Convergence programme

The European Commission has today published an assessment of Malta's convergence programme which expects a correction of the deficit to below 3% in 2006 and a debt below 60% of GDP in 2009. From the EC website:

Malta submitted a new update of its convergence programme on 7 December 2006, covering the period 2006-2009. The update aims at correcting the excessive deficit by 2006 and further improving its public finances thereafter. The MTO for the budgetary position is a balanced position in structural terms, which is to be reached only after 2009. The structural deficit is expected to improve gradually over the programme period, and the pace of adjustment is broadly in line with the Pact after the correction of the excessive deficit. There are, however, risks of worse-than-targeted budgetary outcomes after 2007 due to the markedly favourable macroeconomic scenario underlying the update's projections. Malta appears to be at medium risk as regards the long-term sustainability of public finances.

Overall, the programme seems consistent with a correction of the excessive deficit by 2006 and the debt ratio seems to be diminishing at a satisfactory pace towards 60% of GDP. Maintaining a budgetary position that is robust to offset possible growth reversals is important especially in light of the recent build-up of external imbalances.

Therefore, the Council should invite Malta to: (i) pursue adequate progress towards the MTO and ensure that the debt-to-GDP ratio is reduced accordingly, while spelling out the budgetary strategy, especially on the expenditure side, with a longer time perspective; and (ii) in view of the level of debt and the projected increase in age-related expenditure, improve the long-term sustainability of public finances by achieving the MTO and making further progress in the design and implementation of the healthcare reform.