European Union’s Commission casts doubts on government’s fiscal targets – PN
The European Commission recommendations (CSRs) for Malta throw cold water on government’s claims that the national deficit is under control, the Nationalist Party said in a statement yesterday.
In its reports published on Wednesday, the Council highlighted what the PN said were a number of serious economic and financial concerns namely: • Government’s planned deficit targets are at high risk of significant deviation; Public expenditure is rising faster than the potential GDP growth, in particular in recent years; State-owned enterprises are a source of potential risks to the state budget, and subsidies to the economy increased from 2% of GDP in 2004, with a moderation in 2009-2011 to 1.7% of GDP, to 2.5% of GDP in 2014; Apart from one-off largescale projects in 2014 and 2015, investment in Malta is lower than anticipated; The long-term sustainability of public finances in Malta remains a challenge. This is mainly due to the budgetary impact of ageing-related costs, such as healthcare and long-term care and pensions; Malta scores below average on poverty prevention and important coverage gaps exist. Malta is still far from its 2020 poverty target; No comprehensive transport strategy has yet been implemented, despite the fact that the development of a national transport strategy and master plan is a pre-condition • • • • • • for accessing EU structural and investment funds (2014-2020), which will be used to co-fund transport investments. In the statement, signed by deputy leader and shadow finance minister Mario de Marco, the PN said that in view of the forecasted slippage, the Commission is recommending a significant long-term fiscal adjustment of 4.4% of GDP to put the Maltese public debt on a sustainable path. The Commission is also recommending measures targeted at reducing primary expenditure (by 0.16% of GDP), especially in the areas of compensation of employees, intermediate consumption and capital transfers.
These reports throw cold water on government’s claims that the national deficit is under control. The European Commission concluded that government’s fiscal targets are not believable, government expenditure is raising too fast and that economic growth is being fuelled by one-off events. The Commission also highlighted that government failed to address satisfactorily important structural issues such as those related to transport and pension reform.
The European Commission’s position is in line with that of the Opposition which has in the past repeatedly warned government to keep its expenditure in check. Government chose to ignore the Opposition’s claims. The same concerns are now being highlighted by the European Commission, the PN said.