Caruana’s shift in a few months – from confidence to warnings

In the months before last May’s general elections, Finance Minister Clyde Caruana presented public finances as improving sufficiently to accommodate energy subsidies, Labour’s electoral promises and a declining deficit. By September, he had shifted his emphasis to spending discipline, protecting subsidies and explaining why financial pledges might have to wait.

The contrast raises questions about his pre-election assurances, particularly his claim that manifesto commitments were already included in the government’s fiscal projections.

In March, Caruana told Parliament that Malta had €250 million in additional fiscal headroom, above approximately €150 million already being spent on energy and fuel subsidies. That flexibility, he said, would allow the government to absorb further price shocks while remaining within the EU’s 3% deficit threshold.

In April, with the election approaching, Caruana sounded increasingly confident.

Announcing a 2025 deficit of 2.2% of GDP, below the earlier 3.2% forecast, he outlined a path towards surpluses in 2029 and 2030. Debt was projected to decline from 46.4% of GDP in 2025 to 38.9% in 2030. These were debt ratios, rather than promises that outstanding borrowing in euros would immediately fall.

The most consequential assurance came on 21 May, nine days before polling.

Asked about Labour’s manifesto, Caruana said its costs had already been factored into the deficit and debt projections. He did not, however, provide an overall cost for the programme when questioned.

Labour won the election, and Caruana remained in charge of the public purse. Within months, his message had changed.

By the pre-budget discussions in September, the fiscal outlook had weakened.

As The Shift reported, Caruana’s forecast for the 2026 deficit had risen from April’s 1.6% of GDP target to 2.8%. Applying both ratios to a rounded GDP estimate of €26 billion produces a difference of approximately €312 million.

These remain forecasts, not final annual accounts.

Nevertheless, the revision points to deterioration from 2025 rather than the improvement promised in April. Staying below the EU’s 3% ceiling would still leave the government substantially above its own target.

The change in tone also extends to Labour’s flagship €1,000 annual “super bonus”.

Caruana indicated that its introduction in Budget 2027 was unlikely, without definitively excluding it. He stressed that the manifesto covered five years and that energy support and healthy public finances took priority.

He also acknowledged that government had previously covered agencies’ additional expenses when it perhaps should not have, promising tighter discipline.

Rising energy costs provide part of the explanation.

The latest subsidy estimate cited was €392 million. But the available figures do not provide an itemised reconciliation of the deficit revision or establish what contribution, if any, election-related spending made. That leaves unanswered questions about the spending Caruana authorised and the assumptions behind his assurances.

What changed in his calculations?

Publishing the original implementation timetable and a breakdown of revised revenue and expenditure would allow voters to assess whether his earlier confidence was justified – or whether electoral convenience took precedence over a realistic account of the country’s finances.