Government finances are on track

Prime Minister Lawrence Gonzi argued yesterday that while the Labour Party was consistently painting a doom and gloom picture of the economic situation in the country, Ecofin has reported that the government finances are in line with projections.

The Ecofin Council covers EU policy in a number of areas including economic policy coordination and surveillance, monitoring of EU member states' budgetary policy and public finances, among others.

The Cabinet had on Friday started discussing whether and when Malta should join the ERM II prior to adopting the euro as each EU member state was obliged to do.

The aim of ERM II, (ERM stands for Exchange Rate Mechanism), is to maintain exchange-rate stability between the euro and the participating national currencies.

Dr Gonzi said a number of member states that joined the EU last year have already decided to adopt the euro by 2008. Unless the government decided to join ERM II by April, (the date when Malta would be able to adopt the Euro), and would be postponed for a substantial period.

Fielding questions by journalists, the Prime Minister said joining the euro would not mean the lira would be devalued or its value adjusted.

"There is absolutely no consideration to devalue and neither is there to make any adjustments," Dr Gonzi stressed.

The difference would be that while currently the lira was pegged to a basket of currencies made up of the euro, the dollar and sterling - the lira would be pegged solely to the euro.

Adopting the euro could make inroads into the country's competitiveness and one would have to see what measures could be taken to shore up against this eventuality.

Dr Gonzi was speaking during his regular monthly meeting with the media at the Auberge de Castille in Valletta. Tackling more questions from the floor, Dr Gonzi felt that there was no contention between the country's constitution and the EU Treaty and therefore no need for a referendum on this matter.

The EU treaty will deal with a country's relations with the EU. Dr Gonzi argued that Malta had one of the most intensive campaigns prior to it joining the EU and the electorate had decided in favour of joining.

The campaign had delved into the question of status of the Maltese language in the EU, the sixth MEP and a commissioner for Malta among other topics.

The government, he added, expected the MLP to decide on how to vote on the EU Treaty and would wait till mid-year for such a decision but then the government would go ahead and decide.

The EU treaty will be adopted by Malta by a simple parliamentary majority.

Regarding the PN's decision not to participate in the forthcoming local council elections in Marsa and Zejtun next Saturday, Dr Gonzi said this was a decision similar to the one the MLP had taken many a time.

The government would keep striving to get to work in partnership with local councils because so much more could be achieved by working on this model, particularly as regards to the preservation of the environment.

He said he found preposterous the decision by those councils who refused a government subvention of Lm1,600 to set up bring-in sites.

Asked where the inquiry into the Safi incidents between members of the Armed Forces and illegal immigrants has got so far, Dr Gonzi replied that Mr Justice Depasquale had a long list of people to interview and he "did not in any way want to influence him" by any of his declarations.

When it was pointed out to Dr Gonzi that the government's revenue up till January 2005 was lower than the previous year and spending was higher - when the government had been saying it was reigning in the deficit - Dr Gonzi said there were reasons for this.

One was that by January 2005, the government had to pay out an additional week of social services benefits, a payment had to be made to church schools and thirdly, refunds had to be paid to the EU which had not been paid the previous year.

On the report on the workings of the Foundation for Tomorrow's Schools, the Prime Minister said it was not fair that a report issued two years after the inquiry was set up did not include the steps taken by the government and by Education Minister Louis Galea to ensure that the irregularities highlighted in the report would not be repeated.