Malta registers highest deficit in EU – austerity expected next year 

Malta is expected to be one of the first EU members states to have to impose obligatory austerity measures next year to get its public finances in order after the island registered the highest deficit in the EU for 2021.

According to the latest statistics compiled by the EU, and which will serve as European Commission’s benchmark for assessment and projections later on this year, Malta ended 2021 with a deficit of €1.2 billion, equivalent to 8% of GDP.

On average, the EU’s deficit stood at 4.7%, just over half Malta’s.

This means that Malta’s current deficit is five percentage points higher than Euro Area rules usually permit (3%). These have been temporarily relaxed for the duration of the Covid-19 pandemic, but are expected to be re-enforced next year.

Brussels sources told The Shift that with this level of deficit, Malta is expected to be included in an Excessive Deficit Procedure (EDP) next year, once the rules, better known as the Maastricht criteria, are back.

According to the latest published figures, while Malta increased its revenue to €5.4 billion in 2021, it spent more than €6.6 billion, having to rely on around €1.2 billion in new loans.

The government’s measures to keep the economy afloat last year also increased substantially, meaning expenditure rocketed to 45.5% of GDP, an increase of as much as 10% since Robert Abela became Prime Minister.

While registering the EU’s highest deficit last year, Malta’s record is closely followed by Greece (-7.4%), Latvia (-7.3%) and Italy (-7.2%).

As a result, Malta’s general debt also shot up, reaching €8.2 billion by the end of 2021, equivalent to 57% of GDP.

In the last two years, helped by the government’s dependence on loans to boost the economy, Malta increased its debt by 17% or more than €3 billion. 

Still, in this area, Malta remains on ‘safe ground’ – EU debt alarm bells only start chiming once a country rises above the union’s threshold of 60% of GDP.

Although Malta’s debt levels are increasing at a steady pace, they’re still well below the EU’s average, which stood at 88.1% in 2021.