The opposition spokesman for finance and for economic affairs said today that it was very serious that the European Commission had not believed the government's Budget projections and ordered a €40m cut in spending. They insisted that the government should explain how it would reduce its spending by €40m.
Finance spokesman Karmenu Vella told a press conference that the Budget presented in November was meant to be a Budget of financial consolidation and economic growth, but the PL had immediately said that the government's projections were wrong and the Budget was deceitful.
The government's economic growth projections had been overly optimistic, and the EU had said the same thing, proving Labour right.
The government had claimed it would end the year with a deficit of 2.3% while the EU had said a deficit of 3.5% was more likely. The EU had therefore told the government to reduce its spending so that the deficit would slip below 3%.
It appeared, Mr Vella said, that the government would have to reduce its spending by almost €40 million - just a few weeks after the Budget was approved by the House.
The big question was where the cutbacks would take place. It appeared that the cutbacks would be in the salaries bill, maintenance, public entities and programmes and initiatives, which included pensions and social benefits.
Mr Vella asked how the reduction in the salaries bill would take place when the number of public sector workers increased last year.
Again, the government had not specified where the cutbacks in maintenance, in public entities and progress and initiatives would take place.
This year, the growth in outlay on progress and initiatives had been expected to increase, because of the cost of living increases. So how would the cutbacks happen?
Mr Vella said he expected EU figures in March would show an even worse situation in the government deficit situation for 2011, further compounding the situation.
The reduction in €40 million in government spending was expected to mean a drop of €60 million in the economy because of the multiplier affect, Mr Vella said.
His appeal was the government to show the full picture of its finances. Furthermore, creative accounting could not be tolerated. The government, he said, was already trying to hide its outlay of some €90m which would have to be made on the City Gate and Parliament House project.
Mr Vella said the EU had not given the government any certificate on its deficit reduction yesterday, as the prime minister had said. It was only acknowledging that the government was observing what the Commission had said needed to be done.
Charles Mangion, Opposition spokesman on economic affairs, regretted that the government's focus was not on the country's problems, but on retaining power. It was very serious, he said, that the European Commission had not found the government's Budget projections to be credible and had ordered a downward revision of spending plans.
He said the expected reduction of €9m on salaries and overtime would impact the people's purchasing power, which was already tight. The government's situation was made worse by the fact that some 700 additional workers were taken on last year and several hundred workers would be absorbed form Air Malta this year.
The drop in programmes and initiatives was expected to reach €14,2 million, but one could not see how this would happen in an ageing population dependant ons social services.
Would the reduction in spending on public entities mean that those entities would raise their own tariffs?
Dr Mangion said there were areas where the government could reduce its costs, such as car rentals, travel and the appointment of consultants.
Prof Edward Scicluna MEP said this could, no doubt, be classified as an austerity programme. The government's predicament could have been avoided had the government heeded the European Commission before presenting the Budget. The formal warning to Malta was made on November 10 but there were signals before that. The government had claimed its projections were based on more recent figures than those used by the European Commission, but it had now become clear that the Budget had not conformed to the EU's rules, Prof Scicluna said.
The government could have aligned itself without finding itself in a strait jacked and having to reduce €10m from its salaries bill. Prof Scicluna said between 400 and 500 jobs would have to be suppressed, in one way or another and overtime would have to be cut back.
The cuts in the other sectors would also bite into the people's pockets and impact the economy. All this was the government's making, Prof Scicluna said.