Malta set to be first country to exit EU excessive deficit procedures

Updated 1.15pm with European Commission statement

The European Commission has moved to drop excessive deficit procedures against Malta on Wednesday, with the country having reduced its deficit levels in recent years.

The EU launched proceedings against Malta in 2024, at a time when the deficit stood at 4.9%. EU rules say a country’s deficit cannot exceed 3% of its GDP.

At the time, the EC had also placed six other countries under excessive deficit procedures, namely Belgium, France, Italy, Hungary, Poland and Slovakia.

In 2025, the commission recommended that Malta brings its excessive deficit down to beneath the 3% threshold by 2027, while keeping a lid on its expenditure.

If Malta had failed to do so, it could have faced sanctions such as fines and limits on its spending.

In a statement issued on Wednesday, the commission said its forecast for Malta shows that "the excessive deficit in Malta has been corrected."

The 2024 decision placing Malta under excessive deficit procedures "should therefore be abrogated," it said.

However, the commission warned that Malta should continue to keep a close eye on its spending to "ensure that net expenditure growth does not exceed the recommended maxima".

Malta was set to be the only country removed from the excessive deficit procedure, according to Politico.

The decision will have to be confirmed by the Economic and Financial Affairs Council (ECOFIN), a gathering of economy and finance ministers from across the EU’s member states, at its next meeting in July.

Sources say this will largely be a formality, with the council expected to rubber-stamp the decision.

Then-finance minister Clyde Caruana had hinted at the possibility of Malta exiting the procedure by the summer when presenting Malta’s fiscal forecast in April.

Malta’s deficit levels peaked at 8.7% in 2020, largely driven by the impacts of the Covid-19 pandemic, with the government scrambling to cushion the blow for workers through initiatives such as the wage supplement.

However, Malta’s deficit remained high for several years, as initiatives such as energy subsidies and the Stabbiltà scheme, intended to protect citizens from rising inflation rates, took a toll on public finances.

Throughout this time, Malta has faced repeated calls from international bodies, including the European Commission and the International Monetary Fund, to scrap energy subsidies in order to bring its deficit down.

While deficit was initially slated to dip to 3.5% in 2025, in April Caruana had announced that deficit had dropped more sharply than expected to 2.2%.

This means that Malta’s deficit is now below the EU threshold for the first time since before the pandemic.

According to Caruana, Malta’s deficit will drop further in the coming years, with Malta set to balance its books by 2029 or 2030.

The European Commission’s spring forecast, published in May, said Malta’s deficit is set to remain stable over the coming years, dipping slightly to 2.1% in 2027.