Finance Minister Tonio Fenech said yesterday that Leader of the Opposition Joseph Muscat had learnt nothing from the Greek crisis as shown by his proposal to cut utility bills which effectively meant that this would push up the national debt.

The minister was winding up the debate in second reading of the Participation and Guarantees under the European Financial Stability Facility (Amendment) Bill. In a blow-by-blow answer to Dr Muscat’s comments, Mr Fenech said it was indeed right to argue that the way forward was through economic growth, but the Labour leader had failed to explain how this could be achieved.

Mr Fenech claimed Dr Muscat had copied his proposals from the Financial Times, making them his own. Dr Muscat’s proposal of a European Monetary Fund was similar to the European Stability Mechanism, which would be able to intervene in secondary markets.

He said that although Dr Muscat was against a fiscal union, his proposal on the euro bonds meant that a structure leading to a fiscal union had to be set up. This structure had to include a European treasury and the right to impose taxes. The government was not against Eurobonds but one had to look at the conditions.

Mr Fenech spoke on the collateral issue arguing that Malta insisted on the right of receiving equal treatment as other countries. Malta would not take up collateral because it would not benefit the country.

Malta’s exposure to the guarantees on the Greek loan would be from €6 to €8 million. Its exposure to the guarantees given on the Irish loan would rise from €3.5 to €5million.

The Bill increases Malta’s contribution and guarantees to the eurozone’s bailout fund to €704.33 million. The minister moved a motion authorising the government to borrow not more than €24 million to be loaned to Greece.

(A full report of Mr Fenech’s winding-up speech will be carried tomorrow together with contributions by Robert Arrigo (PN) and Labour MPs Charles Mangton, Helena Dalli and Alfred Sant.)

Introducing the debate, Mr Fenech announced that Malta had already paid €19 million last year and €25 million this year of its €74 million commitment over three years as part of the €80 billion contribution and guarantees agreed upon by the EU.

The amendment to the Bill is the ratification of the European Financial Stability Facility (EFSF) agreed upon at the June summit. Ireland and Portugal are currently the only two states utilising this temporary mechanism which has an emergency fund of €440 billion, of which Malta contributes €398 million.

Parliament was being asked to ratify the increase in guarantees which in Malta’s case would go up to €704 million.

There was still much to be done to strengthen EU institutions leading to the permanent European Stability Mechanism (ESM), which is envisaged to come into force in 2012, which was also in Malta’s interest.

The eurozone was going through extraordinary times. Failure to successfully emerge from this period would also have extraordinary consequences – more costly than the measures which were currently being taken. This was evidenced by the problems facing Dexia Bank, the bank the market judged most vulnerable to Greece. France and Belgium had moved to guarantee its debts.

Three years ago, the US government had not intervened when Lehman Bank was in difficulties, and the repercussions had vibrated throughout the world with economies collapsing and millions of workers losing jobs. Factories in Malta had had to go on a four-day week.

On May 8 last year, the EU council agreed to assist Greece. But the respective parliaments had not accepted that this assistance be given unconditionally or without a programme that would lead to economic and financial viability. These included stiff measures such as cutting down on public spending, enforcing taxation, increasing income, entering into a privatisation programme and enforcing labour reforms to bolster economic activity.

Every disbursement to Greece was pegged to the assessment by the European Commission, the European Central Bank and the International Monetary Fund – the so-called “troika”. By mid-October, Greece should have received another tranche but analysts had still not concluded their assessment to ensure Greece was following the agreed programmes.

Malta’s disbursements totalled €19 million last year and €20 million this year. A further disbursement of €5 million due this month had been postponed pending the progress report. There appeared to be some slippage in deficit reduction by Greece, and economic reforms were taking longer to be implemented than planned.

Following a demand for guarantees by Finland should a second bailout be agreed with Greece, Malta and five other countries including the Netherlands sought guarantees. But the agreed formula was far too expensive for guarantees to be given and Malta had, therefore, decided to drop its request.

The guarantee did not exceed 20 per cent of what was being lent or guaranteed. Furthermore, whereas the disbursements were to be made over a number of years, the countries given the guarantees would have to make their payments at one go. And should the guarantees be called, the payment could well end up being made 25 or 30 years later. Clearly, the message was that it was not worth seeking a guarantee.

Mr Fenech stressed that in terms of the EFSF, which may come into force next year or in 2013, Malta would contribute €58 million in paid-up share capital which would not be calculated for the purposes of the national debt because the EFSF was considered as being a financial institution.