It is not only the European Commission that doubts Malta’s ability to keep to the deficit reduction programme. The Central Bank, too, has now come out expressing concern over the matter. Still, Finance Minister Tonio Fenech remains undaunted and has once again emphasised his government’s determination to stick to its programme.

It will take time to see who is right or wrong in all the arguments being made, but the outlook does not appear to be all that bright.

The government has already shaved its expenditure, but will this be enough to help the minister to keep to the target? Neither the EU Commission nor the Central Bank appears all that confident.

The Central Bank has warned that the government may have to take additional fiscal measures to reach its deficit reduction target. The deficit last year was 2.7 per cent, and the government is committed to reducing it to 2.2 per cent this year.

The Central Bank is arguing that the government risks missing its target as a result of the widening deficit in the first three months. But the finance minister holds that the first quarter figure of 3.3 per cent does not necessarily show a trend. He argues that the higher expenditure in the first quarter, for instance, reflects “support measures” to the energy corporation Enemalta and to Air Malta.

Enemalta has been further subsidised to the tune of €20 million to keep utility rates unchanged following the rise in the price of oil on the international market.

With the utility rates still considered as one of the people’s major complaints, the government could have hardly allowed the rates to go up again without further damaging its prospects at the next election, bad as they already are today. So, on this score, it has very little room within which to manoeuvre until election time.

There is no question either that Air Malta must be saved at all costs. The money pumped into the airline, said the minister, was in accordance with the restructuring plan. It is all to the good that a dispute between the airline and the pilots has now been settled as industrial action would have hit both Air Malta and the economy at a time when both could least afford it.

The pay increase to the police, deserved as it undoubtedly is, may not cause a great dent to the government’s finances, but are there any other one-off bills that have not yet been taken into account, such as collective agreements, that could make an impact on the government’s finances?

The big question is: what other fiscal consolidation measures can be taken in the circumstances? It is unlikely that the government will at this point in time choose to cut capital expenditure on projects that are already in hand, such as new roads, which was necessary, and the building of a new parliament house, which was not.

But with the general election now approaching fast, the temptation to spend more than budgeted for may become strong. Few administrations have managed to resist such temptation, but the situation this time is different as the country is now subject to the rules and regulations of the EU.

Hopefully, the government will stick to its declared commitment to keep to its deficit reduction programme. This is Malta’s direct interest, especially given we are now living in difficult times.