Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Malta
Date: 2024-06-19
Institutions: European Commission, Secretariat-General
Subjects: Malta, budget policy, economic policy, economic recovery, economic reform, education policy, employment policy, renewable energy, social policy, stability pact

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   EUROPEAN COMMISSION  Brussels, 19.6.2024  COM(2024) 618 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Malta {SWD(2024) 600 final} - {SWD(2024) 618 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the economic, social, employment, structural and budgetary policies 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 Regulation (EU) 2024/1263 of the European Parliament and of the Council 
of  29  April  2024  on  the  effective  coordination  of  economic  policies  and  on  multilateral 
budgetary surveillance and repealing Council Regulation (EC) No 1466/971, and in particular 
Article 3(3) 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) 

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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 to the Member 
States  for  the  implementation  of  reforms  and  investment,  entailing  a  fiscal  impulse 
financed by the EU. In line with the European Semester priorities, it helps achieve the 
economic  and  social  recovery  and  implement  sustainable  reforms  and  investment,  in 
particular  to  promote  the  green  and  digital  transitions  and  make  the  Member  States’ 
economies  more  resilient.  It  also  helps  strengthen  public  finances  and  boost  growth 
and job creation in the medium and long term, improve territorial cohesion within the 
EU and support the continued implementation of the European Pillar of Social Rights.  
The  REPowerEU  Regulation3,  adopted  on  27  February  2023,  aims  to  phase  out  the 
EU’s  dependency  on  Russian  fossil  fuel  imports.  This  would  help  achieve  energy 
security  and  diversify  the  EU’s  energy  supply,  while  increasing  the  uptake  of 

the  Recovery  and  Resilience  Facility 

OJ L 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
(OJ  L  57,  18.2.2021,  p.  17),  ELI: 
establishing 
http://data.europa.eu/eli/reg/2021/241/oj 
Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council  of  27  February  2023 
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans 
and  amending  Regulations  (EU)  No  1303/2013,  (EU)  2021/1060  and  (EU)  2021/1755,  and  Directive 
2003/87/EC (OJ L 63, 28.2.2023, p. 1), ELI: http://data.europa.eu/eli/reg/2023/435/oj 

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(3) 

(4) 

(5) 

renewables,  energy  storage  capacities  and  energy  efficiency.  Malta  added  a  new 
REPowerEU chapter to its national recovery and resilience plan in order to finance key 
reforms and investments that will help achieve the REPowerEU objectives. 

On  16  March  2023,  the  Commission  issued  a  Communication  on  the  ‘Long-term 
competitiveness of the EU: looking beyond 2030’4, in order to inform policy decisions 
and  create  the  framework  conditions  for  increasing  growth.  The  Communication 
frames competitiveness along nine mutually reinforcing drivers. Among these drivers, 
access to private capital, research and innovation, education and skills, and the single 
market  emerge  as  paramount  policy  priorities  for  reform  and  investment  to  address 
current productivity challenges as well as to build up the long-term competitiveness of 
the EU and its Member States.  On 14 February  2024, the Commission  followed this 
Communication  with  the  Annual  Single  Market  and  Competitiveness  Report5.  The 
report  details  the  competitive  strengths  and  challenges  of  Europe's  Single  Market, 
tracking yearly developments according to the nine competitiveness drivers identified. 

On 21 November 2023, the Commission adopted the 2024 Annual Sustainable Growth 
Survey6, marking the start of the 2024 cycle of the European Semester for economic 
policy  coordination.  The  European  Council  endorsed  the  priorities  of  the  survey 
around  the  four  dimensions  of  competitive  sustainability  on  22  March  2024.  On  21 
November 2023, on the basis of Regulation (EU) No 1176/2011, the Commission also 
adopted the 2024 Alert Mechanism Report, in which it did not identify Malta as one of 
the  Member  States  that  may  be  affected  or  may  be  at  risk  of  being  affected  by 
imbalances, and for which an in-depth review would be needed. On the same date, the 
Commission  adopted  an  opinion  on  the  2024  draft  budgetary  plan  of  Malta.  The 
Commission  also  adopted  a  recommendation  for  a  Council  recommendation  on  the 
economic policy of the euro area, which the Council adopted on 12 April 2024, as well 
as the proposal  for the  2024  Joint Employment Report analysing the implementation 
of  the  Employment  Guidelines  and  the  principles  of  the  European  Pillar  of  Social 
Rights, which the Council adopted on 11 March 2024.  

On  30  April  2024,  the  EU’s  new  economic  governance  framework  came  into  force. 
The  framework  includes  the  new  Regulation  of  the  European  Parliament  and  of  the 
Council  (EU)  2024/1263  on  the  effective  coordination  of  economic  policies  and 
multilateral  budgetary  surveillance  and  repealing  Council  Regulation  (EC)  No 
1466/97. It also includes amended Regulation (EC) No 1467/97 on the implementation 
of  the  excessive  deficit  procedure  and  the  amended  Directive  2011/85/EU  on  the 
budgetary  frameworks  of  Member  States7.  The  objectives  of  the  new  framework  are 
public debt sustainability and sustainable and inclusive growth through gradual fiscal 
consolidation as well as reforms and investments. It promotes national ownership and 
has  a  greater  medium-term  focus,  combined  with  more  effective  and  coherent 
enforcement. Each Member State should submit to the Council and to the Commission 
a national medium-term fiscal-structural plan. National medium-term fiscal-structural 
plans  contain  the  fiscal,  reform  and  investment  commitments  of  a  Member  State, 

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COM(2023) 168 final. 
COM(2024) 77 final. 
COM(2023) 901 final. 
Council  Regulation  (EU)  2024/1264  of  29  April  2024  amending  Regulation  (EC)  No  1467/97  on 
speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit  procedure  (OJ  L,  2024/1264, 
30.4.2024,  ELI:  http://data.europa.eu/eli/reg/2024/1264/oj)  and  Council  Directive  (EU)  2024/1265  of 
29  April  2024  amending  Directive  2011/85/EU  on  requirements  for  budgetary  frameworks  of  the 
Member States (OJ L, 2024/1265, 30.4.2024, ELI: http://data.europa.eu/eli/dir/2024/1265/oj). 

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covering a planning horizon of 4 years or 5 years depending on the regular length of 
the national legislature. The net expenditure8 path in the national medium-term fiscal-
structural plans should comply with the requirements of Regulation (EU) 2024/1263 , 
including  the  requirements  to  put  or  keep  general  government  debt  on  a  plausibly 
downward path by the end of the adjustment period at the latest, or for it to remain at 
prudent  levels  below  60%  of  GDP,  and  to  bring  and/or  maintain  the  government 
deficit below the 3% of GDP reference value over the medium term. Where a Member 
State  commits  to  a  relevant  set  of  reforms  and  investments  in  accordance  with  the 
criteria  set  out  in  Regulation  (EU)  No  2024/1263,  the  adjustment  period  may  be 
extended  by  3  years  at  most.  For  the  purpose  of  supporting  the  preparation  of  those 
plans,  on  [21  June]  2024,  the  Commission  is  set  to  provide  Member  States  with 
guidance on the content of the plans and the subsequent annual progress  reports that 
they  will  need  to  submit  and,  in  accordance  with  Article  5  of  Regulation  (EU)  No 
2024/1263,  will  transmit  to  them  technical  guidance  on  the  fiscal  adjustments 
(reference  trajectories  and  technical  information,  where  applicable).  Member  States 
should submit their medium-term fiscal-structural plans by 20 September 2024, unless 
the Member State and the Commission  agree to extend the deadline by  a reasonable 
period  of  time.  Member  States  should  ensure  the  involvement  of  their  national 
parliaments, and the consultation of independent  fiscal institutions, of social partners 
and other national stakeholders, as appropriate. 

In 2024, the European Semester for economic policy coordination continues to evolve 
in  line  with  the  implementation  of  the  Recovery  and  Resilience  Facility.  The  full 
implementation  of  the  recovery  and  resilience  plans  remains  essential  for  delivering 
the policy priorities under the European Semester, as the plans help effectively address 
all  or  a  significant  subset  of  challenges  identified  in  the  relevant  country-specific 
recommendations  issued  in  recent  years.  The  2019,  2020,  2022  and  2023  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.  

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 
October 2021, the Council adopted its Decision on the approval of the assessment of 
the  recovery  and  resilience  plan  for  Malta9,  which  was  amended  on  14  July  2023 
following Article 18(2) of Regulation (EU) 2021/241 to update the maximum financial 
contribution for non-repayable financial support, as well as to include the REPowerEU 

(6) 

(7) 

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9 

Net expenditure as defined in Article 2 of Council Regulation (EU) 2024/1263 of 29 April 2024 (OJ L 
2024/1263,  30.4.2024,  ELI:  http://data.europa.eu/eli/reg/2024/1263/oj).  Net  expenditure  means 
government  expenditure  net  of  (i)  interest  expenditure,  (ii)  discretionary  revenue  measures,  (iii) 
expenditure  on  programmes  of  the  Union  fully  matched  by  Union  funds  revenue,  (iv)  national 
expenditure  on  co-financing  of  programmes  funded  by  the  Union,  (v)  cyclical  elements  of 
unemployment benefit expenditure, and (vi) one-offs and other temporary measures. 
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).  

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(8) 

(9) 

chapter10. 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. 

On 15 April 2024, Malta submitted its 2024 National Reform Programme in line with 
Article  4(1)  of  Regulation  (EC)  No  1466/97.  In  accordance  with  Article  27  of 
Regulation  (EU)  2021/241,  the  2024  National  Reform  Programme  also  reflects 
Malta’s  biannual  reporting  on  the  progress  made  in  achieving  its  recovery  and 
resilience plan.  
The  Commission  published  the  2024  country  report  for  Malta11  on  19  June  2024.  It 
country-specific 
addressing 
assessed  Malta’s 
recommendations  adopted by the Council  between 2019  and  2023 and  took stock of 
Malta’s implementation of the recovery and resilience plan. 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. 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.  

progress 

relevant 

the 

in 

(10)  Based  on  data  validated  by  Eurostat12,  Malta’s  general  government  deficit  decreased 
from a deficit of 5.5% of GDP in 2022 to a deficit of 4.9% in 2023, while the general 
government debt fell from 51.6% of GDP at the end of 2022 to 50.4% at the end of 
2023. As announced in the fiscal policy guidance for 202413, the Commission is taking 
the first step for the opening of deficit-based excessive deficit procedures on the basis 
of the outturn data for 2023, in line with existing legal provisions. On 19 June 2024, 
the  Commission  adopted  a  report  under  Article  126(3)  of  the  TFEU14.  That  report 
assessed  the  budgetary  situation  of  Malta,  as  its  general  government  deficit  in  2023 
exceeded the reference value of 3% of GDP. The report concluded that in the light of 
this  assessment,  and  after  considering  the  opinion  of  the  Economic  and  Financial 
Committee  as  established  under  article  126(4)  TFEU,  the  Commission  intends  to 
propose  in  July  to  open  an  excessive  deficit  procedure,  by  recommending  to  the 
Council  to  adopt  a  Decision  under  Article  126(6)  establishing  the  existence  of  an 
excessive deficit, for Malta. 

(11)  On 12 July 2022, the Council recommended15 that Malta take action to ensure in 2023 
that  the  growth  of  nationally  financed  primary  current  expenditure  is  in  line  with  an 

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14 

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Council  Implementing  Decision  of  14  July  2023  amending  the  Implementing  Decision  of  5  October 
2021 on the approval of the assessment of the recovery and resilience plan for Malta (ST 11202/2023 
INIT, ST 11202/2023 ADD 1). 
SWD(2024) 618 final. 
Eurostat-Euro Indicators, 22.4.2024. 
COM(2023) 141 final. 
Report  from  the  Commission,  prepared  in  accordance  with  Article  126(3)  of  the  Treaty  on  the 
Functioning of the European Union, 19.6.2024, COM(2024) 598 final. 
Council Recommendation of 12 July 2022 on the National Reform Programme of Malta and delivering 
a Council opinion on the 2022 Stability Programme of Malta OJ C 334, 1.9.2022, p. 146. 

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overall neutral  policy stance16, taking into  account  continued temporary  and targeted 
support to households and firms most vulnerable to energy price hikes and to people 
fleeing Ukraine. Malta was recommended to stand ready to adjust current spending to 
the evolving situation. Malta was also recommended to expand public investment for 
the  green  and  digital  transitions,  and  for  energy  security  taking  into  account  the 
REPowerEU  initiative,  including  by  making  use  of  the  Recovery  and  Resilience 
Facility and other Union funds. In 2023, according to the Commission estimates, the 
fiscal stance17 was contractionary, by 0.6% of GDP, in a context of high inflation. The 
growth  in  nationally  financed  primary  current  expenditure  (net  of  discretionary 
revenue measures) in 2023 provided a contractionary contribution to the fiscal stance 
of 1.6% of GDP. This includes the increased cost of the targeted  emergency support 
measures to households and firms most vulnerable to energy price hikes by less than 
0.1% of GDP. The growth of nationally financed primary current expenditure in 2023 
was in line with the Council recommendation. Expenditure financed by Recovery and 
Resilience  Facility  grants  and  other  EU  funds  amounted  to  0.9%  of  GDP  in  2023. 
Nationally  financed  investment  amounted  to  2.6%  of  GDP  in  2023,  representing  an 
increase  of  0.1  percentage  points  as  compared  to  2022.  Malta  financed  additional 
investment  through  the  Recovery  and  Resilience  Facility  and  other  EU  funds.  Malta 
financed  public  investment  for  the  green  and  digital  transitions,  and  for  energy 
security, such as the renovation of private and public buildings including hospitals and 
schools,  the  electrification  of  the  transport  sector  and  projects  related  to  the 
digitalisation  of  the  public  administration  and  the  private  sector,  which  are  partly 
funded by the Recovery and Resilience Facility and other EU funds. 

(12)  The  Commission  Spring  2024  Forecast  projects  real  GDP  to  grow  by  4.6%  in  2024 
and 4.3% in 2025, and HICP inflation to stand at 2.8% in 2024 and 2.3% in 2025. 

(13)  The Commission Spring 2024 Forecast projects a government deficit of 4.3% of GDP 
in 2024, while the general government debt-to-GDP ratio is set to increase to 52.0% 
by the end of 2024. The decrease of the deficit in 2024 mainly reflects the contained 
growth of intermediate consumption and the wage bill as well as the phasing out of the 
costs  related  to  the  national  airline's  restructuring.  Based  on  the  Commission’s 
estimates, the fiscal stance is projected to be contractionary, by 1.3% of GDP, in 2024. 

(14)  Expenditure amounting to 0.4% of GDP is expected to be financed by non-repayable 
support  (“grants”)  from  the  Recovery  and  Resilience  Facility  in  2024,  compared  to 
0.2%  of  GDP  in  2023,  according  to  the  Commission  Spring  2024  Forecast. 
Expenditure  financed  by  Recovery  and  Resilience  Facility  grants  will  enable  high-
quality investment and productivity-enhancing reforms without a direct impact on the 
general government balance and debt of Malta.   

16 

17 

Based on the Commission Spring 2024 Forecast, the medium-term potential output growth of Malta in 
2023, which is used to measure the fiscal stance, is estimated at 11.2% in nominal terms, based on the 
10-year average real potential growth rate and the 2023 GDP deflator. 
The fiscal stance is defined as a measure of the annual change in the underlying budgetary position of 
the  general  government.  It  aims  to  assess  the  economic  impulse  stemming  from  fiscal  policies,  both 
those  that  are  nationally  financed  and  those  that  are  financed  by  the  EU  budget.  The  fiscal  stance  is 
measured as the difference between (i) the medium-term potential growth and (ii) the change in primary 
expenditure  net  of  discretionary  revenue  measures  (and  excluding  temporary  emergency  measures 
related to the COVID-19 crisis) and including expenditure financed by non-repayable support (grants) 
from the Recovery and Resilience Facility and other Union funds. 

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(15)  On  14  July  2023,  the  Council  recommended18  that  Malta  ensure  a  prudent  fiscal 
policy,  in  particular  by  limiting  the  nominal  increase  in  net  nationally  financed 
primary  expenditure19  in  2024  to  not  more  than  5.9%.  When  executing  their  2023 
budgets  and  preparing  their  Draft  Budgetary  Plans  for  2024,  Member  States  were 
invited  to  take  into  account  that  the  Commission  would  propose  to  the  Council  the 
opening  of  deficit-based  excessive  deficit  procedures  based  on  the  outturn  data  for 
2023.  According  to  the  Commission  Spring  2024  Forecast,  Malta’s  net  nationally 
financed primary expenditure is projected to increase by 5.5% in 2024, which is below 
the  recommended  maximum  growth  rate.  However,  net  expenditure  in  2023  was 
higher than expected at the time of the recommendation (by 0.8% of GDP). Therefore, 
as the  recommendation for 2024 was  formulated  as a growth  rate, the  assessment  of 
compliance  also  needs  to  take  into  account  the  base  effect  from  2023.  Had  net 
expenditure in 2023 been the same as expected at the time of the recommendation, the 
resulting  growth  rate  of  net  expenditure  in  2024  would  have  been  above  the 
recommended  growth  rate  by  0.7%  of  GDP.  Therefore,  net  nationally  financed 
primary  expenditure  is  assessed  as  at  risk  of  not  being  fully  in  line  with  the 
recommendation. 

(16)  Moreover,  the  Council  recommended  that  Malta  take  action  to  wind  down  the 
emergency energy support measures in  force, using the related savings to  reduce the 
government  deficit,  as  soon  as  possible  in  2023  and  2024.  The  Council  further 
specified  that,  should  renewed  energy  price  increases  necessitate  new  or  continued 
support  measures,  Malta  should  ensure  that  these  were  targeted  at  protecting 
vulnerable  households  and  firms,  fiscally  affordable,  and  preserve  incentives  for 
energy savings. According to the Commission Spring 2024 Forecast, the net budgetary 
cost20 of emergency energy support measures is estimated at 1.7% of GDP in 2023 and 
projected  at  2.0%  in  2024,  and  1.0%  in  2025.  In  particular,  cuts  to  indirect  taxes  on 
energy  consumption  and  subsidies  to  energy  production  to  compensate  for  the  price 
increase of imported electricity and carbon emissions are assumed to remain in force 
in  2024  and  202521.  While  acknowledging  the  challenges  faced  by  Malta  due  to  the 
high dependency on energy imports and the exposure to external shocks amplified by 
the  small  size  of  the  economy,   the  emergency  energy  support  measures  are  not 
projected to  be wound down as soon as  possible in  2023 and 2024. This risks  being 
not  in  line  with  what  was  recommended  by  the  Council.  Consequently,  there  are  no 
related  savings  to  be  used  to  reduce  the  government  deficit  as  recommended  by  the 
Council.  The  budgetary  cost  of  emergency  energy  support  measures  targeted  at 
protecting  vulnerable  households  and  firms  is  estimated  at  0.2%  of  GDP  in  2024 
(0.1%  in  2023),  of  which  0.2%  of  GDP  preserve  the  price  signal  to  reduce  energy 
demand and increase energy efficiency (0.1% in 2023). 

(17) 

In  addition,  the  Council  also  recommended  that  Malta  preserve  nationally  financed 
public  investment  and  ensure  the  effective  absorption  of  Recovery  and  Resilience 

18 

19 

20 

21 

Council  Recommendation  of  14  July  2023  on  the  2023  National  Reform  Programme  of  Malta  and 
delivering a Council opinion on the 2023 Stability Programme of Malta, OJ C 312, 1.9.2023, p. 167. 
Net primary expenditure is defined as nationally financed expenditure net of (i) discretionary revenue 
measures, (ii) interest expenditure, (iii) cyclical unemployment expenditure, and (iv) and one-offs and 
other temporary measures. 
The figure represents the level of the annual budgetary cost of  those measures, including revenue and 
expenditure and, where applicable, net of the revenue from taxes on windfall profits of energy suppliers. 
Measures that, according to Malta, remain in place until the end of 2024 are, in principle, assumed in 
the Commission Spring 2024 Forecast as having a budgetary impact also in 2025.  

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Facility  grants  and  other  EU  funds,  in  particular  to  foster  the  green  and  digital 
transitions.  According  to  the  Commission  Spring  2024  Forecast,  nationally  financed 
public investment is projected to increase to 2.8% of GDP in 2024 from 2.6% of GDP 
in  2023.  This  is  in  line with  what  was  recommended  by  the  Council.  In  turn,  public 
expenditure  financed  from  revenues  from  EU  funds,  including  Recovery  and 
Resilience Facility grants, is expected to remain stable at 0.9% of GDP in 2024.  

(18)  Based on policy measures known at the cut-off date of the forecast and on a no-policy-
change  assumption,  the  Commission  Spring  2024  Forecast  projects  a  government 
deficit of 3.9% of GDP in 2025. The decrease of the deficit in 2025 mainly reflects the 
expected decrease in the cost of the energy support measures. The general government 
debt-to-GDP ratio is set to increase to 52.6% by the end of 2025.  

(19) 

In accordance with Article 19(3), point (b), and Annex V, criterion 2.2 of 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 are expected 
to  help  effectively  address  all  or  a  significant  subset  of  challenges  identified  in  the 
relevant  country-specific  recommendations.  Within  this  tight  timeframe,  proceeding 
swiftly  with  the  effective  implementation  of  the  plan  including  the  REPowerEU 
chapter is essential to boost Malta’s long-term competitiveness through the green and 
digital transition, while ensuring social fairness. To deliver on the commitments of the 
plan  by  August  2026,  it  is  essential  for  Malta  to  continue  the  implementation  of 
reforms and investments. The systematic involvement of local and regional authorities, 
social  partners,  civil  society  and  other  relevant  stakeholders  remains  essential  to 
ensure  broad  ownership  for  the  successful  implementation  of  the  recovery  and 
resilience plan. 

(20)  As  part  of  the  mid-term  review  of  the  cohesion  policy  funds,  in  accordance  with 
Article 18 of Regulation (EU) 2021/1060, Malta is required to review each programme 
by March 2025, taking into account,  among other things, the challenges identified in 
the 2024 country-specific recommendations, as well as its national energy and climate 
plan.  This  review  forms  the  basis  for  the  definitive  allocation  of  the  EU  funding 
included  in  each  programme.  While  Malta  has  made  progress  in  implementing 
cohesion  policy  and  the  European  Pillar  of  Social  Rights,  some  challenges  remain. 
Accelerating  the  implementation  of  cohesion  policy  programmes  is  crucial.  The 
priorities agreed in the programmes remain relevant. Investments in energy efficiency 
and renewable energy are key to achieving energy savings, strengthening sustainability 
in  the  energy  sector  and  reducing  its  dependence  on  international  energy  sources. 
Continuing  investments  in  sustainable  multimodal  solutions  and  active  mobility  is 
important to reduce traffic congestion and curb emissions from road transport. Efforts 
are  still  needed  to  ensure  the  sustainability  of  water  and  wastewater  management. 
Furthermore,  circular  economy  practices, 
the  recycling 
potential, are needed to reduce landfilling and meet recycling targets. In addition, adult 
learning needs to  be  promoted to  increase the skill  levels of the population  and  ease 
labour shortages. The social and labour market integration of vulnerable groups should 
continue  to  be  promoted,  with  the  focus  on  non-EU  nationals  and  people  with 
disabilities, as well as on gender equality. Malta could also make use of the Strategic 
Technologies for Europe Platform (STEP) initiative to support the strategic autonomy 
of the EU and the competitiveness and sustainability of industry. 

including  maximising 

(21)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan and other EU funds, Malta faces several additional challenges related to features 

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of  the  tax  system  that  facilitate  aggressive  tax  planning,  education  and  skills, 
renewable energy and transport.  

(22)  Tackling aggressive tax planning remains key to improving the efficiency and fairness 
of  tax  systems.  In  view  of  the  spillover  effects  of  aggressive  tax  planning  strategies 
between  Member  States,  coordinated  action  to  complement  EU  legislation  through 
national policies by all Member States is paramount. Malta has taken steps to address 
aggressive tax planning practices by implementing previously agreed international and 
European  initiatives,  and  further  committed  to  tackling  the  issue  in  its  recovery  and 
resilience plan. As part of the plan’s reform agenda, the Maltese government adopted a 
new  law  introducing  transfer  pricing  rules,  which  became  applicable  as  of  January 
2024.  It  aims  to  prevent  opportunities  for  corporate  profit  shifting.  Malta  also 
commissioned an independent study on outbound and inbound payments (i.e. between 
EU residents and non-EU residents), to be followed up by legislation. However, until 
Malta applies withholding taxes on interest, dividends and royalty payments made by 
Malta-based companies to  zero and low-tax jurisdictions (here intended to  mean any 
jurisdiction with a statutory corporate income tax rate below 9%, the lowest statutory 
corporate income tax rate in the EU), or equivalent defensive measures – to ensure that 
firms cannot shift their profits untaxed to non-EU countries – the risk of double non-
taxation  of  these  profits  remains  high.  Furthermore,  the  treatment  of  resident  non-
domiciled  companies  continues  to  pose  a  risk  of  double  non-taxation  for  both 
companies  and  individuals.  The  issue  will  only  be  partly  addressed  by  compliance 
with the EU Minimum Tax Directive, which will only apply to large corporations once 
implemented by Malta. 

(23)  Shortages  of  skilled  labour  as  well  as  skills  mismatches  are  a  bottleneck  to  future 
growth,  competitiveness  and  the  twin  transition.  In  Q1-2024,  labour  shortages  were 
reported as a factor limiting production in Malta, with shortages reported around twice 
as  often  as  the  EU  average  in  services  and  industry.  More  than  two  out  of  three 
companies  report  hard-to-fill  vacancies  for  jobs  requiring  ICT  specialist  skills.  The 
latest results from the OECD Programme for International Student Assessment (PISA) 
show that Malta has one of the highest shares of low achievement in the EU, posing a 
serious  challenge  for  later  skills  development.  Around  one  in  three  15-year-old 
students  along  the  entire  socio-economic  distribution  in  Malta  underperforms  in 
mathematics,  reading  and  science.  Teacher  shortages  have  been  addressed  partly  by 
substitute  teachers,  with  a  level  of  qualification  different  or  lower  than  required  for 
fully qualified teachers. Early school leaving is decreasing but remains above the EU 
average,  increasing  the  already  large  pool  of  low-skilled  adults.  Although  the 
participation  of  adults  in  education  and  training  overall  (in  the  last  12  months)  is  in 
line with the EU average, participation of the low-skilled in learning is low. Similarly, 
although 63% of adults had at least basic digital skills in 2023, the differences in skill 
levels  are  significant.  The  share  of  learners  enrolled  in  upper  secondary  vocational 
education and training (VET) remains low. Strengthening the quality of education by 
focusing on basic skills, addressing teacher shortages and prioritising the professional 
development  of  teachers  to  better  address  the  learning  needs  of  students,  while 
boosting  the  labour  market  relevance  of  Malta’s  education  and  training  systems  in 
close  cooperation  with  the  social  partners,  are  key  to  reducing  the  low  educational 
outcomes and the severe shortage and mismatch of skills.  

(24)  Malta’s  continuing  challenge  is  to  achieve  green  economic  growth,  balancing 
development with environmental sustainability. The country’s green transition is held 
back by the dominant role of fossil fuels in its energy system. Malta’s share of energy 

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derived from renewable sources in gross final energy consumption was 13.4% in 2022, 
one of the lowest shares in the EU. This is well below Malta’s 2030 indicative target 
of  28%  and  the  EU  average  of  41%  in  2022.  Almost  all  installed  renewable  energy 
capacity  is  onshore  solar,  which  is  increasing  slowly  (by  4%  in  2023).  The  ongoing 
RRF  reform,  which  mandates  solar  energy  installations  on  certain  new  buildings  as 
well  as  shortens  permitting  timelines  of  renewable  energy  projects,  should  increase 
their  roll-out.  Malta  has  sizeable  offshore  solar  and  wind  energy  potential  in  its 
exclusive  economic  zone.  However,  this  potential  remains  unused.  Malta’s  ability  to 
deploy  renewables,  while  improving  its  security  of  energy  supply,  also  depends  on 
good  progress  in  constructing  the  second  electricity  interconnector  with  Italy  and 
continuing to strengthen its domestic electricity grid. 

(25)  Reducing  traffic  congestion  as  well  as  high  emissions  from  road  transport  is  a  key 
priority to address the challenge of sustainability. Greenhouse gas emissions from road 
transport have increased by 23.3% compared to 2005 levels.  Passenger cars make up 
86% of passenger transport in Malta, and this is on the increase. Congestion remains 
the main transport challenge in Malta, also affecting the islands’ competitiveness, and 
substantial  scale-up  in  efforts  is  needed.  To  promote  alternative  sea-based  collective 
transport,  Malta  is  implementing  an  inner-harbour  ferry  network  by  upgrading  ferry 
landing  spaces,  with  the  support  of  the  European  Regional  Development  Fund. 
Furthermore,  Malta  is  planning  to  boost  sustainable  multimodal  urban  mobility  by 
developing 17.5 km of clean urban transport infrastructure through cohesion funding, 
including pedestrian paths and cycle lanes. 

(26) 

In view of the close interlinkages between the economies of euro area Member States 
and of their collective contribution to the functioning of the Economic and Monetary 
Union,  in  2024  the  Council  recommended  that  the  euro  area  Member  States  take 
action,  including  through  their  recovery  and  resilience  plans,  to  implement  the 
the  euro  area.  For  Malta, 
recommendation  on 
recommendations  (1),  (2),  (3)  and  (4)  help  implement  the  first,  second,  third  and 
fourth euro area recommendations. 

the  economic  policy  of 

HEREBY RECOMMENDS that Malta take action in 2024 and 2025 to:  

1. 

2. 

22 

Submit  the  medium-term  fiscal-structural  plan  in  a  timely  manner.  In  line  with  the 
requirements  of  the  reformed  Stability  and  Growth  Pact,  limit  the  growth  in  net 
expenditure22  in  2025  to  a  rate  consistent  with  reducing  the  general  government 
deficit  towards  the  3%  of  GDP  Treaty  reference  value  and  keeping  the  general 
government  debt  at  a  prudent  level  over  the  medium  term.  Wind  down  the 
emergency energy support measures by the 2024/2025 winter. To address remaining 
aggressive tax planning risks, introduce a withholding tax on outbound payments or 
equivalent defensive measures, and amend rules on non-domiciled companies. 

Continue with the swift and effective implementation of the recovery and resilience 
plan,  including  the  REPowerEU  chapter,  ensuring  completion  of  reforms  and 
investments  by  August  2026.  Accelerate  the  implementation  of  cohesion  policy 
programmes.  In  the  context  of  their  mid-term  review,  continue  focusing  on  the 

According  to  Article  2(2)  of  Regulation  (EU)  2024/1263,  ‘net  expenditure’  means  government 
expenditure net of interest expenditure, discretionary revenue measures, expenditure on programmes of 
the  Union  fully  matched  by  revenue  from  Union  funds,  national  expenditure  on  co-financing  of 
programmes funded by the Union, cyclical elements of unemployment benefit expenditure, and one-offs 
and other temporary measures. 

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3. 

4. 

agreed  priorities,  while  considering  the  opportunities  provided  by  the  Strategic 
Technologies for Europe Platform initiative to improve competitiveness. 

Strengthen  the  quality  and  labour  market  relevance  of  education  and  training  to 
address  low  educational  outcomes  as  well  as  the  severe  shortage  and  mismatch  of 
skills,  in  particular  by  fostering  basic  skills  of  students  and  the  professional 
development of teachers. 

Accelerate the deployment of renewable energy through large-scale projects as well 
as  small-scale  investments  in  direct  energy  production  and  consumption.  Address 
traffic congestion by improved quality and efficiency of public transport and step up 
investments in ‘soft mobility’ infrastructure.  

Done at Brussels, 

For the Council 
The President 

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