Labour’s false sense of freedom

We have it from the horse’s mouth. The Labour Party does not want to be tied down to EU rules that would stop any government, including a Labour government, from running an excessive deficit. Referring to the ongoing discussions at EU level on tighter financial rules, Labour leader Joseph Muscat took the time in his big Budget speech last week to stress that our country “should not allow itself to be straitjacketed in the financial measures which it needed to take. After all, the big countries did what they wanted when they wanted”.

It sounds macho. But is it sensible? It is not. And it should send shivers down your spine. Let me explain why.

EU rules imposing strict limits on government deficits and debts lie at the basis of the EU monetary union that produced the euro, our currency. Countries that want to adopt the euro must comply with them. We did this before 2008. That’s how we got in. But once you join the eurozone, less attention is paid to the continued respect of the rules. And over time, EU countries were allowed to spend their way into high deficits and amassing high debts. It started with Germany and France, which bullied their way out of the rules in 2005. And it ended with Greece, Spain, Portugal and Ireland that all took the “liberty” of waving goodbye to financial discipline. We all know where that got them.

It is for this reason that EU countries are now engaged in difficult talks to tighten the rules to make them more enforceable with stiff penalties that would serve as a proper deterrent.

The rules would compel euro countries to keep their financial house in order on an ongoing basis, hence, triggering sustainable economic growth based on true productivity rather than reliant on government subventions. To be sure, keeping financial discipline is not easy and comes at a high political price. Just look at the political cost of our hike in water and electricity bills. At the first electoral test, last year, the government got a drubbing in the European Parliament election. And one year on, the PL is still milking it for all it’s worth.

Yet, governments that want to be serious must also have the courage to take difficult political decisions to bring their Budget under control. We had done it to join the euro. And, after overshooting our targets because of the recession, we are now back on track to get within the limits by the end of next year.

Last year, we were one of just two EU countries that reduced the public deficit. It would be in our interest if all the others did the same. And if governments do not have the courage to do what is necessary, then, yes, EU rules should compel them to do so.

But now that EU countries are set to agree on tightening the rules and making them more credible, out comes the Labour leader telling us to “stand up” against them because he wants to be free to take the financial measures he wants. In other words, if Dr Muscat was Prime Minister today he would be in Brussels opposing stiffer EU rules because he would prefer to have the liberty to run big financial holes that would, sooner or later, have to be plugged by taxes.

Dr Muscat’s ill-conceived declaration coincided with news that Labour’s big policy platforms would send our public deficit ballooning to 9.6 per cent. That’s more than three times the EU limit. Labour claimed these estimates were incorrect but failed to come out with estimates of its own. And even if we had to give Labour the benefit of the doubt, it is still clear their main policy measures would send our deficit skyrocketing and put us into financial dire straits.

Now which straitjacket would you prefer? The straitjacket of EU discipline or the financial straitjacket that would result from Labour’s free rein on our Budget deficit? For after a Labour government spends its way beyond the limits, it would still have to turn to you, the taxpayer, to foot the bill. And the higher the deficit, the deeper they will have to dig into your pockets.

With a Budget deficit hovering over nine per cent, as Labour would have it, they’d be cooking austerity measures that would make our utility bills feel like soap. We’d be looking at job lay-offs, cuts in social security benefits, cuts in pensions and, of course, tax hikes.

That is not scaremongering. It is precisely what other countries – that preferred Dr Muscat’s freedom – are facing right now.

They now know it was a false sense of freedom.

www.simonbusuttil.eu

Dr Busuttil is a Nationalist member of the European Parliament.