Last week's contribution dealt with the Lisbon Agenda, the document issued by the European Union in 2000 aimed at transforming the EU into "the most dynamic and competitive knowledge-based economy in the world" by 2010. Given that the results achieved have not been satisfactory, earlier this year the EU relaunched the Lisbon Agenda, focussing on two main areas, employment and growth. A document published by the European Commission gives broad guidelines for economic policies to be followed by member states (and therefore including Malta) and guidelines for the employment policies.

It must be appreciated that the decisions taken within the EU (with the participation of Malta) on the implementation of the Lisbon Agenda are of significance to this country because they should influence greatly the economic strategy of the government. This should not be interpreted that the space available to the government for manoeuvring is limited. It only means that the government's fiscal policies and the policies adopted by the various public entities that influence economic activity such as Malta Enterprise, the Malta Financial Services Authority, the Central Bank of Malta and the Employment and Training Corporation need to take account of these guidelines.

In any case, it should be equally emphasised that the guidelines being recommended by the European Commission are very appropriate for the Maltese economy. This is also because the refocusing of the Lisbon Agenda on growth and employment fits very well with the government's primary economic objectives. This would mean that, in the coming years, we should not be expecting a realignment of our economic strategy but a continued attention to the same issues that have characterised our economic strategy in the last five years.

The first broad economic guideline talks of the need to achieve economic stability by ensuring that deficits in the current account of the balance of payments and fiscal deficits are sustainable. This would help the external competitiveness of firms operating in Malta and contribute towards the stabilisation of output at a higher growth trend.

Policy Guideline 2 talks of the need to safeguard long-term economic sustainability by achieving a progressive reduction of government debt with a view to strengthening pubic finances and thus ensuring the long-term viability of the pension and health care systems. This issue has to be viewed within the context of an aging population and thus a higher dependency ratio.

These two broad economic guidelines embody the main line of thinking that has characterised government economic policy in the recent past. Admittedly, little has been done to address the issues raised by guideline No. 2, but this has been more due to the fact that there are still many who do not believe that, in order to sustain our pensions and health care systems in future, we need to do something about them today.

The corollary to these two policies is the need to promote an efficient allocation of resources through the appropriate fiscal and structural policies; which need is reflected in policy guidelines Nos. 3 and 4. The EU document talks of the need to direct public expenditure towards areas that promote economic growth and to modify the structure of the tax regime in such a manner so as to incentivise initiatives that generate wealth in the economy.

This would require structural reforms that eliminate rigidities (and hence in the labour market, as well as in the provision of services in this country such as transportation. Again, one needs to emphasise that this is nothing different to the issues that have been at the forefront of the economic debate in this country.

Turning to microeconomic policies, the EU document makes reference to the need to implement initiatives that support the growth of small and medium-sized enterprises, that expand and improve the infrastructure and that encourage research, development and innovation. The increased use of information and communication technologies, the strengthening of our industrial base and the harmonisation of environment protection needs with economic growth requirements are seen as critical in order to achieve these objectives. The policies and initiatives announced in the last budget are totally in line with these principles.

One might consider the Lisbon Agenda as some sort of intrusion in government's prerogative to determine its economic strategy. I would rather consider it as a tool that can contribute to help us focus on the real economic issues in this country. Seeking to meet the objectives set out in the broad guidelines for economic policies of the Lisbon Agenda would mean addressing systematically the various economic challenges facing this country.