Who would not wish to have an income tax cut or a wage allowance higher than that already announced to make up for the rise in the cost of living? Unfortunately for all, the Finance Minister will not be meeting such wishes when he comes to present the Budget for next year today. His priorities lie elsewhere, and with good reason too, for, even though the economy is finally growing again, it is not the time to splash out. And it would definitely be a grave mistake on the part of the Labour Party, or of any trade union, for that matter, to think, or plead, otherwise, as some both from the party and the trade unions unwisely did the moment the economy started to recover.
If Labour were to do this, it would expose a dangerous thread in its thinking for it would show that, for purely political reasons, it is prepared to disregard the impact that any worsening of the economic situation in European countries could have on Malta’s economy. It does not pay for Labour to do this because circumstances change and purely political strategies of this nature would not be easily forgotten.
When so many governments are struggling to cut the deficit, with a number of them taking drastic austerity measures, it would be the height of folly on the part of the government if it were to shut both eyes to reality and act as if Malta’s economy stands alone. Very responsibly, it is not doing this.
Malta’s economy is tiny and vulnerable and depends to a large extent on what happens in the economies of its major partners in the European Union and elsewhere too. The unrest in France over the pension reform is a strong eye-opener. Governments across Europe are taking measures that have unsurprisingly stirred a great deal of frustration and resentment. Only last week, for instance, the Chancellor of the Exchequer in Britain announced the biggest spending cuts in over 30 years. Some of the biggest cuts are being made in welfare.
Malta has not had to resort to drastic measures because, thankfully, the economy has not been hit as badly as that in some other countries and, to its credit, the government sought to check adversity by helping out firms in difficulties directly. The steep rise in the water and electricity rates – introduced haphazardly, rather than gradually – is, of course, quite crippling but, since the previous rates meant that the government had to fork out a huge subsidy, it felt the situation justified the move, particularly in the light of the sharp rise in the price of fuel.
The Prime Minister has gone on record saying the Budget for 2011 would be a “prudent” one. It has to be if the government wants to cut the deficit and the national debt to below the thresholds required by EU rules. To do this, it would have to see how it could bring about greater efficiency and how to control government expenditure without causing unnecessary hiccups.
Malta’s deficit problem is not as big as that in neighbouring countries and, as pointed out by Finance Minister Tonio Fenech, in this context Malta was the exception in the Mediterranean. He remarked it would pay if Malta were to keep this impression of being the exception as it would help attract new investment. The argument makes a great deal of sense.