Today the government will table in Parliament an official letter from European Council Services that the word “and” in the instrument of ratification of the ESM means that Malta would qualify for aid if it needed to.
The EC Services wondered why the issue was being raised in Malta after the wording had been changed specifically for the country.
Finance Minister Tonio Fenech confirmed this yesterday at the end of the opposition’s input on the Prime Minister’s statement. At the start of his speech he said there had been queries about if the ESM could be used to lend funds to banks without conditions. At the moment no bank could ask for help except through its government.
As to the concept of a banking union, Mr Fenech said it would indeed be in Malta’s interests to have cross-border instruments under stricter supervision than to date and this would help the country, especially when a foreign bank set up a branch in Malta.
Even a bigger deposit guarantee scheme would be to Malta’s advantage. Currently the system stood at €100,000 for each deposit.
The banks did contribute to the scheme, but their contribution was still far from covering needs. The burden currently fell on the government.
There were 25 banks in Malta, but also 600 funds, trusts, pension insurance schemes and others which would not come under the banking union, which would only supervise cross-border banking.
It was the EFSF that had no seniority and was only on a par with other creditors; the permanent structure gave the ESM seniority.
This was important and Malta would not budge from this concept.
Mr Fenech expressed dismay that Dr Muscat had first said the country-specific recommendations were the same as last year’s and then said they were the same in spirit. The CSRs last year had said Malta needed to think about changes, now they were saying the changes must happen immediately. This was entirely different.
Last year the CSRs had said the cost-of-living adjustment (COLA) should be linked to productivity and the MCESD had come into line. Now they were saying that Malta should immediately remove the inflation component caused by importation.
This was completely different and it was unjust for the opposition to say Malta had not put up a fight last year.
The government had not just discovered that gas was better and cleaner for the power station, but it was only now becoming viable after the EU’s decision that by 2015 Malta and Cyprus needed to be connected to mainland Europe and must be helped with EU funds. Malta could not convert to gas before it had it.
As for the CSRs on the banking sector, Mr Fenech said the government must guard the sector’s size in the economy. It was only due to the banks’ and the government’s prudence that Malta’s banks had not faltered.