The €60 million pay rise to be given to all public service employees over the coming five years should not have any negative impact on the country’s deficit targets, according to Finance Minister Tonio Fenech.
The European Commission had flagged the cost of this collective agreement as a potential risk if Malta was to restore its public finances, but Mr Fenech told The Times the cost of this collective agreement was already factored in the Government’s financial plan.
“What we agreed on is what the country can afford in the parameters of the Stability and Growth pact presented to Brussels earlier this year,” the minister said.
“The €12 million annual increase was already catered for in our projections to reach a balanced budget and I am satisfied that all the unions appreciated our constraints,” he said.
Together with Enemalta’s accumulating debt and the ongoing restructuring of Air Malta, the renewal of the public sector wage agreement was described by the European Commission last May as “a possible reason for higher deficit outcomes,” in its latest economic forecasts on Malta.
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In recent years, Malta had managed to slash its deficit to 2.7 per cent of GDP by the end of 2011 from more than 4.5 per cent in 2008. According to the last budget estimates, Malta is targeting to lower its deficit to 2.3 per cent this year, and consequently reaching a balanced budget 0.5 per cent of GDP by 2015.
The new public service collective agreement, covering the 2011-2016 period, will grant the almost 30,000 civil servants a 2.5 per cent annual increase, inclusive of the cost-of-living adjustment. The agreement also includes a series of family-friendly measures including the introduction of more flexitime schemes.
It is expected to be officially signed next week by the Government and the seven unions involved, including the Union Ħaddiema Magħqudin and the General Workers’ Union.
No deficit improvement in August
Public expenditure continued its upward trajectory in August, outpacing revenue and contributing to a worsening deficit position.
While revenue increased by six per cent in the first eight months when compared with the same period last year, expenditure rose by 11 per cent.
The deficit stood at €268 million in August, an increase of €95 million over last year at the same point, according to official figures released yesterday.
The National Statistics Office said recurrent expenditure went up by €123 million with the major increase recorded in programmes and initiatives, mainly as a result of higher social security benefits, medicines and surgical materials.
Contributions to Government entities increased by €18 million and wages added another €12 million to the bill.
The public purse saw higher revenues from income tax, VAT and social security contributions. But these were partially offset by a decline in grants and excise duties.
In the Budget the Government had set a deficit target of €154 million for this year. The latest NSO figures showed that the target was off mark by €114 million.