Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Malta
Date: 2026-06-03
Institutions: European Commission, Reform and Investment Task Force
Subjects: Malta, budget policy, economic policy, economic recovery, economic reform, employment policy, energy policy, social policy, stability pact, waste management

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   EUROPEAN COMMISSION  Brussels, 3.6.2026  COM(2026) 218 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Malta {SWD(2026) 218 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 
Article 121(2) and Article 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  1466/97  (1),  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) 

Regulation  (EU)  2024/1263  specifies  the  objectives  of  the  economic  governance 
framework,  which  aims  at  promoting  sound  and  sustainable  public  finances, 
sustainable  and  inclusive  growth  and  resilience  through  reforms  and  investments,  as 
well  as  preventing  excessive  government  deficits.  The  Regulation  stipulates  that  the 
Council  and  the  Commission  conduct  multilateral  surveillance  in  the  context  of  the 
European Semester in accordance with the objectives and requirements set out in the 
Treaty  of  the  Functioning  of  the  European  Union  (TFEU).  The  European  Semester 
includes, in  particular, the formulation and the surveillance of  the implementation  of 
country-specific recommendations. 

(2) 

On  16 July 2025,  the  Commission  adopted  its  proposal  for  a  regulation  establishing 
the European Fund for economic, social and territorial cohesion, agriculture and rural, 
fisheries and maritime, prosperity and security for the period 2028-2034 and amending 
Regulation (EU) 2023/955 and Regulation (EU, Euratom) 2024/2509 (2). The proposal 

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EN 

Regulation 

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 
ELI: 
http://data.europa.eu/eli/reg/2024/1263/oj).  
Proposal for a Regulation of the European Parliament and of the Council establishing the European Fund for 
economic,  social  and  territorial  cohesion,  agriculture  and  rural,  fisheries  and  maritime,  prosperity  and 
security for the period 2028-2034 and amending Regulation (EU) 2023/955 and Regulation (EU, Euratom) 

(EC)  No 

2024/1263, 

30.4.2024, 

1466/97 

(OJ 

L, 

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aims to increase the effectiveness of Union funding by reducing the fragmentation of 
the  financial  architecture  and  to  support  Member  States’  in  the  coordination  of  their 
economic  policy  in  line  with  Article  175  of  the  TFEU.  On  25  November  2026,  the 
Commission  adopted  an  opinion  on  the  2025  draft  budgetary  plan  of  Malta.  On  the 
same date, on the basis  of Regulation  (EU) No  1176/2011,  the Commission  adopted 
the  2026  Alert  Mechanism  Report,  in  which  it  did  not  identify  Malta  as  one  of  the 
Member States for which an in-depth review would be needed. The Commission also 
adopted a recommendation for a Council recommendation on the economic policy of 
the euro area, a recommendation for a Council recommendation on human capital in 
the  European  Union,  and  a  proposal  for  the  2026  Joint  Employment  Report,  which 
analyses the implementation of the Employment Guidelines and the principles of the 
European  Pillar  of  Social  Rights.  The  Council  adopted  the  Recommendation  on  the 
economic  policy  of  the  euro  area  (3)  on  21 April 2026  and  the  Joint  Employment 
Report, and the Recommendation on human capital on 9 March 2026.  

On  29 January 2025,  the  Commission  published  the  Competitiveness  Compass,  a 
strategic  framework  that  aims  to  boost  the  Union’s  global  competitiveness  over  the 
next  five  years.  It  identifies  the  three  transformational  imperatives  of  innovation, 
decarbonisation  and  competitiveness,  and  security  as  critical  pillars  for  sustainable 
economic  growth.  The  European  Semester  is  aligned  with  the  Competitiveness 
Compass,  ensuring  that  Member  States’  economic  policies  are  consistent  with  the 
Commission’s  strategic  objectives,  creating  a  unified  approach 
to  economic 
governance that fosters sustainable growth, innovation and resilience across the Union. 

In  2026,  the  European  Semester  for  economic  policy  coordination  continues  to 
develop  alongside  the  final  stage  of  the  Recovery  and  Resilience  Facility  (RRF) 
implementation (4). Recovery and resilience plans (RRPs), along with cohesion policy 
funding, have been essential for delivering on the policy priorities under the European 
Semester, as the plans were required to effectively address all or a significant subset of 
challenges identified in the relevant country-specific recommendations issued in recent 
cycles, and programmes funded by the European cohesion policy were required to take 
country-specific recommendations into account. As the RRF approaches the end of its 
lifetime,  it  remains  essential  to  sustain  the  reforms  and  investments  supported  and 
implemented  under  the  RRF,  in  particular  those  that  contribute  to  addressing 
challenges identified in the country-specific recommendations. 

in 

progress 

On  3 June 2026,  the  Commission  published  the  2026  country  report  for  Malta.  It 
assessed  Malta’s 
country-specific 
addressing 
recommendations and took stock of Malta’s implementation of the RRP. On the basis 
of  that,  the  country  report  identified  the  most  pressing  challenges  Malta  is  facing.  It 
also  assessed  Malta’s  progress  in  implementing the  European  Pillar  of  Social  Rights 
and  in  achieving  the  Union  headline  targets  on  employment,  skills  and  poverty 
reduction,  as  well  as  progress  in  achieving  the  United  Nations  Sustainable 
Development Goals.  

relevant 

the 

(3) 

(4) 

(5) 

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2024/2509 - COM(2025) 565 final. The proposed Regulation is currently the subject of negotiations with the 
co-legislators.  
OJ C, C/2026/2434, 28.4.2026, ELI: http://data.europa.eu/eli/C/2026/2434/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).  

the  Recovery  and  Resilience  Facility 

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(6) 

(7) 

(8) 

On  21 January 2025,  the  Council,  upon  the  assessment  and  recommendation  of  the 
Commission, adopted a Recommendation endorsing the national medium-term fiscal-
structural  plan  of  Malta5.  The  plan  covers  the  period  from  2025  until  2028  and 
presents  a  fiscal  adjustment  spread  over  four  years.  The  Council  recommended  the 
following  maximum  growth  rates  of  net  expenditure:  6.0%  in  2025,  5.8%  in  2026, 
5.8%  in  2027  and  6.1%  in  2028,  which  correspond  to  the  maximum  cumulative 
growth rates calculated by reference to the base year of 2023 of 13.8% in 2025, 20.4% 
in 2026, 27.4% in 2027 and 35.1% in 2028. For the years 2025-2027, these maximum 
growth rates of net expenditure coincide with the corrective path, as recommended by 
the Council under Article 126(7) TFEU on 21 January 2025, with a view to bringing 
an  end  to  the  situation  of  an  excessive  deficit  (6).  Following  the  timely  and  durable 
correction of the excessive deficit, on [date] the Council, upon a recommendation from 
the  Commission,  adopted  a  Decision  under  Article  126(12)  TFEU  (7)  abrogating  its 
previous Decision establishing the existence of an excessive deficit (8).  

Russia’s  war  of  aggression  against  Ukraine  and  its  repercussions  constitute  an 
existential  challenge  for  the  European  Union.  The  Commission  has  invited  Member 
States  to  request  the  activation  of  the  national  escape  clause  of  the  Stability  and 
Growth Pact in a coordinated manner to support the EU efforts to achieve a rapid and 
significant  increase  in  defence  spending  (9)  and  this  proposal  was  welcomed  by  the 
European Council of 6 March 2025. Member States may still request the activation of 
the national escape clause at any time until 2028, if they fulfil the criteria set in Article 
26 of Regulation (EU) 2024/1263. 
On 30 April, Malta submitted its 2026 Annual Progress Report (10) on adherence to the 
recommended  maximum  growth  rates  of  net  expenditure  and  the  implementation  of 
reforms and investments responding to the main challenges identified in the European 
Semester country-specific recommendations. The Annual Progress Report also reflects 
Malta’s  biannual  reporting  on  the  progress  made  in  implementing  its  recovery  and 
resilience plan in accordance with Article 27 of Regulation (EU) 2021/241. The report 
on  action  taken  under  the  excessive  deficit  procedure  is  integrated  in  the  Annual 
Progress Report. 

(9) 

Real  GDP  growth  in  2025  was  4.0%  and  HICP  inflation  stood  at  2.4%.  The 
Commission  Spring  2026  Forecast  projects  real  GDP  to  grow  by  3.7%  in  2026  and 
3.6% in 2027, and HICP inflation to stand at 2.7% in 2026 and 2.3% in 2027. 

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10 

Council Recommendation of 21 January 2025 endorsing the national medium-term fiscal-structural plan 
of Malta (OJ C, C/2025/649, 10 February 2025, ELI: http://data.europa.eu/eli/C/2025/649/oj). 
Council  Recommendation  with  a  view  to  bringing  an  end  to  the  situation  of  an  excessive  deficit  in 
Malta, adopted on 21 January 2025. All documents related to the excessive deficit procedure of Malta 
can  be  found  at:  https://economy-finance.ec.europa.eu/economic-governance-framework/stability-and-
growth-pact/corrective-arm-excessive-deficit-procedure/excessive-deficit-procedures-
overview/Malta_en. 
Council  Decision  (EU)  2026/[OJ:  please  insert]  of  [date]  abrogating  Decision  2024/2128  EU  on  the 
existence of an excessive deficit in Malta (OJ [please insert relavant OJ references]). 
Council Decision (EU) 2024/2128 of 26 July 2024 on the existence of an excessive deficit in Malta (OJ 
C, C/2024/2128, 01.8.2024, ELI: http://data.europa.eu/eli/dec/2024/2128/oj. 
Communication  from  the  Commission,  'Accommodating  increased  defence  expenditure  within  the 
Stability and Growth Pact’, Brussels, 19 March 2025, C(2025) 2000 final. 
The  2026  Annual  Progress  Reports  are  available  on:  https://economy-finance.ec.europa.eu/economic-
and-fiscal-governance/stability-and-growth-pact/preventive-arm/annual-progress-reports_en.   

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(10)  Based on data provided by Eurostat (11), Malta’s general government deficit decreased 
from  3.4%  of  GDP  in  2024  to  2.2%  of  GDP  in  2025.  The  decrease  in  the  deficit  in 
2025  reflects  high  revenue  growth,  including  from  corporate  and  indirect  taxation, 
mainly driven by the expansion of nominal GDP and tax bases, as well as significant 
tax  windfalls.  On  the  other  hand,  notwithstanding  the  non-repetition  of  a  sizeable 
capital  transfer  granted  to  the  national  airline  company  in  2024,  government 
expenditure  continued  to  increase  significantly,  with  substantial  increases  in  the 
government’s  wage  bill  and  intermediate  consumption,  as  well  as  a  one-off 
expenditure  arising  from  a  court  decision.  Based  on  policy  measures  known  by  the 
cut-off date of the forecast, the Commission Spring 2026 Forecast projects a deficit of 
2.2% of GDP in 2026 and 2.1% in 2027. 

(11)  Based  on  the  Commission’s  estimates,  the  fiscal  stance  (12),  which  includes  both 
nationally  and  EU  financed  expenditure,  was  contractionary,  by  0.6%  of  GDP,  in 
2025.  It  is  projected  to  be  broadly  neutral  in  2026  and  contractionary,  by  0.5%  of 
GDP, in 2027. 

(12)  Based  on  data  provided  by  Eurostat  (13),  Malta’s  general  government  debt  increased 
from 45.9% of GDP at the end of 2024 to 46.4% of GDP at the end of 2025. Based on 
policy  measures  known  at  the  cut-off  date  of  the  forecast,  the  Commission  Spring 
2026 Forecast projects the debt-to-GDP ratio to decrease to 46.2% by the end of 2026 
and to remain stable at that level by the end of 2027. 

(13)  Based  on  Eurostat  data  (14),  total  general  government  defence  expenditure  in  Malta 
amounted  to  0.5%  of  GDP  in  2025.  According  to  the  Commission  Spring  2026 
Forecast, it is projected at 0.6% of GDP in 2026. 

(14)  The  Union  continues  to  face  risks  of  energy  supply  disruptions  and  elevated  price 
volatility,  exacerbated  by  geopolitical  tensions  which  affect  global  oil  and  gas 
markets.  Experience  from  the  2022–2023  energy  crisis  has  shown  that  broad  and 
untargeted  measures  entail  large  fiscal  costs  and  are  socially  and  economically 
inefficient. Since the outbreak of the war in the Middle East in February 2026, Malta 
has  not  adopted  new  fiscal  policy  measures  to  mitigate  the  impact  of  high  energy 
prices on households and firms (15). However, since the energy crisis in 2022, Malta 
has kept retail electricity and fuel prices frozen at among the lowest levels in the EU. 
According  to  the  Commission  Spring  2026  Forecast,  the  fiscal  cost  of  these  non-
temporary and untargeted energy subsidies is projected to increase from 0.9% of GDP 
in 2025 to approximately 1.4% of GDP in 2026. 

(15)  Based  on  the  Commission’s  calculations,  net  expenditure  in  Malta  grew  by  5.6%  in 
2025  and  22.2%  cumulatively  over  2024  and  2025.  The  net  expenditure  growth  in 
2025 is below the recommended maximum growth rate. When considering 2024 and 
2025  together,  the  cumulative  growth  rate  of  net  expenditure  is  above  the 

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Eurostat-Euro Indicators, 22 April 2026. 
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 including expenditure financed by non-repayable 
support (grants) from the Recovery and Resilience Facility and other Union funds. 
Eurostat-Euro Indicators, 22 April 2026. 
Eurostat, government expenditure by classification of functions of government (COFOG). 
This reflects the situation at the cut-off date of the Commission’s Spring 2026 Forecast (4 May 2026). 

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recommended maximum growth rate, corresponding to a deviation of 2.3% of GDP in 
cumulative terms. 

(16)  Based on the Commission’s calculations, net expenditure in Malta is projected to grow 
by 6.1% in 2026 and 29.7% cumulatively over 2024, 2025 and 2026. The projected net 
expenditure  growth  in  2026  is  above  the  recommended  maximum  growth  rate, 
corresponding  to  a  deviation  of  0.1%  of  GDP  in  annual  terms.  When  considering 
2024, 2025 and 2026 together, the projected cumulative growth rate of net expenditure 
is also above the recommended maximum growth rate, corresponding to a deviation of 
2.2% of GDP in cumulative terms. 

(17)  Reducing tax gaps by improving tax compliance, tackling avoidance and evasion and 
combatting  aggressive  tax  planning  remain  important  to  ensure  fair  and  efficient  tax 
systems. Malta's total tax revenue-to-GDP ratio is well below the EU average, relying 
heavily  on  corporate  taxation.  Its  overall  tax  mix  is  limited,  reflecting  only  a  small 
share of environmental taxation and the absence of recurrent property taxes. 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  actions  to  address  aggressive  tax 
planning  practices  aligned  with  EU  standards,  OECD  guidance,  and  its  obligations 
under  the  Code  of  Conduct  framework.  However,  until  Malta  applies  withholding 
taxes – or equivalent defensive measures – on interest, dividends and royalty payments 
made by Malta-based companies to zero and low-tax jurisdictions to ensure that firms 
cannot shift their profits to non-EU countries untaxed, 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. 

(18)  Malta’s supplementary pension sector has scope for growth to support the adequacy of 
retirement  income  and  mitigate  future  fiscal  pressures  from  demographic  ageing. 
While  voluntary  second  and  third-pillar  pension  schemes  are  available,  participation 
remains  limited.  Conversely,  Malta’s  pension  system  relies  heavily  on  first-pillar 
scheme, which is subject to caps that reduce the average benefit ratio to around 38.3%, 
one  of  the  lowest  in  the  EU  compared  to  the  EU  average  of  47%.  Strengthening 
supplementary pensions can contribute to improving retirement income adequacy and 
enhancing the sustainability of public finances.  

(19)  The  systematic, meaningful and timely involvement  of  local  and  regional  authorities, 
social partners, civil society and other relevant stakeholders remains essential in order 
to ensure  broad  ownership  for  the  successful  implementation  of  the  Union’s  funding 
instruments, as well as in the context of the European Semester.  

(20)  The  implementation  of cohesion  policy programmes, which encompass support from 
the  European  Regional  Development  Fund  (ERDF),  the  Just  Transition  Fund  (JTF), 
the European Social Fund Plus (ESF+) and the Cohesion Fund (CF) in Malta, is above 
the  average  pace  at  EU  level,  both  in  terms  of  project  selection  and  payments.  It  is 
important to keep the current momentum, while maximising the impact of investments 
on the ground. Malta is already taking action under its cohesion policy programmes to 
boost  competitiveness  and  growth.  Nevertheless,  some  areas  may  require  further 
strengthening  in  implementation,  including  those  relating  to energy  efficiency  and 
renewable  energy  investments  as  well  as  social  inclusion  and  equal  labour  market 
participation. It is essential to ensure that the new investments identified by Malta in 
its  mid-term  review  of  the  cohesion  policy  funds,  notably  those  linked  to  the  five 

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priorities identified in the Mid-Term Review Regulation (16), are deployed rapidly and 
effectively.  

(21)  Malta  faces  several  challenges  related  to  research  and  innovation,  attracting  and 
retaining  high  skilled  labour,  the  justice  system,  the  production  and  deployment  of 
renewable  energy,  energy  efficiency  in  buildings,  traffic  congestion  and  sustainable 
mobility, high fossil fuel subsidies, quality and labour market relevance of education 
and  training,  skills  mismatches  and  shortages,  the  inclusiveness  of  education  and 
training, job quality in low-skill jobs, and to waste and water management.  

(22)  Research  and  innovation  continue  to  play  a  small  role  in  Malta’s  economy,  with 
persistently  low  investment  in  research  and  innovation  limiting  the  country’s 
innovation performance. Malta’s overall R&D intensity remains amongst the lowest in 
the EU (at 0.54% of GDP in 2024 vs EU average of 2.24%), reflecting the constrained 
investment by both public and private sector. Public R&D expenditure is particularly 
low  (0.16%  of  GDP  in  2024  vs  EU  average  of  0.72%),  hampering  research 
institutions’  capacity  to  develop  strong  scientific  capabilities.  A  similar  picture 
emerges  for  private  investment,  with  expenditure  as  a  percentage  of  GDP  remaining 
weak  (0.38%  compared  the  EU  average  of  1.49%)  and  firms’  uptake  of  support 
schemes limited. Overall, key measures stimulating both public and private investment 
targeted 
remain  at  an  early  stage,  public  support  schemes  require  more 
implementation,  and  strengthened  cooperation  between  academia  and  business  is 
essential to foster product and service innovation. 

(23)  Malta’s ability to transition towards a higher-productivity economy is contingent on its 
capacity to attract and retain high skilled labour. Persistent labour and skill shortages 
and  mismatches,  particularly  in  high-skilled  and  STEM  occupations,  may  hamper 
Malta’s growth prospects. While Malta has taken some steps to attract and retain high-
skilled workers, further efforts are required including through a more targeted use of 
skilled  migration  to  support  growth  in  high  value-added  sectors  of  its  economy. 
Strengthening the use of skills intelligence tools in economic development policy, and 
developing the economic, legal and social infrastructure to attract and retain talent can 
support Malta’s adaptation to a higher productivity growth model.  

(24)  The justice system continues to face significant delays, with the time required to reach 
judicial decisions in civil and commercial cases at first instance one of the highest in 
the  EU.  The  time  taken  to  resolve  administrative  cases  at  first  instance  remains  the 
longest  in  the  EU.  Despite  progress  registered  in  recent  years,  resources  for  the 
judiciary  remain  a  concern,  with  a  shortage  of  premises  and  staffing.  Notably  the 
number  of  judges  per  capita  is  the  third  lowest  in  the  EU,  with  a  very  high  civil, 
commercial,  and  administrative  caseload  per  judge.  Despite  moderate  progress  in 
digitalisation,  there  are  delays  in  the  implementation  of  the  national  digital  justice 
strategy and critical gaps remain, with core judicial functions remaining paper based. 
Malta remains behind in comparison to other Member States in promoting alternative 
dispute resolution, which can play an important role in relieving pressure on the justice 
system.  Reviewing  and  improving  the  codes  of  judicial  procedure  would  also  help 
expedite trials.  

16 

Regulation  (EU)  2025/1914  of  the  European  Parliament  and  of  the  Council  of  18 September 2025 
amending  Regulations  (EU)  2021/1058  and  (EU)  2021/1056  as  regards  specific  measures  to  address 
strategic challenges in the context of the mid-term review. 

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(25)  Malta’s share of renewables in gross final energy consumption (17.2% in 2024) and in 
the electricity mix (16.7% in 2025) remains very low and well below the EU average. 
The  renewable  energy  generation  is  almost  exclusively  coming  from  solar  energy, 
with  a very small  part of biomass/combustible renewable fuels,  and with  no wind or 
hydropower  generation  recorded.  Malta  has  announced  that  a  new  floating  offshore 
wind farm is expected to be ready by 2033, which would represent an important step 
in  increasing  installed  renewables  capacity.  There  is  scope  to  leverage  further  the 
potential of offshore solar and wind projects, as well as to expand onshore solutions. 
Stepping  up  efforts  in  this  regard  would  help  Malta  to  accelerate  the  deployment  of 
renewable energy. 

(26)  Energy  consumption  has  been  on  the  rise  in  most  sectors  in  Malta  since  2019,  and 
most  prominently  in  residential  buildings,  amid  sharp  population  growth.  Further 
measures promoting retrofitting of the building stock would contribute to address this 
rising trend. 

(27)  Traffic  congestion  persists  as  a  significant  structural  challenge,  adversely  affecting 
environmental  sustainability,  the  economy’s  competitiveness  and  citizens’  quality  of 
life.  The  economic  cost  of  traffic  congestion is  projected to  rise to  EUR 917 million 
annually  by  2030  (17)  in  the  absence  of  further  policy  measures.  Despite  efforts  to 
improve the public transport system and reshape mobility in Malta, measures have yet 
to significantly reduce private car dependency. As of 2024, 58% of Malta’s population 
reported  never  using  public  transport.  The  transport  sector  also  continues  to  be  the 
primary  source  of  greenhouse  gas  emissions  under  the  Effort  Sharing  Regulation, 
accounting for 48% of such emissions in 2024, a 45% increase since 2005. This trend 
persists,  despite  zero-emission  vehicles  reaching  37.7%  of  new  passenger  car 
registrations  in  2024,  an  increase  of  17.4  percentage  points  from  the  previous  year. 
Additionally,  Maltese  transport  infrastructure  remains  highly  vulnerable  to  climate-
related risks, with a transport vulnerability index score of 0.42, one of the highest in 
the  EU.  For  Malta  to  tackle  traffic  congestion  and  rising  emissions  from  transport, 
sustainable mobility policies are required that would discourage car use, including by 
introducing  dedicated  bus  lanes,  restricting  vehicle  access  in  congested  areas  and 
limiting  parking  availability  At  the  same  time,  improving  the  efficiency  of  road  and 
maritime  transport,  alongside  investments  in  sustainable  mobility,  particularly  active 
mobility infrastructure such as expanded cycling and pedestrian networks, as well as 
zero-emission  buses  and  alternative  fuels  recharging  infrastructure,  would  ensure  a 
shift 
transport  options.  Additional 
investments  are  needed  to  strengthen  the  transport  infrastructure’s  resilience  to 
climate-related risks, including extreme weather events.  

toward  more  sustainable  and  multimodal 

investments 

(28)  With no planned phase out, fossil fuel subsidies accounted for around 1% of Malta’s 
GDP  in  2024,  significantly  above  the  EU  average  of  0.32%.  Fossil  fuel  subsidies 
discourage 
the 
electrification  of  transport,  which  would  contribute  to  meeting  climate  goals, 
enhancing  energy  security  and  promoting  better  quality  of 
in  Malta. 
Simultaneously, Malta’s fossil fuel subsidies represent a heavy fiscal burden. They do 
not provide cost-efficient support to the economy during periods of high international 
energy prices and they do not address energy poverty in a targeted way. 

in  renewable  energy,  energy  efficiency  and 

life 

in 

17 

Ministry for Transport, Infrastructure and Public Works of Malta, 2026. National Transport Master Plan 
https://infrastructure.gov.mt/wp-content/uploads/2026/01/NATIONAL-TRANSPORT-
2030. 
MASTERPLAN-2030.pdf. 

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(29)  Malta  generates  some  of  the  highest  levels  of  waste  per  capita  in  the  EU,  the  vast 
majority  of  which  is  disposed  of  in  landfill,  exerting  considerable  pressure  on  the 
islands’ natural environment. In 2024, municipal waste generation reached 621 kg per 
capita, one of the highest rates in the EU, while the recycling rate remained critically 
low at 16.7%, significantly below the EU average of 48%. Malta has already failed to 
meet the 2020 municipal waste recycling target of 50% and is now at risk of having 
missed the 2025 target  of 55%. Furthermore, in  2023, the landfill  rate for municipal 
waste  stood  at  74%,  far  exceeding  the  EU  average  of  22%.  The  substantial  gap 
between  the  current  landfill  rate  and  the  2035  municipal  waste  landfilling  target  of 
10% remains a pressing concern. Despite increased investments in waste management 
infrastructure and introduction of several re-use and recycling initiatives, the adopted 
measures  have  not  yet  resulted  in  measurable  effects  on  waste  management 
performance.  Therefore,  Malta  would  benefit  from  observing  the  waste  hierarchy  by 
prioritising waste prevention, strengthening recycling and circular economy practices, 
both  through  stricter  enforcement  of  existing  national  waste  legislation  and  by 
expanding  recycling and reuse infrastructure, while accelerating planned  investments 
in waste processing facilities to reduce reliance on landfilling. 

(30)  Malta  faces  structural  water  scarcity,  exacerbated  by  substantial  population  growth, 
rising  temperatures  and  prolonged  droughts,  which  have  significantly  diminished 
freshwater  availability.  This  challenge  is  underscored  by  the  seasonal  Water 
Exploitation Index Plus (WEI+), which reached 66.7% in the third quarter of 2023, the 
second-highest level among EU Member States, indicating severe water scarcity. The 
high  demand  for  water,  driven  primarily  by  the  tourism,  agricultural,  domestic  and 
industrial sectors, further intensifies scarcity. In response, Malta has sought to mitigate 
these  pressures  through  increased  groundwater  extraction  and  seawater  desalination. 
Apart from water scarcity, poor water quality remains a persistent issue in Malta. As 
outlined in  Malta’s Third River Basin  Management Plan, only  58% of surface water 
bodies (by number) attained good or high ecological status, while just 45% met good 
chemical  status.  With  regard  to  groundwater,  82%  of  groundwater  bodies  (by  area) 
failed  to  achieve  good  quantitative  status,  and  100%  did  not  meet  good  chemical 
status.  Main  pressures  on  surface  water  and  groundwater  quality  stem  from 
agricultural  activities  and  saline  intrusion  due  to  over-abstraction.  Moreover,  two 
Maltese agglomerations remain non-compliant with the Urban Wastewater Treatment 
Directive  due  to  the  low  proportion  of  households  connected  to  at  least  secondary 
urban  wastewater  treatment.  To  address  these  challenges,  Malta  would  benefit  from 
expanding  investments  in  urban  rainwater  harvesting  infrastructure  and  nature-based 
solutions,  which  could  reduce  flood  risks  and  enhance  groundwater  recharge. 
Additionally,  stricter  regulation  of  groundwater  extraction  and  expanded  wastewater 
treatment  capacity seem  to  be necessary to  improve water quality  and tackle surface 
water and groundwater pollution. 

(31) 

In light of the crucial role of human capital in enhancing the Union’s competitiveness 
and  strategic  autonomy,  in  2026  the  Council  recommended  that  Member  States  take 
action  to  urgently  address  human  capital-related  structural  challenges  in  the  area  of 
skills  and  education,  which  hamper  competitiveness.  The  2026  country-
specific recommendations addressed to Malta can contribute to the implementation of 
the Council Recommendation on human capital in the Union. 

(32)  Skills  shortages  and  mismatches  risk  undermining  Malta’s  strong  labour  market  and 
hindering its green and digital transitions. Despite very high job vacancy rates, critical 
gaps  persist  in  information  and  communication  technology  (ICT),  construction, 

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healthcare,  education,  and  green  transition  roles,  with  43%  of  firms  lacking  green-
skilled  employees  and  two-thirds  reporting  an  unprepared  workforce.  The  skills 
supplied  by  the  Maltese  education  and  training  system  do  not  keep  up  with  labour 
market  demand,  which  is  also  due  to  fragmented  skills  governance  and  forecasting 
capacity.  Strengthening  skills  intelligence  tools  can  help  anticipate  labour  market 
needs  and  address  existing  mismatches.  Science,  technology,  engineering  and 
mathematics  (STEM)  graduates  account  for  just  13.8%  of  post-secondary  graduates, 
far  below  the  EU  average,  with  even  fewer  women,  and  Malta  recorded  the  lowest 
post-secondary STEM enrolment in the EU in 2023. Vocational education and training 
(VET)  pathways  also  fall  short,  with  limited  work-based  learning  and  uptake  of 
STEM-related  VET  programmes,  particularly  among  women.  Adult 
learning 
participation  remains  uneven  as  only  a  small  share  of  the  large  pool  of  low-skilled 
adults engages in training. Persistent basic skills gaps further exacerbate the challenge: 
one in  three 15-year-olds  lack basic skills  in mathematics, reading,  or science, while 
half  of  12–13-year-olds  lack  basic  digital  skills.  Weaknesses  in  teacher  supply, 
professional  development  and  support  for  increasingly  diverse  classrooms  risks 
limiting  the  capacity  of  the  education  system  to  improve  learning  outcomes.  To 
address  these  issues,  strengthening  the  quality  and  labour  market  relevance  of 
education  and  training,  use  of  skills  intelligence  tools,  teacher  training,  work-based 
VET, and adult upskilling, especially in STEM and green transition fields, is essential 
to reduce shortages, improve education outcomes, and align skills with labour market 
needs. 

is  particularly  prevalent  among  students 

(33)  The limited inclusiveness of education and training, starting already in early childhood 
education, hampers the potential of people in vulnerable situations. Due to a shortage 
of adequately qualified teaching staff and ineffective teaching practices and curricula, 
the  system  insufficiently  caters  for  all  children,  including  pupils  with  a  disability. 
Persistent disparities in learning and employment outcomes linked to socio-economic 
background  and  school  type  suggest  that  significant  equity  challenges  remain. 
Notably,  underachievement 
from 
disadvantaged  socio-economic  backgrounds:  51.5%  underperform  in  reading,  47.7% 
in mathematics and 46.0% in science. Further, early school leaving remains especially 
high  among  young  people  with  disabilities,  while  a  significant  number  of  young 
people with disabilities are not in employment, education or training. Regarding early 
childhood  education  and  care  (ECEC),  Malta’s  system  currently  anchors  ECEC 
entitlement  to  parental  activity  (work,  education,  training)  rather  than  universal  or 
poverty-based  entitlement.  Although  recent  provisions  expanded  to  some  groups  of 
unemployed parents, the participation gap between children at risk of poverty or social 
exclusion (AROPE) and non-AROPE remains very wide: non-AROPE children were 
nearly twice as likely (48.2%) to attend over 25 hours of ECEC per week compared to 
those at risk (24.9%). Concerns also remain regarding the quality of ECEC provision, 
as  recent  estimates  suggest  that  more  than  one  fifth  of  childcare  staff  lack  relevant 
pedagogical  qualifications,  which  may  limit  its  potential  to  support  early  skills 
development,  particularly  for  disadvantaged  groups.  Strengthening  targeted  support 
for  children  from  disadvantaged  backgrounds  and  those  with  additional  needs 
regardless  of  the  employment  or  educational  background  of  their  parents  seems 
necessary. 

(34)  Uneven job quality  hinders the retention of  workers. The share of low-paid  jobs  has 
increased, with over 10% of workers remaining in low-paid jobs for the last four years, 
disproportionally  affecting  women  and  third-country  nationals.  Malta  also  records  a 
relatively  high  share  of  atypical  working  hours  (39.1%  of  workers  vs  32.6%  in  the 

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EU).  Several  sectors  increasingly  rely  on  third-country  national  workers,  such  as 
healthcare.  However,  third-country  nationals  working  in  low-skill  jobs  often  face 
weaker  labour  conditions  and  low  job  quality  in  multiple  dimensions:  long  working 
hours, higher turnovers, restricted career progression prospects, limited rights in case 
of  employment  loss,  and  worse  health  and  safety  workplace  conditions.  In-work 
poverty  is  also  disproportionally  impacting  third-country  nationals  (17.3%  against 
5.6%  of  native  population).  Labour  inspection  capacity  increased  but  remains  below 
International Labour Organisation (ILO) standards and sanctions for breaches are still 
relatively  low.  Addressing  quality  jobs  concerns,  in  close  cooperation  with  social 
partners, and further boosting labour inspection could have a positive impact on labour 
turnover and high vacancy rates. 

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,  in  2026  the  Council  recommended  that  the  euro-area  Member  States  take 
action, including through their RRPs, to implement the 2026 Recommendation on the 
economic policy of the euro area. For Malta, the recommendation (1) helps implement 
the first, the second and the third recommendations on the euro area, recommendation 
(2) helps implement the fourth recommendation on the euro area, recommendation (3) 
helps  implement  the  fifth  and  seventh  recommendations  on  the  euro  area, 
recommendation  (4)  helps  implement  the  seventh  recommendation  on  the  euro  area 
and the recommendation (6) and help implement the fifth recommendation on the euro 
area. 

(35) 

HEREBY RECOMMENDS that Malta take action in 2026 and 2027 to:  

1. 

2. 

3. 

4. 

In  view  of  the  material  deviation  recorded  by  2025  and  projected  for  2026  by  the 
Commission  vis-à-vis  the  recommended  net  expenditure  ceiling,  take  action  to 
control net expenditure so that it respects the maximum growth rates recommended 
by the Council on 21 January 2025. Reinforce defence spending and readiness while 
ensuring  spending  efficiency  and  gradually  adapting  the  budget  to  sustain 
structurally higher defence spending. Ensure that any measures taken to mitigate the 
impact of the hike in energy prices are temporary, targeted at protecting vulnerable 
households or at addressing the needs of energy-intensive firms, preserve incentives 
for  energy  savings  while  ensuring  that  their  fiscal  cost  is  compatible  with  the 
commitments  under  the  EU  fiscal  framework.  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.  Promote  the 
supplementary pension sector, notably through occupational pension schemes. 

Ensure continuity of reforms and investments implemented under the Recovery and 
Resilience  Facility.  Sustain  implementation  momentum  under  cohesion  policy 
programmes  building,  where  appropriate,  on  the  reallocation  to  strategic  priorities 
and flexibilities in the mid-term review of the cohesion policy framework. 

Strengthen  research  and  innovation  by  increasing  public  R&D  investment  and 
stimulating private R&D investment through effective support schemes and stronger 
links between academia and business. Strengthen the attraction and retention of high-
skilled workers. Improve the efficiency of the justice system by addressing the case 
backlog and reducing the length of proceedings.  

Accelerate  the  production  and  deployment  of  renewable  energy.  Reduce  energy 
demand through improved energy efficiency in buildings. Address traffic congestion 
and reduce transport emissions by  discouraging car usage, improving the efficiency 

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5. 

6. 

of  public  transport,  facilitating  multimodality  and  investing  in  active  mobility 
infrastructure, as well as in climate resilient transport infrastructure. Phase out fossil 
fuel subsidies that are not temporary and targeted to the most vulnerable households 
and firms. 

Improve waste management by promoting recycling and circular economy practices, 
while  reducing  reliance  on  landfilling.  Enhance  sustainable  water  management  and 
quality by expanding water collection and reuse, while tackling pollution in surface 
water and groundwater. 

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,  especially  in  STEM,  in  particular  by  fostering  basic  skills  of  students,  the 
initial and continuous training of teachers as well as promoting enrolment in work-
based  vocational  education  and  training,  and  in  adult  learning  for  the  low-skilled. 
Strengthen  the  inclusiveness  of  education  and  training,  including  by  enhancing 
access  to  high  quality  early  childhood  education  and  care  (ECEC).  Address  job 
quality  concerns  in  low-skill  jobs,  including  for  third  country  nationals,  notably 
through strengthening labour inspections. 

Done at Brussels, 

For the Council 
The President 

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