The Prime Minister yesterday declared in Parliament that the government would like the EU rule on balanced budgets, the so-called “golden rule”, to be entrenched in the Constitution by a two-thirds majority.
The challenge is to achieve a balance between deficit and economic growth
In a statement to the House on last week’s EU summit, Dr Gonzi told Opposition Leader Joseph Muscat that this principle had to be agreed with the opposition. Discussions would take place at the opportune time when the parameters on the constitutional text would be made clear.
The government had pronounced its preference so early to curtail uncertainty. “This was a strong statement because it was essential to reach benchmarks and targets established in the fiscal pact treaty,” he said.
In direct answer to a comment by Alfred Sant, the Prime Minister said this did not mean that the government was submitting itself to the European Commission’s dictat. Member states had previously agreed to take measures for balanced budgets to send a message of confidence to the financial markets.
The treaty aimed at zero deficit budgets, with deficits having to decrease by 0.25 per cent every year and national debt brought under 60 per cent by 2020. The reports which the government followed included the national reform programme, the stability and growth pact with analysis from the annual growth survey together with an analysis paper. These were public documents as was the 2020 strategy.
Dr Sant interjected and insisted that the fiscal pact changed the parameters on which the government worked. This year’s budget was amended according to the stability and not the fiscal pact.
Dr Gonzi said the government had updated its programmes including targets to be reached to arrive at a balanced budget in an established term preferably within six years under the parameters set by the fiscal pact.
Finance Minister Tonio Fenech said the new parameters included stronger enforceability by the EC in the situation where a country failed to take steps to reduce its deficit.
He said that the national debt, which amounted to around 69 per cent, would have to decrease by about five per cent over a 20-year period. This meant a decrease in deficits and more revenue for the government through privatisation programmes and higher economic growth.
The government’s policy was to curtail its expenditure and give incentives for economic growth.
Dr Sant insisted that Malta’s obligation would be to run surplus budgets adding that under the treaty the last few budgets would not have been allowed by the EC. Parameters had changed.
Dr Fenech did not agree. Malta was not put under the excessive debt procedure. Budget expenditure cuts were taken as a precautionary measure, which would enable the government to address the utility rates.
Earlier, Dr Gonzi said that the greatest challenge was to achieve a balance between deficit and economic growth. Malta was taking, and would continue to take, measures to ensure fiscal consolidation, investment and reforms. This would be done in an intelligent way.
Referring to questions by Charles Mangion and Karmenu Vella, Dr Gonzi said the City Gate project itself provided opportunities for the construction industry at a time when this sector was going through a difficult phase.
It was good news for Malta that the EU Council of Ministers agreed to remove all obstacles within the internal market giving priority to digital services. Malta had an advantage in this sector.
It was also good news that the EC intended to reduce bureaucracy and simplify regulations and procedures on SMEs.
The Prime Minister denied that Air Malta had given any indication of reducing or changing routes during this year. The company’s direction was to become sustainable and to change its economic model which worked well and gave results 20 years ago but was not relevant in today’s economic reality. The airline could not move forward with a 1,300-strong work force. The low-cost airlines had nothing to do with the issue.
He said that the government was not hiding anything on Enemalta through the special purpose vehicle. Malta was doing what other countries had been doing in using mechanisms on how to leverage. He appealed to the opposition to refrain from putting such dangerous questions. Standard and Poor’s were able to give a credit rating to Enemalta because of its economic position. Its estimates were regularly discussed in Parliament.
Enemalta had to face the different current economic and technological realities.
Dr Gonzi said the Maltese government strongly condemned violence against innocent citizens in Syria, adding that measures on freezing Syrian assets would not affect Syrians married to Maltese nationals.
He agreed with George Vella that a parliamentary debate on Syria and the so-called “southern neighbourhood” was called for.