The Prime Minister this evening moved the first reading of a Bill to amend the Constitution.
He told the House of Representatives that the amendments would feature the provisions laid down in the fiscal stability and governance treaty agreed by 25 EU heads of government on Monday. The pact is expected to be signed in March.
Dr Gonzi gave a statement to the House where he spoke on the proceedings of the EU summit. This, he said, was an important summit which discussed fiscal consolidation and discipline as a means towards the ultimate aim of achieving growth and job creation.
Fiscal stability on its own would not pull Europe out of the fiscal crisis, he said and it was growth that was needed.
The summit, he said, had focused on youth unemployment, role of SMEs and the single market. In Europe, 23 million were unemployed, he said. In Spain, almost half of young people were unemployed, with many other countries having youth unemployed in the 30% range. In Malta it was 14.3%, the fourth smallest figure in the EU. In unemployment in general, Malta's was the fifth smallest.
SMEs, Dr Gonzi said, were the motor of economic growth and job creation. It was one of the reasons why he had appointed a minister specifically for this sector. One of his tasks was to further reduce bureaucracy for this sector.
The government, Dr Gonzi said, had also, in association with the banks, introduced schemes for easier access to funds for SMEs.
Dr Gonzi said major progress was also made in the talks on financial stability. Dr Gonzi said the Maltese government agreed with the Fiscal Stability and Governance Pact after problems it had on clause 10 were ironed out. The issue, he said, were over words which could be interpreted as meaning that there could be an obligation for 'enhanced cooperation.' Malta insisted that this should not be an obligation and should always be a choice of each country.
In terms of the pact, the countries would be bound by their Constitutions to seek a balanced Budget. Dr Gonzi noted that when this provision, known as the 'golden rule' was first announced in December, the Opposition pronounced itself in favour.
Therefore he would present the first reading of a Constitution (amendment) Bill today and eventually discuss the proposed amendments with the Opposition once the text was finalised.
Opposition leader Joseph Muscat said no one should deceive himself. This sitting was being held in the shadow of the fact that the government had been unable to muster a majority when the no-confidence vote was taken on Thursday. Without Opposition agreement, therefore, this Constitutional amendment Bill would not be possible.
The Opposition, however, agreed with the principle of this Bill and looked forward to talks with the government. In enacting this Bill, the two sides should be mindful of its timing, considering when and how the treaty would come into force and also the fact that the French presidential contender, currently leading in the polls, had said he wanted changes to the Treaty.
Dr Muscat asked whether there was anything, other than declarations of intent, on how the EU would achieve growth.
He noted that Malta was now no longer under the excessive deficit procedure, but the government was being required to cut some €40 million of its spending. Could the government explain where these cuts would come from? These cuts showed how the EU did not have confidence in the government's projections. The IMF too, had said that economic growth projections were overly optimistic.
Furthermore, would he tangibly say how the €80m City Gate project would be financed?
GOVERNMENT DEBT
Charles Mangion (PL) said government debt and debt guarantees currently reached some 85% (€5.5 billion) when the acceptable level under the treaty was 60%. How would the lower figure be achieved?
Dr Mangion asked if Malta was being forced to accept the imposition of a financial transactions tax.
He also asked if people who were due to be given €3000 for photovoltaic panels would now be given €2,700 as part of the government spending cutbacks.
Dr Alfred Sant said that had the new Treaty been introduced six years ago, the last six Budgets would not have been acceptable. He asked how the Treaty would impact on the budgetary workings of Malta into the future. He also insisted that commitments made by Malta regarding fiscal obligations should be subject to parliamentary approval. Was it true that commitments so far, in debt guarantees under the fiscal stability past, amounted to over half a billion euros?
Dr Sant also complained that the treaty had not been published.
Other questions were asked by Labour MPs Leo Brincat, Owen Bonnici and Evarist Bartolo. Mr Bartolo asked if Malta and the other EU creditor countries would have to forfeit some of their lending to Greece (a haircut).
Replying, Finance Minister Tonio Fenech said the government's first forecasts, published well before the Budget, projected stronger growth. The assumptions of the EU were different from the government's. Indeed, the IMF forecasts on Malta were different from those of the EU. EU Commission experts had visited two Malta before the Budget and examined the figures, without raising objection. However, in view of the new fiscal arrangements in the EU, the Commission had asked five countries to reduce sending. The spending reduction was a precautionary measure to ensure that Malta achieved its deficit reduction targets while having the elbow room to intervene in particular sectors of the economy, as necessary.
He explained how much of the saving would be by reducing government recruitment. Some 1,500 retired every year from the public service. The government's aims would be achieved if recruitment was 400 less. There would be a slight decrease on overtime, a 5% cut in operative spending and a similar cut in government institutions. Mr Fenech observed that the Opposition had noted certain declarations by the IMF and the Commission, without noting the positives, such as that Malta's economy was sustainable and how the deficit was being reduced in a sustainable manner.
CITY GATE FUNDING
As for City Gate, Mr Fenech said a substantial portion of the costs were already included in the accounts, as presented and published by the EU. The government felt that for major infrastructural projects, in order to have a long-term budget, an investment vehicle would be created and listed on the exchange, for public subscription. The government would then pay that vehicle over a number of years. Talks on this model, found in several other countries, were already well in hand with the Commission. This mechanism was also being discussed with the Opposition.
Mr Fenech said government debt was 68% which had to be reduced at least to 60% over 20 years. That could only start to happen once the budget was balanced and then produced a surplus.
On the refunds for photovoltaic panels, Mr Fenech said people were being paid 50% of the value of the panels, as had been previously agreed.
Dr Gonzi, replying to Dr Muscat, said a motion which the Leader of the Opposition presented on Thursday had not been approved and parliamentary business would continue.
Dr Gonzi said he was surprised by the superficiality of some of the Opposition's questions and the way it was ignoring economic reality.
Dr Gonzi said the situation was slowly improving in Europe, although major problems remains. With regard to Greece, he said progress was being made and talk of a 'haircut' was speculation.
With regard to Dr Sant, the prime minister said the treaty had been published and was available on the internet.
The first reading of the Constitution (amendment) Bill was then approved unanimously.
The House meets again on Monday evening.