Finance Minister Tonio Fenech will today be presenting the government’s Budget for next year against a background of market turmoil and serious economic concerns brought about by a complex set of developments. Deep uncertainties over the economic situation in a number of countries, such as Greece and Italy, for example, have now set in motion fears of another recession, with the IMF chief, Christine Lagarde, warning that the world’s economy could be hurtling into a “lost decade”.

Clearly, the Finance Minister is forced to frame his Budget for next year against the background of the evolving situation. It is unreasonable to expect that Malta will escape the impact of the crisis. In fact, the European Commission is already forecasting a slowdown in the island’s economic growth. Even so, Malta is still expected to register an economic growth rate far higher than that expected for the euro area. According to the European Commission’s forecasts, Malta’s deficit is expected to be of three per cent of GDP this year and of 3.5 per cent next year but the Finance Minister said in his reaction that the government was standing by its plan to reduce the deficit to below the threshold required by the EU, that is, less than three per cent.

Hopefully, the minister’s assertions will turn out to be correct. But whatever he does in the Budget for 2012, he is expected to get the usual flak from the Labour Party and from certain trade unions for not doing what they would expect him to do.

The trouble with the Labour Party is that it is talking and acting as if Malta were immune to what is happening abroad, preferring instead to play to the gallery. Uncommitted voters will surely not accept the kind of superficial stand Labour is taking.

The Finance Minister’s job is not to appease any ephemeral wishes of the opposition to avoid criticism but to keep firmly to the road map the government has set to consolidate its finances and to see how it can further help in the national effort to boost growth at an even higher rate, if this is at all possible in the circumstances. The minister has already indicated that this is exactly what the government plans to do and it also has in mind to seek “targeted reductions in expenditure”. In going about this exercise, it is also essential for the government to be seen to ensure that money is wisely spent at all times.

Ensuring the long-term sustainability of the health and welfare system ought to receive greater weight in the Budget. Unfortunately, however, for purely political interest the two major parties are holding back from facing the sustainability problem in any effective manner. The country may eventually have to pay a heavy price for this.

There will, of course, be the usual protests over the rate of allowance to be given to make up for the rise in the cost of living and, naturally too, the opposition would continue to harp on the impact of the water and energy rates on low-income families. But the government has very little room to manoeuvre as its main aim is, correctly, to consolidate the country’s finances.

The Budget is not merely a financial allocation exercise but also a blueprint setting the Administration’s direction. That direction has to be strictly focused on keeping the economy going on the same track followed over the past months, a track that has given good results.