Change to Lisbon Treaty still on the cards – Gonzi

Prime Minister Lawrence Gonzi said yesterday that the proposed limited changes to the Lisbon Treaty were not discarded during last week’s EU and eurozone summits in Brussels.

Answering questions in Parliament by Opposition Leader Joseph Muscat and by Labour MP Alfred Sant, Dr Gonzi said Malta believed one had to do what was necessary as regards changes to the EU treaty. Malta had still to be convinced that stronger instruments were needed. Following discussions the government would make its own analysis and go to Parliament before taking its decision.

Together with other eurozone countries, Malta remained determined to curb the current crisis and transform it into opportunities for the Maltese while increasing economic growth. In his statement the Prime Minister covered the EU strategy for economic growth, fiscal consolidation and strengthening the governance of the eurozone through increased economic integration while supporting member countries in financial difficulties.

He referred to the analysis of the package agreed to during the summit on the European Financial Stability Facility (EFSF) and the Greek debt. The decisions taken aimed at a final solution intended to calm the financial markets. Positive reactions followed but one had to wait for the coming days and weeks on how the situation was evolving.

Certain details on the agreed package were still being finalised. Dr Gonzi saw no reason why the markets would not calm down once the recapitalisation of banks was in place. One had to wait for developments on whether China and other third countries participated in the EFSF.

The Dutch proposal for a commissioner to monitor the implementation of measures on excessive deficits was still on the table.

On the issue of balanced budgets, Dr Gonzi said he saw nothing wrong in linking this to a country’s Constitution although this was a fiscal aim. It was natural that there would be certain conditions but this link would provide clear parameters to governments.

The government had aimed at balancing the budget by 2012 without resorting to constitutional amendments. This was not achieved because of the global recession and it was the government’s priority to safeguard jobs.

He added that there were no definite criteria for balanced budget rules. Discussion within EU structures was on-going and the relevant report would be presented and discussed by national parliaments.

There was nothing wrong in coordinating on tax policies. He mentioned the rationalisation of tax rates among other matters adding that this did not mean Malta had to change its policy.

The Prime Minister said there were EU procedures whereby national governments submitted their budget proposals to the European Commission which gave its opinion. It was then up to the national governments to make their own decisions. The issue of independent analysis was technical, not political.

Dr Gonzi explained the 50 per cent haircut by banks on the Greek debt adding that this was not a credit default because it was voluntarily agreed although there were serious consequences if private sector involvement (PSI) did not materialise. The banks in the PSI had negotiated with the commission through their association’s representative and they would commit their final decision in the coming days. The haircut was on the nominal value.

The formula for the Greek debt to be lowered to 120 per cent of the GDP by 2020 had been arrived at because this was the limit under which a country’s debt was still sustainable. There were other eurozone countries which had similar debt levels.

Eurozone countries would not be forking out other financial guarantees for the Greek debt because the Greek government had accepted to raise enough finance for the increased bailout from €109 to €130 billion.