Prime Minister Lawrence Gonzi believes the best way to boost Malta’s economy and respond to the negative outlook label placed on it this week is to keep doing “what we have been doing”.
... I support all initiatives to put strict (deficit) parameters in place, so even future governments have to abide by these strict parameters
Speaking three days after credit agency Moody’s downgraded Malta’s bond rating by one notch and revised the outlook to negative, Dr Gonzi said he was determined for the country not to be “humiliated” internationally like other countries.
He listed his government’s initiatives and emphasised the fact that the island was surrounded by financial and political instability, a situation that was obviously taking its toll.
“Even if we register good results, we can’t have peace of mind because we are encircled by trouble,” Dr Gonzi said after a visit to a blossoming web development and IT education company, NIU, run by two youths.
Asked if Malta should follow in Spain and Germany’s footsteps and introduce a balanced Budget rule in its Constitution to curb overspending, the Prime Minister said Maltese law already regulated the amount of money the government could borrow.
“(But) I have no difficulty... in fact, I support all initiatives to put strict parameters in place so even future governments have to abide by these strict parameters.”
Asked if Moody’s downgrade should prompt the government to take some difficult decisions, such as reforming the health care system, Dr Gonzi said his government had long been taking difficult decisions, even when the opposition “tried to ride on their political impact”.
“This is why Malta is among the EU countries with good statistics and results,” he said, listing, among Malta’s achievements, employment, tourism, manufacturing, lowering the deficit and controlling the national debt.
Dr Gonzi said Malta prioritised health care. Echoing the Nationalist Party’s chosen slogan for the forthcoming Independence Day celebrations, he said: “I am proud that our country is strong enough to provide this situation.”
He warned against “superficial” comparisons with other countries, stressing that, while Malta offered certain services and medicine freely, in other countries the services of family doctors were paid for by the government.
Dr Gonzi said he had warned of an economic storm back in 2007 when he also suggested that Malta should aim for a zero deficit to be achieved over around five years.
“The global economic and financial crises were worse than anyone predicted, so this target became difficult. (But) our country should continue working towards a situation where there is no deficit and a balanced Budget,” he said, stressing that if a country spent more than it earned it would be forced to continue borrowing.
Economists and observers have long called for reform in sectors such as health care, education and pensions. Former Central Bank Governor Michael Bonello spent the past few years insisting time and again on “sustainable funding” for these sectors and warning of the increasing deficit. But action has been slow, probably due to the political implications of such unpopular decisions.
Dr Gonzi lashed out at the opposition, saying it spent three years acting irresponsibly by “hiding the economic crisis” and calling the government’s decisions capricious. (The Labour Party on Thursday accused Dr Gonzi of going into hiding because he had not yet reacted to the downgrading.)
“Now is the time for the opposition to change its behaviour, become more serious and come out with concrete proposals instead of blowing hot air,” he said.
Asked what the government would do to boost economic growth, Dr Gonzi said: “The same thing we are doing now and have been doing.”
He then went on to list the government’s investment in education (particularly vocational training) and generating new types of employment. He also stressed the importance of being more competitive, not just by being advantageous in terms of tax but also by offering quality professionalism.
Labour leader Joseph Muscat on Wednesday called for Dr Gonzi to be more honest about the economic situation. He reiterated his party’s pledge to reduce the water and electricity rates.