On the 24th November, the European Commission gave the all-clear to Malta’s 2022 Budget and confirmed that it complies with the recommendation of the European Council.
This has been confirmed by Prime Minister Robert Abela during an interview on ONE Radio this morning.
Though at present, because of the pandemic, the fiscal rules are not being enforced strictly, countries’ spending plans are still being assessed closely by the Commission and recommendations submitted for changes.
For instance, in its overall assessment for all Euro area economies one finds that “in order to contribute to the pursuit of a prudent fiscal policy, the Commission invites Italy to take the necessary measures within the national budgetary process to limit the growth of nationally financed current expenditure”. In essence here, the Commission is saying that Italy’s budget includes too much spending. The same assessment is made on Latvia and Lithuania.
The assessment also mentions critically that the Netherlands have not yet submitted a recovery and resilience plan. The Commission also warned Belgium, France, Greece, Italy, and Spain that due to their high level of national debt they must have more prudent medium strategies on how to restore their public finances. As for Malta, apart from placing it within the group of countries with low/medium debt, the Commission states that it is one of two countries, the other being Slovakia, where the Government is being more cautious than the Commission’s recommendations.
While the Opposition in its response to the budget argued that the Government’s estimates do not make sense and are unachievable, the Commission’s experts stated more than once in their report that “estimates are in line with the Commission 2021 autumn forecast”.
Malta is one of two countries, the other being Slovakia, where the Government is being more cautious than the Commission’s recommendations.
While the Opposition claims that the deficit is not because of economic support measures due to the pandemic and instead is due to reckless over-spending, in its assessment the Commission states that “the fiscal stance, which excludes crisis-related temporary emergency measures while including the impact on aggregate demand from investment financed by both the national and the EU budgets, notably the Recovery and Resilience Facility, is projected in the Commission 2021 autumn forecast at 0% of GDP in 2022.” This means that excluding support measures, the Maltese Government would not be running a deficit but instead would have balanced books.
Whereas the Opposition leader argued that Malta’s recovery and resilience plan was a froġa, a Maltese derogatory term for a disaster, the Commission’s report instead states that this plan “has the potential to increase the GDP of Malta by 0.7% to 1.1% by 2026, not including the possible positive impact of structural reforms, which are substantial”. Now if this is a froġa, imagine what the Commission would say about the Conservatives’ track record which landed our country in its excessive deficit procedure three times in a row.
While the Opposition harps that the economy is not doing well, the Commission’s experts point out that while the Government’s economic projections are plausible, they expect higher growth than what Government predicts as they think there will be higher private consumption and investment. So much so that they tell the Maltese Government to consider the “strength of the recovery” when phasing out economic assistance measures as they may no longer be needed.
While the Opposition criticises the Government and says it thinks only for today, on public investment the Commission says, “the level of investment is historically high and is expected to facilitate the twin transition while supporting productivity, as recommended by the Council”. European experts also emphasise that “the increase in public investment planned in the Draft Budgetary Plan of Malta is expected to support the green and digital transition and increase growth potential”.
Once again while the current administration comes out of this assessment with flying colours, the exact opposite can be said of the Opposition, which continues to make no headway whatsoever in its financial and economic analysis.