Recommendation for a COUNCIL RECOMMENDATION with a view to bringing an end to the situation of an excessive deficit in Malta
Date: 2024-11-26
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Malta, budget deficit, budgetary control, economic policy, economic reform, gross domestic product, public debt, public finance, stability pact

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   EUROPEAN COMMISSION  Brussels, 26.11.2024  COM(2024) 955 final  Recommendation for a COUNCIL RECOMMENDATION with a view to bringing an end to the situation of an excessive deficit in Malta  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

with a view to bringing an end to the situation of an excessive deficit in Malta 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU),  and  in 
particular Article 126(7) thereof, 

Having regard to the recommendation from the Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

According  to  Article  126  of  the  TFEU,  Member  States  shall  avoid  excessive 
government deficits. 

The Stability and Growth Pact is based on the objective of sound government finances 
as  a  means  of  strengthening  the  conditions  for  price  stability  and  for  strong, 
sustainable and inclusive growth underpinned by financial stability, thereby supporting 
the achievement of the Union’s objectives for sustainable growth and employment. 

On  30  April  2024,  the  EU’s  reformed  economic  governance  framework  entered  into 
force.  The  framework  includes  Regulation  (EU)  2024/12631  of  29 April 2024  on  the 
effective  coordination  of  economic  policies  and  multilateral  budgetary  surveillance 
and  repealing  Council  Regulation  (EC)  No  1466/97.  It  also  includes  Council 
Regulation  (EU)  2024/1264  amending  Council  Regulation  (EC)  No  1467/972  on 
speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit  procedure,  as 
well  as  Council  Directive  (EU)  2024/12653  of  29  April  2024  amending  Directive 
2011/85/EU on requirements for budgetary frameworks of the Member States. 

On 26 July 2024, the Council decided, in accordance with Article 126(6) TFEU, that 
an excessive deficit existed in Malta due to non-compliance with the deficit criterion4. 

Article 126(7) TFEU and Article 3(4) of Council Regulation (EC) No 1467/97 require 
the Council to adopt a recommendation addressed to the Member State concerned with 
a view to bringing the situation of excessive deficit to an end within a given period. In 
line  with  Article  3(4)  of  Council  Regulation  (EC)  1467/97,  that  recommendation  is 
also to establish a maximum deadline of six months for effective action to be taken by 
the Member State concerned to correct the excessive deficit, which can be reduced to 
three months  when warranted by the seriousness  of the situation. Furthermore, in  its 
recommendation,  the  Council  is  to  recommend  that  the  Member  State  implements  a 
corrective net expenditure5 path, which ensures that the general government deficit is 

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OJ L, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj.  
OJ L 209, 2.8.1997, ELI: http://data.europa.eu/eli/reg/1997/1467/2024-04-30.  
OJ L, 30.4.2024, ELI: http://data.europa.eu/eli/dir/2024/1265/oj.  
OJ L, 1.8.2024, ELI: https://eur-lex.europa.eu/eli/dec/2024/2128/oj. 
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 

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brought and maintained below the 3% of GDP reference value within the deadline set 
in  that  recommendation.  Where  the  excessive  deficit  procedure  was  opened  on  the 
basis of the deficit criterion, the corrective net expenditure path is to be consistent with 
a minimum annual structural adjustment of at least 0.5% GDP as a benchmark for the 
years when the general government deficit is expected to exceed the reference value. 
The Commission  may, during a transition  period in  2025, 2026 and 2027, adjust the 
benchmark  to  take  into  account  the  increase  in  interest  payments  when  setting  the 
proposed  corrective  path  for  those  years,  taking  into  account  recital  23  of  Council 
Regulation (EU) 2024/1264.  

the  Commission 

In  view  of  the  submission  of  the  national  medium-term  fiscal-structural  plan  in 
accordance  with  Articles  11  and  36(1),  point  (a)  of  Regulation  (EU)  2024/1263,  the 
Council Decision of 26 July 2024 took into account that the next step in the excessive 
deficit  procedure,  namely 
for  a  Council 
recommendation under Article 126(7) TFEU on the correction of the excessive deficit, 
would take place together with the Commission Opinion on the Draft Budgetary Plans 
of  euro  area  Member  States  under  Article  7  of  Regulation  (EU)  No  473/2013.  This 
approach allows to ensure consistency between the budgetary requirements under the 
excessive deficit procedure and the adjustment path set out in the medium-term fiscal-
structural  plans.  This  timeline  is  exceptional  and  linked  to  the  transition  to  the  new 
framework, therefore not setting a precedent.  

recommendation 

Real  GDP  in  Malta  expanded  by  7.5%  in  2023.  According  to  the  European 
Commission  Autumn  2024  Forecast,  the  economy  is  expected  to  grow  by  5.0%  in 
2024, on the back of  strong domestic demand and export performance.  In 2025, real 
GDP  is  expected  to  increase  by  4.3%,  as  the  economy  maintains  its  growth 
momentum.  The  unemployment  rate  is  expected  to  reach  3.2%  in  2024  and  3.1%  in 
2025. Inflation is set to decrease from 5.6% in 2023 to 2.5% in 2024 and reach 2.2% 
in 2025.  
According  to  the  data  validated  by  Eurostat  on  22  October  20246,  the  general 
government deficit in Malta stood at 4.5% of GDP in 2023. The budget outcome was 
also affected by a sizable upward impact on GDP of the benchmark revision compared 
to the spring notification. The European Commission Autumn 2024 Forecast projects a 
general government deficit of 4.0% of GDP in 2024 and 3.5% of GDP in 2025, thus 
above the reference value in both years. The structural deficit is projected at 3.8% of 
GDP in 2024 and is expected to decrease by 0.7 percentage points in 2025.  

General  government  debt  stood  at  47.4%  of  GDP  at  end-2023.  According  to  the 
European Commission Autumn 2024 Forecast, it is projected to increase to 49.8% of 
GDP at end-2024 and 50.4% of GDP at end-2025, thus remaining below the 60% of 
GDP reference value. 

(6) 

(7) 

(8) 

(9) 

(10)  On  20  September  2024,  Malta  submitted  its  first  national  medium-term  fiscal-
structural plan, in accordance with Articles 11 and 36(1), point (a) of Regulation (EU) 
2024/1263.  The  plan  covers  the  period  2025-2028  and  presents  a  fiscal  adjustment 
spread over four years. The Council Recommendation endorsing the national medium-
term  fiscal-structural  plan  of  Malta  for  the  years  2025  to  2028  recommends  a  net 

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programmes funded by the Union, cyclical elements of unemployment benefit expenditure, and one-offs 
and other temporary measures. 
Eurostat 
https://ec.europa.eu/eurostat/en/web/products-euro-indicators/w/2-22102024-AP 

Indicators 

published 

October 

2024. 

Euro 

See: 

22 

on 

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expenditure path that factors in all the necessary requirements of a corrective path and 
should  be  recommended  as  the  corrective  net  expenditure  path  under  the  excessive 
deficit  procedure.  The  corrective    net  expenditure  path  is  thus  consistent  with  a 
minimum  annual  structural  adjustment of at  least 0.5% GDP as a benchmark for the 
years when the general government deficit is expected to exceed the reference value, 
in line with Council Regulation (EC) 1467/97.   

(11)  Based  on  the  net  expenditure  path,  asthe  sole  operational  reference  for  monitoring 
compliance,  which  is  set  out  in  the  Council  Recommendation  endorsing  the  plan  of 
Malta and in this recommendation, and based on the European Commission medium-
term  government  debt  projection  framework  and  the  European  Commission  Autumn 
2024  Forecast,  the  general  government  deficit  is  expected  to  decrease  from  4.0%  of 
GDP  in  2024  to  2.9%  by  2027.  Likewise,  based  on  the  assumptions  of  the  plan,  the 
deficit would go below the 3% deficit reference value in 2027.  

(12)  Based  on  the  corrective  net  expenditure  path  to  be  recommended,  the  European 
Commission medium-term government debt projection framework, and the European 
Commission Autumn 2024 Forecast, the general government debt would remain stable 
around 50% of GDP until 2027.  

(13)  Budgetary consolidation measures should secure a lasting correction of the  excessive 
deficit,  while  being  geared  towards  enhancing  the  quality  and  composition  of  the 
public  finances,  preserving  investment  and  reinforcing  the  growth  potential  of  the 
economy. Reforms of a fiscal and broader economic nature should improve the growth 
and  resilience  potential  of  the  economy  in  a  sustainable  manner,  and  support  fiscal 
sustainability. 

HEREBY RECOMMENDS: 

1. 

2. 

3. 

Malta should ensure that the nominal growth rate of net expenditure does not exceed 
the maxima established in Annex I.  

Malta should thus put an end to the excessive deficit situation by 2027. 

The  Council  establishes  the  deadline  of  30  April  2025  for  Malta  to  take  effective 
action  and  present  the  necessary  measures  together  with  its  2025  annual  progress 
report,  to  be  submitted  to  the  Commission  in  accordance  with  Article  21  of 
Regulation (EU) 2024/1263. Thereafter, Malta should report on progress made in the 
implementation of this recommendation at least every six months until the excessive 
deficit has been corrected. 

This Recommendation is addressed to the Republic of Malta. 

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ANNEX I 
Maximum growth rates of net expenditure 
(annual and cumulative growth rates, in nominal terms) 
Malta 

Growth rates 
(%) 

Years 

Annual 

2025 

6.0 

2026 

5.8 

2027 

5.8 

Cumulative (*) 

13.8 

20.4 

27.4 

(*) The cumulative growth rates are calculated by reference to the base year of [2023]. 

Done at Brussels, 

For the Council 
The President 

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