionary  contribution  at 
0.1 percentage points of GDP.  

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(19) 

(20) 

support  to  households  (0.3%  of  GDP)  and  of  the  contributory  and  non-contributory 
pension benefits in excess of the cost of living adjustment (0.2% of GDP).  In addition, 
intermediate  consumption  (net  of  measures)  is  expected  to  grow  less  than  nominal 
GDP (0.4% of GDP).  

In  the  2022  Stability  Programme,  the  general  government  deficit  is  expected  to 
gradually  decline  to  4.6%  of  GDP  in  2023,  2.8%  in  2024  and  to  2.4%  by  2025. 
Therefore, the general government deficit is planned to go below 3% of GDP by 2024. 
According to the Programme, the general government debt-to-GDP ratio is expected to 
decrease  by  2025,  specifically  with  a  decrease  to  58.6%  in  2024,  and  a  decline  to 
57.2% in 2025.  Based on the Commission’s analysis, debt sustainability risks appear 
medium over the medium term.  

In accordance with Article 19(3), point (b), and Annex V, criterion 2.2, to Regulation 
(EU) 2021/241, the recovery and resilience plan includes an extensive set of mutually 
reinforcing reforms and investments to be implemented by 2026. These help address 
all  or  a  significant  subset  of  the  economic  and  social  challenges  outlined  in  the 
country-specific recommendations addressed to Malta by the Council in the European 
Semester  in  2019  and  2020,  in  addition  to  any  country-specific  recommendations 
issued  up  to  the  date  of  adoption  of  a  plan.  In  particular,  the  plan  is  ambitious  and 
envisages  reforms  and  investments  to  address  the  challenges  identified  in  health, 
employment, education and skills, climate and digital transition, justice and the fight 
against corruption and money laundering. Good governance is one of the pillars of the 
government’s  long-term  economic  vision,  and  the  plan  makes  significant  efforts  to 
remedy the challenges in this area. Investing in education also features prominently in 
the  plan,  with  relevant  measures  proposed  to  address  weaknesses  in  the  education 
system.  A  major  part  of  planned  investments  focuses  on  the  green  and  digital 
transition, thereby addressing the country-specific recommendations on investments in 
these  areas.  The  challenges  identified  in  aggressive  tax  planning,  R&I  and  the 
sustainability of the pension system are partly addressed.  

(21)  The  implementation  of  the  recovery  and  resilience  plan  of  Malta  is  expected  to 
contribute  to  making  further  progress  on  the  green  and  digital  transition.  Measures 
supporting  the  climate  objectives  in  Malta  account  for  53.8%  of  the  plan’s  total 
allocation,  while  measures  supporting  digital  objectives  account  for  25.5%  of  the 
plan’s total allocation. The fully-fledged implementation of the recovery and resilience 
plan, in line with the relevant milestones and targets, will help Malta swiftly recover 
from  the  fallout  of  the  COVID-19  crisis,  while  strengthening  its  resilience.  The 
systematic  involvement  of  social  partners  and  other  relevant  stakeholders  remains 
important  for  the  successful  implementation  of  the  recovery  and  resilience  plan,  as 
well  as  other  economic  and  employment  policies  going  beyond  the  plan,  to  ensure 
broad ownership of the overall policy agenda. 

(22)  Malta has not yet submitted the Partnership Agreement and the other cohesion policy 
programming documents19.  In line with  Regulation (EU) 2021/1060  of the  European 
Parliament  and  of  the  Council  of  24  June  2021,  Malta  shall  take  into  account  the 
relevant  country-specific  recommendations  in  the  programming  of  the  2021-2027 

19 
Regulation  (EU)  2021/1060  of  the  European  Parliament  and  of  the  Council  of  24  June  2021  laying 
down  common  provisions  on  the  European  Regional  Development  Fund,  the  European  Social  Fund  Plus,  the 
Cohesion  Fund,  the  Just  Transition  Fund  and  the  European  Maritime,  Fisheries  and  Aquaculture  Fund  and 
financial rules for those and for the Asylum, Migration and Integration Fund, the Internal Security Fund and the 
Instrument for Financial Support for Border Management and Visa Policy. OJ L 231, 30.6.2021, p. 159. 

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cohesion  policy  funds.  This  is  a  prerequisite  for  improving  the  effectiveness  and 
maximising  the  added  value  of  the  financial  support  to  be  received  from  cohesion 
policy  funds,  while  promoting  the  coordination,  complementarity  and  coherence 
between  these  funds  and  other  Union  instruments  and  funds.  The  successful 
implementation  of  the  Recovery  and  Resilience  Facility  and  cohesion  policy 
programmes also depends on the removal of bottlenecks to investment to support the 
green and digital transition and balanced territorial development. 

(23)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan,  Malta  faces  a  number  of  additional  challenges  related  to  features  of  the  tax 
system  that  facilitate  aggressive  tax  planning.  Tackling  aggressive  tax  planning 
remains key to improve the efficiency and fairness of tax systems, as acknowledged in 
the  2022  euro  area  recommendation.  Spill  over  effects  of  aggressive  tax  planning 
strategies between Member States call for a coordinated action of national policies to 
complement EU legislation. Malta has taken steps to address aggressive tax planning 
practices  by  implementing  previously  agreed  international  and  European  initiatives, 
and  by  committing  in  its  recovery  and  resilience  plan,  to  carry  out  an  independent 
study  on  outbound  and  inbound  (i.e.  between  Union  residents  and  third-country 
residents)  payments  to  be  followed  up  by  implementing  legislation  in  line  with  the 
study’s findings. Still, outbound payments of interests, royalties, and dividends made 
by  Malta-based  companies  to  zero  and  low-tax  jurisdictions  (hereby  intended  as  any 
jurisdiction  with  a  statutory  corporate  income  tax  rate  below  the  lowest  statutory 
corporate  income  tax  rate  in  the  EU,  which  is  9%),  may  lead  to  those  payments 
avoiding tax altogether until withholding taxes, or equivalent defensive measures, are 
in  place  in  Malta  to  ensure  that  such  payments  are  properly  taxed.  Furthermore,  the 
treatment of resident non-domiciled companies continues to pose a risk of double non-
taxation for both, companies and individuals. 

(24) 

In  response  to  the  mandate  by  the  EU  Heads  of  State  or  Government,  set  out  in  the 
Versailles Declaration, the REPowerEU plan aims to phase out the European Union’s 
dependence on fossil fuel imports from Russia as soon as possible. For this purpose, 
the most suitable projects, investments and reforms at national, regional and EU level 
are being identified in dialogue with the Member States. These measures aim to reduce 
overall reliance on fossil fuels and shift fossil fuel imports away from Russia.  

(25)  Malta is  lagging behind  in  achieving its  2030 target  of  reducing, by 19% from  2005 
levels,  greenhouse  gas  emissions  not  covered  by  the  EU  emissions  trading  system 
(ETS), falling under the Effort-Sharing Regulation. Malta’s commitment to becoming 
climate  neutral  by  2050  will  require  sustained  investment  by  households,  firms  and 
government alike. With increased EU climate ambition focusing on more affordable, 
secure  and sustainable  energy, more  effort is  required to  further exploit  its  solar and 
wind potential, including floating offshore energy, given that renewables only account 
for 8% of the energy mix. Malta is heavily reliant on oil (48%) and natural gas (44%). 
Natural gas was used to generate 86% of Malta’s electricity in 2020. While it does not 
import any gas or oil from Russia20, the rapid increase in energy prices has started to 
affect  Malta.  Malta  intends  to  ensure  better  security  of  energy  supply  through  the 
building  of  a  second  electricity  interconnector.  Reducing  dependence  on  fossil  fuels 
would also call for an upgrade of its electricity transmission and distribution grids, and 

20 
Eurostat (2020), share of Russian imports over total imports of natural gas, crude oil and hard coal. For 
the EU27 average, the total imports are based on extra-EU27 imports. For Malta, total imports include intra-EU 
trade. Crude oil does not include refined oil products. 

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investments in electricity storage in order to supply firm, flexible and fast responding 
energy.  Targeting  energy  efficiency  of  buildings,  particularly  residential  buildings, 
including  by  rolling  out  heat  pumps  and  other  green  solutions,  would  help  reduce 
energy  demand.  Further  increase  in  ambition  for  reducing  greenhouse  gas  emissions 
and increasing renewables and energy efficiency will be needed for Malta to be in line 
with  the  ‘Fit  for  55’  objectives.  In  addition,  road  transport  emissions  are  steadily 
growing, forming the largest source of non-ETS greenhouse gas emissions. Reducing 
traffic  congestion  would  require  an  improvement  in  public  transport,  deployment  of 
intelligent  transport  systems,  and  investments  in  soft  mobility  infrastructure  (such  as 
pavements and cycling lanes) for a safe alternative to private car use. 

(26)  While  the  acceleration  of  the  transition  towards  climate  neutrality  and  away  from 
fossil  fuels  will  create  significant  restructuring  costs  in  several  sectors,  Malta  can 
make  use  of  the  Just  Transition  Mechanism  in  the  context  of  cohesion  policy  to 
alleviate the socio-economic impact of the transition. In addition, Malta can make use 
of  the  European  Social  Fund  Plus  to  improve  employment  opportunities  and 
strengthen social cohesion.  

(27) 

(28) 

In  the  light  of  the  Commission’s  assessment,  the  Council  has  examined  the  2022 
Stability Programme and its opinion is reflected in recommendation (1) below. 

In view of the close interlinkages between the economies of euro area Member States 
and  their  collective  contribution  to  the  functioning  of  the  Economic  and  Monetary 
Union,  the  Council  recommended  that  the  euro  area  Member  States  take  action, 
including 
the 
recommendation on the economic policy of the euro area. For Malta, this is reflected 
in particular in recommendations 1, 2 and 3 below. 

resilience  plans, 

recovery  and 

implement 

through 

their 

to 

HEREBY RECOMMENDS that Malta take action in 2022 and 2023 to:  

1. 

2. 

3. 

4. 

In 2023, ensure that the growth of nationally-financed current expenditure is in line 
with  an  overall  neutral  policy  stance,  taking  into  account  continued  temporary  and 
targeted support to households and firms most vulnerable to energy price hikes and 
to  people  fleeing  Ukraine.  Stand  ready  to  adjust  current  spending  to  the  evolving 
situation.  Expand  public  investment  for  the  green  and  digital  transition  and  for 
energy  security,  including  by  making  use  of  the  RRF,  RePowerEU  and  other  EU 
funds. For the period beyond 2023, pursue a fiscal policy aimed at achieving prudent 
medium-term fiscal positions. 

Proceed with the implementation of its recovery and resilience plan, in line with the 
milestones and targets included in the Council Implementing Decision of 5 October 
2021. Submit the 2021-2027 cohesion policy programming documents with a view to 
finalising  their  negotiations  with  the  Commission  and  subsequently  starting  their 
implementation.  

Take  action  to  effectively  address  features  of  the  tax  system  that  may  facilitate 
aggressive  tax  planning  by  individuals  and  multinationals,  including  by  ensuring 
sufficient  taxation  of  outbound  payments  of  interests,  royalties,  and  dividends,  and 
amending the rules for non-domiciled companies. 

Reduce overall reliance on fossil fuels by accelerating the deployment of renewables, 
promoting and enabling investments in wind and solar energy, including in floating 
offshore  energy,  further  upgrading  Malta’s  electricity  transmission  and  distribution 
grids, and creating incentives for electricity storage to supply firm, flexible and fast-
responding  energy.  Reduce  energy  demand  through  improved  energy  efficiency, 

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particularly  in  residential  buildings.  Reduce  emissions  from  road  transport  by 
addressing  traffic  congestion  through  improved  service  quality  in  public  transport, 
intelligent transport systems and investing in soft mobility infrastructure.  

Done at Brussels, 

For the Council 
The President 

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