Brussels okays Malta’s €40 million spending cuts

Updated with finance minister Tonio Fenech's reaction

European commissioner for monetary affairs and euro Olli Rehn spared Malta the embarrassment of facing sanctions over its excessive deficit, declaring "acceptable" Valletta's plans to slash €40 million from its forecasted expenditure for 2012.

"Malta, together with Cyprus and Poland - the other countries that were at risk of not meeting their deadlines of 2011 or 2012 to correct their excessive deficit - have taken effective action. Therefore, the Commission considers that no further steps in the excessive deficit procedure are necessary for these four countries, though it will continue to monitor budgetary developments closely," Commissioner Rehn said.

 This is the first time the European Commission has applied the new rules of the strengthened Stability and Growth Pact (SGP), which are part of the so-called "sick-pack" on economic governance, which entered into force on 13 December 2011.

Rehn said that "today's report shows that the six-pack is already delivering. It has given the European Commission teeth to act when countries fail to bring their deficits under control and reduce their debt. Fiscal discipline is crucial to reinforce confidence in our public finances. I stand by my word: I am determined to fully use this new powerful set of tools from Day One."

Reacting to the news, finance minister Tonio Fenech told MaltaToday that the Commission's announcement was " positive news that confirms the appreciation of the Commission of the hard work and the prudent fiscal strategy that Malta is adopting to ensure further economic growth which is grounded on stability."

Fenech added that the Commissions projections put Malta with one of the lowest deficits among the EU 27.

"Government is achieving these targets with serious focus on controlling public expenditure without  the need to resort to austerity measures as has been the case in other countries," Fenech concluded.

In the Commission's Autumn Forecast of 10 November 2011, Malta showed that it was "at clear risk of not meeting its obligations to correct its excessive deficits."

Rehn had immediately written to finance minister Tonio Fenech making clear that, in the absence of corrective measures, further steps under the EDP, with the possibility of prompting sanctions, would become unavoidable.

Hungary

The European Commission conluded that Hungary has not made sufficient progress towards a timely and sustainable correction of its excessive deficit, and proposed to move to the next stage of the Excessive Deficit Procedure (EDP) and recommends that the Council of Ministers decides that no effective action has been taken to bring the deficit below 3% of GDP in a sustainable manner. Subject to this Council decision (under Article 126(8)of the EU Treaty), the Commission will then propose to the Council new recommendations addressed to Hungary (under Article 126(7) of the Treaty) with a view to bringing to an end its excessive government deficit.