Labour have a point in demanding greater information as to how the government plans to cut €40 million in this year’s budget, but what ultimately counts most is that the cuts are done wisely. It was first thought that the cuts were ordered by the European Commission, but the government has been insisting that it is making the additional cuts voluntarily in order to have some leeway in tackling its budget deficit target.

Finance Minister Tonio Fenech has said in Parliament that the savings could come in handy in the face of rising oil prices, obviating the need, for example, for Enemalta to raise tariffs. The government has already announced that it plans to absorb some €25 million of the corporation’s non-core expenditure. It remains to be seen to what extent the government can continue to do this, but for the moment it has at least been able to avoid raising the energy tariffs again. In doing so, it has avoided further anger from those already hit by the sharp rise in the energy tariffs imposed a couple of years ago.

Spending according to the island’s means ought to be an on-going exercise in the effort to keep government finances in a healthy position. Now that the European Union has finally taken more concrete steps, through a fiscal compact, to ensure that national budgets are kept in balance or in surplus, Malta too has no alternative but to adhere to the rules. Actually, rules had already existed before, but these were generally ignored in the face of pressures brought about by difficult economic conditions first sparked by a credit crunch. And even now, one country, Spain, has already tweaked its deficit-cutting target for this year, though it remains committed to its long-term aim.

Once again Malta appears on course in meeting its target, and in terms of economic growth, it has not been doing badly either, considering today’s economic circumstances in countries that are of direct interest to the island’s economy. As one study of the European economy has just remarked, while most of the European countries are still in the process of catching up to pre-crisis GDP levels, by the third quarter of last year only Austria, Belgium, Germany, Malta, Poland, Slovakia and Sweden had fully compensated for the loss in GDP that had occurred since autumn 2008.

The island’s growth rhythm was interrupted in the final quarter of the year when the economy is reported to have contracted by 0.1 per cent. However, this is being seen as a one-off result stemming from the loss made by Enemalta during the year and which was only included in the GDP calculations of the last quarter. In fact, according to a senior NSO official, Malta was expected to continue to register sustained growth even this year. This has been confirmed by Mr Fenech who said he had strong indications that the economy would continue to grow steadily.

This is obviously good news, more so when so many other countries are still gripped by austerity measures taken in efforts to solve debt and deficit problems. Despite the fact that any slowdown in the European economy is likely to affect Malta as well, the fact that the country has managed to reduce the deficit and register some growth reflects the economy’s resilience. Such good results ought to place Malta in a better position to tackle long-running challenges, such as that of remaining competitive in an unstable economic climate.