Malta's fiscal consolidation strategy : a comparison of the 2009-2012 and 2013-2015 excessive deficit procedures

Abstract

The aim of this research is to understand better whether the fiscal consolidation strategy carried out during the 2013-2015 Excessive Deficit Procedure is more successful than the fiscal consolidation carried out during the 2009-2012 Excessive Deficit Procedure. This research also aims to find whether the recipe for fiscal consolidation carried out during the two procedures under two different governments is different. From previous studies, a number of definitions emerged to assess whether a fiscal consolidation strategy is successful or unsuccessful together with factors that determine their success. This research attempts to assess the Maltese fiscal consolidation strategies during the EDPs of 2009-2012 and 2013-2015 through a comparative analysis vis-a-vis the literature, using already available numerical data from a number of sources. Results show that the fiscal consolidation carried out during the 2013-2015 Excessive Deficit Procedure was in fact more successful than the adjustment carried out during the 2009-2012 Excessive Deficit Procedure. However, its success is most likely attributed to favourable economic conditions rather than fiscal consolidations measures. Furthermore, the fiscal plan of the two governments during the two EDPs was different. The fiscal consolidation strategy of the Nationalist government during the procedure of 2009-2012 was more based on expenditure nits whereas the fiscal consolidation strategy of the Labour Party during the procedure of 2013-2015 was more revenue based.