Opposition warns over further commitments on bailout funds
Leader of the Opposition Joseph Muscat yesterday warned that while the opposition supported the government commitments for the Greek bailout and the enlargement of the European Financial Stability Fund, no further commitments should be made without discussion with the opposition.
The opposition did not want to sacrifice Malta’s reputation in shouldering its responsibility in the EU. It wanted Malta to remain in the eurozone and acknowledged the dangers to its economy if the eurozone failed. However, Malta could not give blind commitments but had to negotiate according to the economic and financial circumstances prevailing at the time.
The government had committed itself to a solution that few international economists thought would succeed. The key to the future was economic growth, Dr Muscat said.
The opposition did not want to prejudice the position of taxpayers. They had suffered enough as a result of the government’s economic management. The country could not be extravagant in loans or guarantees to other countries.
It was in Malta’s interest for the euro to be strong and respected. If Greece failed, the repercussions would be similar to those emanating from the Lehmann brothers’ collapse.
He criticised the minister for failing to acknowledge there were problems. The government had abused the prudence shown by the opposition and kept the people in the dark on the euro crisis when other parliaments were discussing the issue. The Prime Minister misguided Parliament when he said that the eurozone meeting was not held because the euro was in crisis, adding that it remained strong and had retained its value.
One could not deny that the eurozone was in crisis. The fact that such countries as Italy and Spain were downgraded because they were in the eurozone was indicative enough.
Dr Muscat called on the government to make a realistic analysis before taking a position. Parliament was only rubber stamping what had had been decided by the European Council. The lack of explanation by the government on its position and on other issues meant it had no position at all or that it did not want to be transparent. A case in point was the collateral issue on the Greek bailout.
While the Finance Minister had said in September that Malta requested collateral, in this week’s Ecofin meeting the same minister did not even keep the right to make a request for collateral. This was irresponsible political posturing.
The Prime Minister also showed he was an amateur when speaking on this issue. The government had to drop this issue because it meant Malta would have to pay a substantial part of the loan to Greece at the outset, something that the country could ill afford.
Dr Muscat called on the government to state its position on the financial transaction tax. The European Council President wanted to introduce this tax within the eurozone. The opposition was against this concept as long as it was not introduced globally in such a way that Malta and the EU would not be at a disadvantage.
The UK – which was not a eurozone member-state – had taken a rigid stand against this tax. He called on the government not to budge in negotiations on the issue because this tax endangered financial services.
Dr Muscat also called on the government to give its reaction to correspondence on the national debt, which he knew was discussed by the Cabinet. He asked whether the government had received any correspondence on the issue.
He also referred to the burden which eurozone states had to shoulder. He mentioned Slovakia’s position which argued that old members had to shoulder a higher burden. The recent eurozone members such as Malta had to observe strict conditions to enter the eurozone when France and Germany had broken the Maastricht rules but no action had been taken.
Dr Muscat spoke on the opposition’s vision which he called on the government to promote in European fora. He said that the European Council was not the adequate mechanism to deal with monetary crisis because it did not adopt the communitarian method. Decisions taken were the result of political negotiations rather than due to market realities.
The opposition was against a common fiscal policy because it believed in the principle of taxation according to representation. The other solution was for the European Central Bank to have its role extended to look at economic growth. Deficit reductions were not sustainable if not accompanied by economic growth.
Dr Muscat spoke of promoting a European Monetary Fund instead of the European Stability Mechanism. BRIC countries (Brazil, Russia, India and China) should be invited to contribute to this fund. The fund would help banks to recuperate to enable them to give loans and lead to economic growth.
One had to think on European lines in managing debts. One had to think of euro bonds, which were an attractive offer for Malta if precautions were taken and a serious structure established.
He criticised the government for declaring that deficit aims were being reached but keeping silent on the increasing national debt. Taxpayers had to pay for this debt.
The money spent on the construction of the new Parliament and the open-air theatre did not feature in the government accounts. The government borrowed money from a private bank, which would ultimately be paid by taxpayers.
The government had shrugged Moody’s downgrading of Malta’s credit rating by declaring there were no problems.
There were lessons to be learnt from the Greek financial collapse.
The Greek government had kept its citizens in the dark and hidden the problems created by corruption, bureaucracy, rising public debt, financial instability, economic mismanagement and creative accounting which gave a false impression.
There was collusion with large businesses and lack of transparency on contracts, promotions and general management. This might ring a bell for Malta.