The European Commission has issued a call for Malta to phase out its existing energy subsidies, emphasizing the need to address government deficit concerns. In a recently released Commission Opinion on Malta’s Draft Budgetary Plan, the substantial energy support measures were highlighted as contributing to a lack of related savings, prompting the Commission to recommend transitioning to means-tested support for managing energy price fluctuations.
Expressing concern over Malta’s Draft Budgetary Plan not aligning fully with the Council Recommendation of July 14, 2023, the Commission outlined its opinion. The report urged Malta to promptly wind down its energy support measures in the years 2023 and 2024.
Earlier advice from the Council in May had encouraged the gradual termination of Malta’s energy support measures by the conclusion of 2023, emphasizing the use of resulting savings to alleviate the government deficit. In cases where rising energy prices necessitate fiscal support measures, the Council proposed adopting targeted approaches to safeguard vulnerable households and businesses.
The Commission’s 2023 Autumn Forecast foresees Malta’s net budgetary cost of energy support measures to be 1.6% of GDP in 2023, escalating to 2% in 2024 and reducing to 1% the following year. Expressing concern, the report noted that the projected winding down of energy support measures in 2023 and 2024 is not in line with the Council’s recommendations.
Budgetary projections indicate that the Maltese government plans to allocate approximately €320 million annually for fuel subsidies until at least 2026 or until issues with Malta’s electricity supply are resolved. Finance Minister Clyde Caruana has committed to maintaining these fuel subsidies as a measure to stabilize energy prices when deemed necessary.
This call from the European Commission reflects a broader push for fiscal responsibility and targeted interventions to address economic challenges within the European Union. As Malta navigates these recommendations, a strategic transition in energy support strategies is envisaged for sustained fiscal stability.
