A prayer for Tonio Fenech

Never envy the person who wears the shoes of Finance Minister. The position is the most important and powerful in the Cabinet, after that of the Prime Minister. It is the most onerous one as well.

The minister has to draw up the annual budget and, in it, combine various objectives, some of them conflicting. He starts off with a bill that has to be paid, whatever happens. It is made up of fixed items, though the amounts within them could vary.

The bill comes from providing education and healthcare, policing society to maintain law and order, covering the outlays on the armed forces which, though small in international standards, are sizeable in our context. In addition, social security payments have to be made, a massive annual outlay.

These are the main heads of expenditure which have to be addressed, no matter what the economic and financial situation in the Maltese islands. They are of a recurrent nature, and the Finance Minister also has to consider requests for other spending by his peers. He has to supply them with funds to cover day-to-day needs other than salaries to run their departments, such as medicines, as well as consider special requests.

In the context of the recurrent budget, the minister has to formulate, largely with the Prime Minister, social and fiscal policy.

The first is to progress towards more social justice, the second is to raise the wherewithal to finance the spending that must be made, even if there is no policy change from year to year.

Still, on the expenditure side, the minister has to draw up the capital budget. This is the most important and demanding of his tasks. It is the major economic tool to influence economic activity directly. Part of the outlay is financed by EU funds, for the time being anyway. But the government has to put up its share in such projects, and also has to finance directly projects which are not eligible for EU funding.

One has to see, for instance, whether any part of the estimated €80 million required to implement the Renzo Piano plan for the restructuring of the first three Valletta pillars will come from the EU. The minister has to select public projects both for their long-term utility, as well as for their short-term - in fact, call it immediate - impact on economic activity.

That objective falls into proper perspective when we recall that the main stimuli bigger countries are giving to their economies to combat recession are coming in the form of infrastructural projects.

The capital budget is practically the only element of discretionary spending open to the government of the day. It can choose what to place under it. It cannot do so with regard to education, health, social security payments and that other major head of recurrent expenditure - servicing the public debt.

If all that is not enough of a tall order to challenge the Finance Minister, whatever his ideological bent and resulting set of priorities, the incumbent has to take political considerations into account.

The interests of the country should come first, no argument about that. But the Finance Minister, though his work is largely technocratic, is a politician. He has to act like a political animal, and the Prime Minister and the sitting party hierarchy will crack their whip to ensure he does not get lost in too many fancy notions of propriety, rectitude and all that.

Now that we are EU members the Finance Minister has another major consideration to keep in mind. And that is the parameters decided from time to time by the whole EU officialdom for members of the club. One such parameter is that the budget deficit should not - must not, really - exceed three per cent of the Gross Domestic Product at current market value.

Well, ours does. For various reasons, one being that the 2008 election caused the sitting government and its Finance Minister, who was then the Prime Minister, to relax their rigour overspending.

That did away with any cushion the Finance Minister could call upon to try to counter the effect of the recession and stay within the three per cent limit. Such a buffer is sorely needed, as the recession threatens to wreak havoc with public finances.

On the expenditure side, the government has to spend more to help out economic actors from falling flat on their back. On the revenue side, economic activity at a reduced pace translates into lower takings. Up to May, that was evident in customs and excise. The tax-take from income tax and VAT still grew, but not nearly as much to cover rising government expenditure.

All of which means we are in for a tough time. The EU, with grandiose stupidity, has decreed that we have to come into the budget parameter line within 18 months, contradicting itself over its reading of the recession.

The government will clearly aim for that. It will be helped by the impact of our relatively high inflation rate on nominal GDP. Yet expenditure will have to be pruned. But, where? More efficiency, less cavalier spending, less evasion - certainly. But, will that be enough?

Brussels is being stupid, but we are still in for a tough time. Do not envy Fenech at all. Better still, say a prayer for him.