How to save a million ... or 40!

Finance Minister Tonio Fenech told Parliament on Wednesday that of the €40 million which the European Commission had asked the government to save on the 2012 budget, €10 million would come from wages, with the replacement of one out of every two workers who retire.

Mr Fenech was replying to opposition questions following a statement by Prime Minister Lawrence Gonzi on his participation in the latest informal EU summit in Brussels last Monday.

The minister said that if the government did not replace 400 of the 1,600 who retired every year, it would already achieve its aim. Nevertheless, this would be a flexible measure because certain people, like teachers, were irreplaceable.

The government would also reduce overtime to the barest minimum but would not eliminate it completely. It would also reduce its operating costs by five per cent. Government entities would also have to reduce their operational costs by a similar amount.

If the government revenue plan was achieved, this exercise would not need to be continued since the government would have reached its deficit goal of 2.2 per cent of GDP.

Malta, he said, wanted to send an international message to entrepreneurs that it was different from other countries. The Commission had praised the government for its budget and for its additional prudent measures. It also said that that the way the government was managing public spending was credible and sustainable. The IMF was also positive with regard to Malta on economic growth in spite of the economic crisis. It praised the government for reducing its deficit over the past four years in a credible way.

Mr Fenech also delivered a stern warning to permanent secretaries, directors, chairmen of entities and executive heads telling them he expected them to tell him how they would achieve this target and not to tell him how impossible it was to follow. “You are paid to tell me what action to take and I expect the cooperation of one and all.”

Earlier Mr Fenech said that estimates and forecasts before the budget indicated that economic growth would be higher than predicted. International organisations were more conservative in their projections. Nevertheless, this did not mean that they contradicted each other. The IMF’s forecasts were different from those of the EU.

Mr Fenech said the 2012 budget was drafted subsequent to meetings held with the European Commission which had requested the government to review it.

The government had also taken into consideration the fact that different indicators were more pessimistic as to the economic situation. While they did not predict a recession, economic turmoil could reduce economic growth.

The government was taking precautionary measures to achieve its fiscal aims. This was contrary to other governments, which had to adopt austerity measures.

Mr Fenech said that a substantial part of the cost of the City Gate Project was already included in the government’s accounts. Meanwhile, the government felt that, for large infrastructural projects, there should be an institution which would implement the project itself and would then rent it to the state. This would be paid over a period of years according to long-term planning. Negotiations with the Commission were also positive in this regard. There were even talks with the opposition. He noted that the Labour Party committed itself not to increase the debt. However, the EU required governments to reduce debts to 60 per cent of the GDP. Thus there was a need of a balanced budget. Answering Evarist Bartolo on VAT returns, Mr Fenech said that returns were issued according to a fixed schedule. Returns issued in December were those of people who became eligible in the scheme announced in the budget.