The structural fiscal deficit is moving to the top of the financial agenda again, and jumping from there straight into the political forum. The reason is that the deficit has set off on an upward trend once more, both in absolute terms and in relation to the nominal Gross Domestic Product.
Last year's deficit outstripped by a very substantial margin the forecast set out in the Budgetary Estimates for 2008. Not only that, it leapt ahead of the government's revised forecast as the year went by.
The Prime Minister, who was Minister of Finance when he presented the Budget for 2008, as well as the present Minister of Finance strove to explain away the jump in the actual outturn for 2008. The extent of the jump became known well into 2009, but had been attributed to certain causal factors much earlier than that.
Two were mentioned. One was the total amount of terminal benefits paid out to shipyard employees to entice them out of their jobs so that the government could move on with its privatisation plans for the enterprise.
That was a rather lame excuse. The Prime and Finance Minister knew of those plans when he presented the Budget for 2008, and could have - indeed, should have - provided at least a realistic token sum for their execution.
That he did not do so cannot really be attributed to the left hand not knowing what the right hand would be proposing to do. To say or think that would be an insult to Lawrence Gonzi, who is not a man to rush blindly into things, and knows his own mind. More likely, the knowledge that the general election would come about not long after the Budget was due to be presented influenced the final presentation of the 2008 Estimates of Income and Expenditure.
The second reason put forward for the increase in the budget deficit was the much higher subvention that had to be paid out to Enemalta because of the effect of the sharp rise in fuel costs during 2008. That was a genuine factor. There was no way that the extent in the price of crude oil and its derivatives could have been forecast.
That said, the combined total of the shipyard terminal payments and the cost of the increased subvention to Enemalta accounted for only a fraction of the amount by which the final 2008 outturn outstripped the original budget forecast.
Rather lamely, the government has offered no reasoned explanation for the final figures which showed that underlying expenditure had overshot targets under various heads, though budgeted capital outlays had been reined back. Then along came 2009 and early signs began developing to show that the forecast deficit would be outstripped again.
This time the Prime Minister and his Finance man had a ready explanation - the government was making unplanned outlays to protect jobs. The reference was to un-detailed expenditure being entered into to shore up parts of the manufacturing sector which had either moved to a shortened working week or was planning to stop production.
Time and time again, as recently as last Sunday, the Prime Minister has declared that he will not be swayed by opposition criticism that the deficit was growing - jobs came first. In the short term he is, of course, right. Were he not so carried away by the widespread inclination of the political class to politicise everything the PM might even put up a reasoned and economically sound argument for deficit financing in the circumstances.
We are in recession. Exports are falling and cannot drive the economy forward. Real investment is also hesitant because of the global negative economic situation. Private consumption is depressed, either because of the direct effect of the recession as manifested in lower employment income, with contractions most evident in the tourism sector, or because of a wary perception among those whose earnings have not been affected that they had better postpone such consumption plans as can be put off.
The only driver to be counted on, therefore, is public consumption. The government had already budgeted for a deficit, which in itself is a stimulus to the economy, allowing for leakages into imports. A higher deficit represents a stronger stimulus.
The Prime Minister and his team, however, are not using this Keynesian argument. Maybe that is due to some intellectual honesty, in that the deficit was not planned as a Keynesian measure, but was a forced outcome.
The actual situation is that the government is not being explicit on how much of the increased deficit in the early months of 2009 is due to outlays to shore up some manufacturing firms. A figure of €3.7 million is being mentioned. The PM himself referred to it on Sunday, but he did not elaborate. The situation seems to be that expenditure is running faster than forecast and is doing so after allowing for the extraordinary outlay to protect jobs. Politicising the point will not help the government or the economy. Lawrence Gonzi is rounding on the opposition as well as on anyone else who dares mention the growing budget deficit. As any politician would do, he is making a virtue out of necessity, but doing so in a belligerent manner.
Fact is, however, that it is not only the opposition and some analysts who are pointing to the accelerating budget deficit. The European Commission is following closely and has announced it will be opening procedures against Malta because of the excessive budget deficit.
The issue should be taken out of the heat of politics. It ought to be discussed sensibly, in the context of what is best for the economy and the thousands of workers and employers who underpin it. It may be that a larger budget deficit which helps to not allow people's pockets to dry up is a positive factor. If that is planned, in the same manner that controversially postponing VAT receipts was planned, it should be stated as such.
Meanwhile, politics should also be rung out of the Prime Minister's statement that the budget could still be within three per cent of the 2009 Gross Domestic Product. Should that come about it will only be because nominal GDP will be swelled by the inflationary forces which are galloping away in Malta, with many prices rising in stark contrast to what is happening in most of the rest of the EU.
The budget deficit, its causes and impact should be discussed much more seriously than is being done at present.