'Comprehensive plan' to control budget deficit

The government will be submitting a report to the European Commission today outlining a comprehensive plan of how to rein in the budget deficit within a realistic timeframe.

The Parliamentary Secretary in the Finance Ministry, Tonio Fenech, was not put off by the European Commission report, which last Wednesday warned Malta and five other acceding countries about the state of their finances.

The countries were given notice by the EU that their budget deficits exceeded the bloc's limits, even if they were given plenty of time to take corrective action.

Poland, the Czech Republic, Hungary, Cyprus, Slovakia and Malta racked up 2003 deficits above three per cent of their gross domestic product, which is the cap set in the EU's Stability and Growth Pact and also the threshold set for euro entry.

Contacted yesterday, Mr Fenech said the report would provide a comprehensive plan on how the government intends to slash the deficit.

There were two variables in the equation - curtailing expenditure and stimulating the economy, he said.

Remaining non-specific, Mr Fenech said the cuts in expenditure were not circled around a particular sector but would be spread across the board.

He said the government could also redimension certain capital projects in a concerted drive to reduce expenditure, though he would not say which projects could take a back-seat.

The EU report, he noted, was not a major worry to the government because it focused on the deficit figure reached at the end of last year, which also took into consideration the Lm57 million soaked up from the drydocks.

"Our targets (of curbing the deficit to Lm90 million) are achievable but we have to restrain our spending even further," Mr Fenech said.

The Commission plans to draw up budget recommendations in time for the EU finance ministers' meeting on July 5.

The deficit in Malta increased to 9.7 per cent of GDP in 2003 (including the cost of a major one-off operation estimated at 3.2 per cent of GDP).

According to the Commission spring 2004 forecasts as well as to the government the deficit for spring will be 5.9 per cent of GDP.

All of the EU's 10 new members want to join the eurozone by 2010 at the latest and will have to abide by a deficit of not more than three per cent of GDP to qualify.