The meeting of the heads of government of the EU member states met this week to seek to put a definite seal on the so-called fiscal compact that was agreed upon last December.

The EU fiscal compact will also mean further control of government expenditure. This is probably the greatest challenge we have- Lawrence Zammit

This fiscal compact is meant to strengthen the rules relating to the fiscal deficit of each member state and to establish a mechanism that would provide some form of support for governments facing sovereign debt issues. It needs to be remembered that these rules were already there under the Growth and Stability Pact but some states simply ignored them or could not respect them fully given the international economic crisis.

The support for member states to address sovereign debt issues was also there through the European Financial Stability Facility. This is now being replaced by the European Stability Mechanism.

The United Kingdom has already declared it will not be signing the Fiscal Compact (the reason for this opposition is probably not so much the actual fiscal deficit rules but rather to maintain its flexibility in determining its own taxation rules and policies) and the Czech Republic claimed that it needs to seek ratification by its national Parliament.

Poland also had an axe to grind as it wanted a seat on the discussion table at meetings of the eurozone group. This was initially opposed by France, who then relented.

One could understand Poland’s stance as non-members of the eurozone could be burdened with decisions taken by the eurozone summits without having any say in those decisions. The treaty will be formally signed in early March and will come into force once 12 nations have ratified it.

This European Council also discussed the theme of economic growth and development. In fact, it has now been recognised that it is useless seeking to achieve sustainability in government finances if the economy is being weakened to the extent that jobs are being lost and growth becomes negative.

The heads of government agreed on two important elements – stimulate youth employment and complete the process of liberalising the internal market. In effect youth unemployment has reached dramatic proportions in certain countries, having hit the 30 per cent mark.

Average youth unemployment in the whole of the EU is 20 per cent. The process of liberalisation of the internal market will seek to eliminate monopolies and rights that seem to have no basis to exist from an economic perspective.

Unfortunately, the summit did fall short in addressing the credit crunch that is still with us.

The summit did speak about access to finance by small- and medium-sized enterprises, but did not say anything about inter-bank lending. My reading is that there is little effort in making sure that the financial resources that exist within the EU are being put to full use.

Another shortcoming is that once more the issue of speculation in the financial markets has not been addressed. Recent experience has shown that the efforts at an EU level to address the crisis of the euro have proved themselves not to be good enough when faced with an attack by speculators.

The topics of the summit are of great interest to us. Instability abroad will eventually lead to uncertainty locally. This is why it is important for us that the euro crisis is resolved sooner rather than later.

The resources that are being made available to stimulate youth employment are also important, even though we are much better off than other countries in this area. Research is showing that there is a great deal of insecurity among Maltese young people, not so much because they do not have a job but because they fear the impact of the international situation on our economy.

The EU fiscal compact will also mean further control of government expenditure. This is probably the greatest challenge we have. We can achieve higher revenues if we were to reduce fiscal evasion.

However, the key issue is our ability to reduce public expenditure by reducing waste.

This aspect needs to be tackled with a sense of urgency and purpose for the benefit of all.