The Prime Minister said yesterday he was ready to override the prepared budget speech, due to be delivered on Wednesday, if a social pact was agreed with the social partners at the last minute.

Addressing supporters at the PN club in St Julians, Lawrence Gonzi observed that the past week has yielded the most serious evidence that the government really wanted to have dialogue.

Lengthy discussions had been taking place at the Malta Council for Economic and Social Development, most of which had been led by Finance Ministry Parliamentary Secretary Tonio Fenech, for the past four months.

There was consensus in the MCESD that there were challenges ahead and that if these were met the country could make progress but that if they were ignored, it would fall behind.

Everyone realised there were big opportunities ahead but some were difficult to achieve. The problem at the MCESD was that no one wanted to take responsibility for the decisions.

There were many areas on which agreement had been reached but there were other points on which there was no agreement. Dr Gonzi said he was willing to wait till the very last minute to implement any agreement reached, even if this was after his budget speech would have gone to print.

If, on the other hand, no agreement was reached, the government was ready to carry the responsibility for its decisions.

Dr Gonzi said that in the first part of the MCESD meeting on Saturday, Government Investments Minister Austin Gatt together with Enemalta Corporation technical staff gave a presentation on the impact of the increase in the international price of oil.

The corporation, he noted, would lose millions if no action was taken. The government was ready to carry a great part of the burden but it could not shoulder it all.

He said that an exercise based on the cost of oil three weeks ago showed that if no action was taken Enemalta would next year lose Lm29 million. Another exercise was held last week because the price of oil had gone down. This showed that the corporation stood to lose Lm16 million. If the lira were devalued, as Labour leader Alfred Sant wanted, the Lm16 million would become Lm20 million.

The proposal made to the MCESD dealt with how the government could distribute this burden widely.

The social partners urged the government to be careful so as not to bring about an increase in the cost of living which would be difficult to undo.

The partners came up with different ideas which the government was to consider but all agreed that a sensitive exercise had been carried out.

The proposal, Dr Gonzi said, was linked to how the price of oil would fluctuate from time to time. It involved a surcharge which would be done away with if the price of oil went down.

The country, the Prime Minister said, had to have solutions to be competitive. It also had to lower the cost of labour.

The government also understood its responsibility to cut abuses and to attack abuse in all its aspects.

The government would be doing its utmost to reduce expenditure and become more efficient. It would be playing its part and it was convinced it would make a success out of this operation.

Dr Gonzi argued that Dr Sant's only proposal to reduce the deficit was a devaluation of the Maltese currency. But was not the Labour leader aware that this would lead to an increase in the cost of imported materials, including the equipment required for the Mater Dei hospital, and for oil? he asked.

The Prime Minister claimed that while Dr Sant had managed to increase the country's deficit in 22 months of Labour government, in seven months his government had brought this down to the level the government wanted it to be in.

He said that once the pensions reform document was published, discussion would be allowed to continue until around March when the government would get to the first phase of the document's implementation.

Parliamentary Secretary Tony Abela said that in the next budget the Prime Minister would be promising that next year the government would be reducing the budget deficit from Lm95 million to Lm76 million.

This year the government kept its promise and kept the deficit to around Lm95 million.

Mr Abela said that when there had been a slight devaluation of the lira in 1992, Dr Sant had described the situation as one of panic that would increase the cost of living. Dr Sant had said it was madness. But he was now proposing devaluation.

A devaluation would increase the cost of items in daily use overnight.

This government wanted an economy based on services, technology and pharmaceuticals.

A difficult decision that lay ahead, Mr Abela said, was to find a solution to the ports situation. The General Workers' Union would be the most to complain but this union was the same one that did not want the social pact.

Nationalist MP Jeffrey Pullicino Orlando said that part of this government's vision was to push the services sector, including tourism, ahead.

Tourism was going through difficulties all over the world, including Malta, but the situation was now improving. Malta had to remain competitive and up to date with developments.

The Malta Tourism Authority had to be upgraded to current needs and it should have a bigger involvement by the private sector. E-business should be expanded and Malta should also do more to keep its competitive edge.

It was also important to stop the few who were abusing as they were giving the whole sector a bad name.