Monday, 29th June 2009
Fenech lays ground for spending cuts
Finance Minister Tonio Fenech yesterday laid the ground for a tough budget characterised by cuts in spending.
"Now is not the time to raise taxes ... to be aggressive with the economy," he said. "But we have to be realistic and keep our feet on the ground."
He said during an interview on Radio 101 that everyone agreed the government needed to cut spending, but the same people would then complain when the cost cuts affected them.
"There will be requests for wage increases, pensions and social services. I would like to accommodate all of these but we have to be realistic," he said, before the first few meetings on the pre-budget document to be launched next week.
Now was not the time to pick the fruits from the tree but the time to plant seeds, he insisted.
His words come on the back of a deadline set by the European Commission for the government to rein in the budget deficit to below three per cent by 2010. Sandwiched between the fiscal deadline of the EU and the need to boost the economy in a time of crisis, the government's solution seems to be targeted spending cuts.
In this vein, Mr Fenech mentioned the removal of subsidies on water and electricity bills.
He said his government had been consistent in saying that lowering taxes would require cutting back on unnecessary subsidies such as those on water and electricity bills, suggesting that this would be the way forward as the government walks a tight rope.
"Nobody, not even at the MCESD (Malta Council for Economic and Social Development) ever suggested that we should pay for the subsidy on water and electricity through higher taxes," he said. "You just cannot have both, it's a reality which does not exist."
He also spoke about the Shipyards and revealed that two of the three bidders which last month had been told to improve their offers for the ship repair operations had filed new bids.
Late last month, the government told the only three consortia which made offers for the ship repair section that their offers were deemed to be minimal. Yesterday he said that even their investment plans were puny.
If they had now followed the guidelines given by the government, which were based on a professional estimate of what the ship repair operations should fetch, then the privatisation of this section could be back on track, he said.
The setback appeared to be quite a blow for the privatisation. Although the other three units up for sale - shipbuilding, the Manoel Island yard and the super yacht facility - are underway, the ship repair section has always been considered to be the trickiest part of the sale.
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Comments
It's a Trojan horse and not a gift horse Martinelli.
Mark Anthony Sammut
That was a debt incurred by the PN administrations in the 1960's.
PL left Lm500 million in Malta's coffer, more than enough to pay that debt 10 times over.
Joe Vella
When you mention the Human Deficit and an Infrastructure Deficit and that it will take another 25 years to remedy it speaks highly of your PN governments who have been in power for more than 20 years and have not yet succeeded in eliminating the shortcomings. This is apart from what you say being a blatant lie.
P. Schembri
J. Vella is so blindfolded with his blue blinkers that he cannot see anything except blue.
This kind of budget should have been issued a lot ago not now that our country has no more physical resources. Malta is dying and not because of the gov but because of greediness which the gov failed to address.
Let's wake up and work and it's a pity that if in 3 years time we waste what we have managed to put apart this kind of budget should go like this for at least 10 years maybe we get our debts down by half.
You say ...."There is no "interest" money going out of the country"
Guess you don't believe that HSBC controls at least half of the econmy, and a good chunk of the real estate market?
Hold your horses on Piano mr. Government! It's our monies and more importantly our lives you're playing with....not an electoral ribbon cutting stunt!
if you read some recent history you would know that When PN went in power in 1987 Their was no debt but a huge sum of millions of liri saved by the labour governments. It was the Pn who spent every cent of it and started borrowing money. i can still remember an ex Pn finance minister saying Id-Dejn ma jinkwietanix. Dak iħalsuħ ulied uliedna!!!! Dik serjeta.
And by the way labour left jewels which were all sold by Nationalist Governments including Mid med Bank just to mention one
One comment was that the government is spending 80 M while the Finance Minister is thinking cutbacks. Such people are so automatically opposed to what the government does, that they twist statements by the same minister. Why is it so hard to understand that the Minister's suggestion is to cut on SUBSIDIES to W&E rates? Is it because these people do not want to pay for what they buy? Yes, using electricity is buying energy.
Then there are the instant economists who say that spending this kind of money is not the way to go at this time. It is exactly the opposite! Governments spend MORE during recessions, not less. If they spend less, they would ADD to the unemployment problem but by stimulating the economy, they create new jobs which will come part way to make up for lost ones. The other thing is that the 80M will not be spent at one go but rather spread over four or more years which translates to some 20M per year for the next four.
There is never a gain without some pain!
Projects like this one and other capital projects is exactly what is needed to boost the economy during this time. Capital projects create jobs. People are working earning a living, they pay taxes; instead collecting social security among other things. The end result is Government Revenues increase, and Expenditures decrease. The benefits is not only to those who are directly working on these projects but also to the many sub trades that need to be engaged. Economist will tell you that an 80 million Euros once it trickles down to the economy the real investment in the eeconomy will be many fold over.
Also, one have to keep in mind that the 80 million euros are not a one time expenditure, but it is over the four years forecasted to complete the project.
@ Domenic Chircop
In regards to Government Debt I am not bothered at all. The reason is that unlike the '70's and the'80's, the Government debt is all locally held. In other words there is no money going out of the Country in the form of interest money. Which also means more money in the pockets of Maltese families to spend.
It is estimated at 80 million euro; knowing how things work out in Malta, a cost overrun could happen.
Just because we are sayimg that there must be spending cuts in other areas does not mean these will actually ensue. Analysis of past financial data, even if corrected for recessionary influences, does not fill one with optimism.
And what exactly does Minister Fenech mean by spending cuts ? Could it mean depriving people even more of their free medicines ? Has he reached some form of agreement on cuts with Almunia ? Or does he mean reducing certain financial privileges of MP's ?
Citizens of Malta, beware ! Your country is already debt-ridden to the tune of a soon to be reached incredible four billion euro. Do not expect any kindness from the EU. They will still pressure us to cut our debt and our deficit, irrespective of the hardship it will cause. They will bully us into submission, unless you give them the two finger salute, like Brown and Sarkozy are doing.
These political tactics are becoming unbearable. Before the General Elections we promise heaven on earth, then just after the elections we find that not all is well on the waterfront. So, the first, second and third year of the legislature we are given tough budgets, even though the people are living in a straight-jacket, then in the last one or two budgets all things on earth become rosy again.
Please, give the people some breathing space and stop taking us for a ride. Dear PN politicians, you have shown to all and sundry that you are unable to get Malta on its feet again
therefore, call an early election and let the people decide on who can get Malta out of this dirty waters that most of us are swimming in.
We have been hearing this year in year out, except before an election!!!