What ought to have been considered as very good news for Malta has been practically bypassed in the wash of the national outrage over the rise in the honorarium for parliamentarians, a matter that has now been referred to the House Business Committee. The good news is the suspension of what is called as the excessive deficit procedure started by the European Commission against Malta in June 2009.
Under this procedure, Malta had to bring down the deficit to below three per cent of the gross domestic product by the following year but, due to the impact of the recession on the finances of the government and other factors, the deadline was extended by one year. The Commission has now found that Malta appears to be back on track and that, in view of this, it recommended the suspension of the excessive deficit procedure.
Such news is unlikely to set off any degree of excitement in a political environment dominated for so many weeks now by debate over the sharp rise in prices, particularly of fuel. It was this discontent over the cost of living that brought into focus the badly timed announcement of the rise in the honorarium to parliamentarians.
A strong argument brought up whenever the government speaks of economic recovery and growth is that the benefits of such advance are not percolating down to all strata of the labour force. The argument runs that, since only a few economic sectors, principally financial services, gaming and tourism, are actually making real progress, this means that, to a large extent, only those employed in these sectors are benefiting.
It is an argument that merits a dispassionate study but, on the other hand, the fact that the island has managed to come out of the recession and to make enough improvement for the Commission to suspend the excessive deficit procedure is surely a good reason for the government to feel pleased about the way it has been dealing with the situation. With deficit and national debt levels reaching dizzying heights, a number of governments have had to take austerity measures that are far heavier than the rise in the water and electricity rates that Enemalta has had to make in the wake of the oil price rise and the government’s decision to cut the subsidy given to the corporation.
There are other considerations that ought to be taken into account, such as, for example, the fact that even according to the European Commission, employment in Malta is seen to be growing faster than labour supply, which is not an insignificant matter. The government’s deficit forecast for 2010 is even better than that made by the Commission in its last update for, while Brussels is projecting a deficit of 4.2 per cent, the Finance Minister thinks it will be down to 3.8 per cent.
Will Malta manage to bring the deficit down to below the three per cent threshold by the deadline set by the European Commission, that is, the end of this financial year? Both the Commission and the Finance Minister think that, yes, the island can make it. It is, of course, very important the deadline is met but, concurrently with the need to improve the government’s finances, greater efforts are required to find ways and means to speed up economic growth through the expansion of as many sectors as possible so that the benefits are widely shared.