Prime Minister Lawrence Gonzi is convinced that the difficult decisions being taken by the government today will lead to an improvement in people's quality of life. In an interview with Steve mallia, the Prime Minister also argues that the turbulence within the Nationalist Party at present helps keep the party on its toes.

You stated that the local council elections result came as no surprise. Is it sufficient in your view to justify a disaster simply by knowing it was coming?
One, it was not a disaster. Two, we carry out regular surveys and polls so we knew what the situation was. Three, almost nine months ago we had a result that spoke for itself (the European Parliament elections) and changing that result in a matter of nine months, during which we took measures that continued to hit sectors of our population a little hard... well, the outcome was a forgone conclusion. We set targets for ourselves during this campaign; some were achieved, others were not.

Which weren't?
Santa Venera came as a big surprise to us. We are still trying to analyse what the situation is and why it developed in that way. But then we had some positives; St Julians was better than expected, as was Gozo. The analysis proves there is no one single reason which one can put one's finger on: There are sectors in our society that decided not to vote or to vote against the government because of national issues, there are others that decided not to vote or to vote against the party because of local issues, so the analysis needs to be carried out very carefully.

Was this only "not a disaster", to use your words, because you pulled out of Marsa and Zejtun?
Marsa and Zejtun have nothing to do with it. In 2002, we obtained a negative result and a few months later won the referendum and general election. So, local council elections are a snapshot of what the situation is at that point in time. If that snapshot is in accordance with what we thought it would be, then that is OK. The problem is if that snapshot fails to develop in the next three years when we have to face a general election which is the final test of a five-year legislature.

You have stated you are taking the best decisions for the country and are trying to justify this kind of result on people's reaction to that.
I recognise that we have taken some decisions that people did not appreciate and that these measures hit people's pockets. And people will react to this. Having said that, the idea is for us to be able to control and reduce the deficit to the levels that are urgently needed for this country and in the meantime stimulating the economy for it to be able to compete and generate jobs. I think we have reached a stage where the initial decisions we took are in the process of giving us the results we want and we are quite confident about the future.

But how can you stimulate the economy if people have less money in their pockets?
That is the million-dollar question. It's a question of finding the right balance between addressing the deficit situation and consolidating our fiscal position as a country on the one hand and doing this without starving the economy of the funds that are required to keep it moving on the other. The budget for 2005 provided the framework for this balance to be found. Of course, the problem we face is that a lot depends on factors that are not within our control, such as the price of oil, which has hit $57 per barrel.

The Sunday Times carried out a survey recently and 60 per cent of the people said they didn't believe this was the best way forward for the country. Do you know better than them?
No, I don't think it's an issue of me knowing better than them. I think it's an issue of identifying consistently what the best interest of the common good is. In other words, I can understand people saying that hiking the price of paraffin is not the best way forward. I can understand people saying that the introduction of the eco contribution is not the best way forward because again this is hitting them in their pockets...

...or departure tax, mobile phones...
...I can understand it. But I would suspect everywhere in the world people would say that a tax is not the best way forward to address the environment.

But I think people's biggest concern at the moment - a survey on The Sunday Times confirmed it - is that they cannot keep up with the cost of living. Is this something that worries you?
Yes, of course. However, again, measuring the cost of living and the increase in the cost of living indicates very clearly that what we went through last year and our rate of inflation was not something out of the ordinary. We also have a system that compensates for the cost of living increases, though there's a delicate balance that needs to be struck because increasing the cost of living means you are increasing the cost of labour and that means you have an issue of competitiveness. But let's see the other side of the coin: these measures are addressing the issue of obtaining fiscal consolidation, bringing the deficit down. Last year we closed the financial year spot on with Lm94 million, which is what we had targeted.

But there are no incentives for people to spend their money because the government is taxing them all the time.
What do you mean there are no incentives? We had a record number of people going abroad this year - they're spending their money - consumer expenditure is indeed going up, savings are going up. There's a number of factors which...

...it's become more expensive to make a mobile telephone call, more expensive to go abroad, buying a car here is one of the most expensive in Europe, wages here are among the lowest if you exclude the eastern bloc countries. So there's something going wrong somewhere.
The comparisons are not quite right. You cannot compare the labour costs, or rather the wages, in Malta with what is paid in other countries. To make that comparison you have to compare like with like and therefore compare the cost of living in those countries with the cost of living in Malta. For example, people don't realise that when you compare the total package of taxes in Malta - social security, income tax, eco contribution - with all the countries in Europe, the island ranks in the lower half of the list. True, the measures that have been taken have led to a sort of shrinking of the money that's available in people's pockets for them to spend. But this is logical, it's natural.

This is a source of disgruntlement but so too is the fact that many people are feeling that if you earn a wage in this country you are being affected because the government can find your money and take it from you whereas there is a sector of society in Malta who aren't affected by this, such as people taking cash in hand and certain self employed.
But the government has done a lot in order to address abuse. Do we stop taking action to stop abuse in order to get a good result in the local election? No. So, for those that are saying 'I am paying my tax while there are people out there evading tax', the answer to that is, yes, but the government is addressing this. And we have addressed it.

Can people look forward to any incentives in future or is there nothing in the offing?
Yes, of course. That is exactly why we are taking the brunt of what I have described as difficult decisions because we are convinced that those difficult decisions we are taking today will give us the results that will be enjoyed by our people. And what we are looking at is not only an improvement in the bottom line - money that you have available to spend - but an improvement in your overall quality of life, such as environment and education.

There's been a lot of disgruntlement from members of your own party about the way the party is being run...
...Everybody has a right to an opinion though I disagree with the analysis or conclusions. Two weeks ago we held an extraordinary general conference which went extremely well. We have introduced changes to our regulations and statutes, we have opened ourselves up in all senses.

Given the bad electoral results and the accusations being made, is it time for the party to replace the general secretary (Joe Saliba)?
The electoral results have nothing to do with the general secretary or the party. The reason for the result lies elsewhere. I think the mechanism within the party operated well during this campaign, they operated in the best way they could in the circumstances...

...people are calling him dictatorial.
Again, I would disagree with that. Our party system is democratic. The general secretary will have to face an election in the coming weeks so how can someone describe someone as dictatorial. Of course, the general secretary has a responsibility to address a long list of issues related to the party; some of them relate to the fact that the party employs a large number of people, it runs a major commercial operation today, together with the political aspect which is the most important: the policies, the way the party...

And, according to the electorate, that's where it's going wrong.
Why do you say that?

It's being reflected in opinion polls being held and in the elections.
The electorate has expressed a judgment either on what the government is doing or what the local councils are doing; it has not expressed an opinion on the way the Nationalist Party operates or the way the general secretary operates or anything of the sort - at least my interpretation is that.

Do you think there is some sort of campaign within your own party being organised against your group of people?
Our party is an open and democratic party. There are currents within the party like any other party...

...strong currents at the moment.
No, I wouldn't describe them as strong. They are natural currents that probably help us to keep on our toes, help us to respond, to double check on what our policies are. It's a healthy way of doing things really, so I have no problem with that.

Would you agree that the country's infrastructure at the moment is in a disastrous state?
What infrastructure is in a disastrous state? If you tell me that we are digging up roads to make them better, I strongly believe we are doing the right thing again...

...even if they are never finished?
Who is saying they are never finished? They are ahead of schedule in some cases, they are on schedule in other cases, they are on budget in all cases. This is something we should be very proud of. Again, perhaps we are not explaining enough. In fact, we will be taking some action in the coming weeks to show people that we are on budget and on schedule.

When are you going to have a Cabinet reshuffle?
Whenever I decide that it is necessary to do so.

Do you believe at the moment that each and every member of your Cabinet is performing?
All of us can perform better. What I am saying is, however, that this Cabinet is indeed working very hard.

You seem to be hinting you are not happy with certain elements of it.
I repeat: I think every single one of us can do more even if what we are doing today is a lot; so much so that the criticism levelled at the government is that it is doing too much, that we have tackled too many issues in one go, which is the best proof I think...

...not if you can't finish them.
We have finished some of them; we are in the process of finishing others; we are in the process of launching others.

Do you rule out that you are going to have a reshuffle this year?
I rule out nothing. That is a responsibility that the Prime Minister shoulders. It is the Prime Minister's prerogative to do so. It will certainly not be done because someone writes in the media and says that a reshuffle needs to take place. It will certainly not be done simply as a cosmetic exercise. It will only be done if there is something really positive that can be achieved.

Is it something that's on your mind at the moment?
Everything is on my mind.

What in your opinion has been the biggest drawback of EU membership so far?
The fact that we did not have sufficient time to be able to adapt in a smoother way to the changes that were coming with effect as from May 1, 2004. The fact that our application was frozen for two years meant that in 1998 we started with a two-year backlog which we had to make up for.

But then the government had four years.
Yes, but that meant there was an enormous volume of legislation that had to be set up, new authorities, which meant that all of these faced May 1 in a situation where perhaps not all of them had the capacity to be able to handle it or they needed to adjust or grasp what the issues are. The drawback as from May 1, with a totally open market, with the consumer suddenly having a much wider choice of products....

...and yet the prices of certain products remained high in spite of liberalisation.
Yes. But there again, the mechanisms we have in place today that control fair trade, that control monopolies, that check on prices etc, those mechanisms needed time and still need time to give the results one expects.

Will the euro be introduced before the next election?
That is a decision that we are in the final stages of taking now. We are having a series of high-level technical meetings to be fully aware of what the issues are, the advantages and disadvantages. The nine other new EU states have already declared their strategy for joining the euro and we know they will be competing with us.

Do you want it to be an election issue?
It should not be a political issue at all, not just not an election issue.

But if it's not settled it will be. You accept that.
Whether it's settled or not, I sincerely hope no one will attempt to politicise an issue which is highly technical, which is related to the competitiveness of our country and which will span a number of legislatures; in other words, the decisions we are taking today are decisions that will have an impact on future legislatures, future governments.

Do you hope it will be settled by the election?
I hope it will be settled by the election in the sense that it need not necessarily mean that the euro would have been introduced by the next election but at least it would mean that Malta would be sufficiently on the way towards the introduction of the euro.