Finally, at an EU level, the efforts of individual countries to correct macroeconomic imbalances – and Malta is not alone in facing such a challenge – would be greatly facilitated by an early completion of the Single Market project, particularly in the area of services, and by a strengthening of the economic component of EMU, including the Stability and Growth Pact. In this regard, it should not be forgotten that the economic rationale of a monetary union foresees an important role for surplus countries as well in redressing imbalances within the Union. BIS Review 73/2010  5
When the fiscal rule was introduced, the expected return was estimated at 4 percent. The estimates presented today entail a considerably lower expected rate of return for any realistic equity allocation. As mentioned, with an equity allocation of 75 percent, the expected annual real return will be about 2.5 percent per year over the next ten years. Chart: Petroleum revenue spending over the budget Another important objective of the GPFG and the fiscal rule is to insulate the budget from sharp fluctuations in oil revenues. The GPFG is now so large and finances such a sizeable share of government spending that it may become just as important to manage swings in the fund’s value as swings in petroleum revenues. The fiscal authorities face an important trade-off: on the one hand, closely linking fiscal policy to changes in the value of the GPFG will have a substantial impact on other government spending and revenues from one year to another. This is far from desirable. On the other hand, a substantial degree of decoupling between changes in the GPFG’s value and government spending of its funds over the budget could lead to greater uncertainty about the value of the GPFG in the longer term. Oil revenue spending should be based on a realistic estimate of expected return. At the same time, due consideration must be given to return uncertainty. It may therefore be wise to consider spending somewhat less than the expected return over time.