The government is giving a misleading picture of the state of the economy and trying to hide its problems, the Labour Party's spokesmen on the economy and on finance, Karmenu Vella and Charles Mangion, said this morning.

Mr Vella told a press conference that the government's debt and deficit projections for the end of last year had been over-run, inflation was rising faster than the EU average, while the people's purchasing power was shrinking.

He said the central government debt at the end of November was €50 million higher than the government had said it would be, and the deficit at the end of the first nine months of last year was 4.1% when the government had projected 3% by the end of the year. The government would have needed a surplus of €13 million to achieve its aims by the end of the year, he said.  The official end-of-year figures will be issued in the coming months.

Mr Vella said the projections for this year were already going astray. The Budget was based on a growth forecast of 2.2% but the IMF and the EU had both said that the likely true figure would be about 1%. What repercussions would this have on the Budget, particularly the revenue projections?

Mr Vella said the core of the government's problems was lack of foresight and squandering.

For example, 18 months ago the governemnt claimed that the EU would not let it recapitalise Air Malta. Now it was saying it would do exactly that - at four times the cost. One wondered if the government had actually proposed recapitalisation to the EU 18 months ago.

Dr Mangion noted that while the government was saying that the economy was growing faster than the EU average, it needed to be kept in mind that just 0.3% of the growth in Malta was coming from private sector activities. The rest was all governemnt capital projects and spending. In contrast, most of the economic growth in the EU was from the private sector. 

According to eurostat, in the first nine months of last year investment dropped by 14 per cent while in the eurozone it increased by 22%. Only Ireland and Greece had worse figures.

Even more worrying for Malta was how foreign direct investment was down by 65 per cent last year compared to the previous year.

With regard to jobs, Dr Mangion noted that Malta still had the second lowest participation rate in Europe. 

It should be a matter of concern, Dr Mangion said, how the gap between Malta and the EU was widening in terms of per capita income. In the EU it was up by 2.5 per cent in the past year. In Malta it contracted by 2.1 percent, meaning  lower purchasing power. It also meant more people were at risk of poverty and social exclusion.

With regard to financial services, Dr Mangion said the Opposition agreed about the importance of this sector, but the La Valletta Fund episode pointed to the need of more supervision and tough regulation.

Concluding, when asked how a Labour government would tackle the financial situation, Mr Vella said there was a need to cut waste and redress priorities. The government needed to stop the all too common spending overruns and a situation where too many contracts were awarded by direct orders.

It also needed to stop spending as in the case of €35m spent on consultants and €40m spent needlessly on the Fairmount ship conversion contract.

He complained that a 2009 report by the Auditor General on government procurement procedures had been shelved by the administration.