Malta is poised to become the first European Union member state to be removed from the Excessive Deficit Procedure (EDP), after successfully reducing its budget deficit below the bloc’s prescribed threshold.
The European Commission is expected to announce on Wednesday that it will recommend the closure of the proceedings opened against Malta in 2024, when the country’s deficit stood at 4.9% of GDP, well above the EU’s 3% limit.
Malta was one of seven countries placed under the procedure at the time, alongside Belgium, France, Italy, Hungary, Poland and Slovakia. According to reports, Malta is expected to be the only country among them to secure an exit from the process at this stage.
Under recommendations issued in 2025, Malta had been instructed to bring its deficit below the 3% threshold by 2027 while maintaining tighter control over public expenditure. Failure to meet these targets could have exposed the country to sanctions, including potential financial penalties and restrictions on government spending.
The Commission’s recommendation will still require formal approval by the Economic and Financial Affairs Council (ECOFIN), which brings together finance ministers from the EU’s member states. The council is expected to consider the matter at its July meeting, although approval is widely viewed as a formality.
Former finance minister Clyde Caruana had already indicated in April that Malta could exit the procedure by the summer, citing stronger-than-expected fiscal performance.
Malta’s deficit reached a record 8.7% of GDP in 2020 as the government rolled out extensive support measures to mitigate the economic impact of the Covid-19 pandemic, including the wage supplement scheme. In the years that followed, public finances remained under pressure due to continued spending on energy subsidies and the Stabbiltà scheme, both designed to shield households and businesses from rising costs.
International institutions, including the European Commission and the International Monetary Fund, repeatedly urged Malta to phase out energy subsidies in order to accelerate fiscal consolidation.
Despite projections that the deficit would decline to 3.5% in 2025, revised figures announced in April showed a much sharper improvement, with the deficit falling to 2.2% of GDP.
The latest figures place Malta comfortably below the EU’s 3% ceiling for the first time since before the pandemic, paving the way for the country to become the first member state to emerge from the current round of excessive deficit proceedings.