The Labour Party said yesterday that it expects Budget 2012 to be based on good sense, and that the government’s fiscal and economic policy should reflect transparency and honesty.

Karmenu Vella, the party’s main spokesman for finance, addressed a news conference themed ‘għaqal’ (good sense) together with Charles Mangion, the main spokesman for economic development, and MEP Edward Scicluna. He said the PL expects the budget to include a number of measures aimed at helping families and businesses.

“Fiscal consolidation cannot be sustainable unless it is accompanied by economic growth as this would only translate into more sacrifices for families and place heavier burdens on businesses,” said Mr Vella.

The government should heed the warnings it has been receiving, including those from the EU and international credit agencies. Mr Vella said inflation needs to be controlled in a bid to improve people’s purchasing power. Between 2006 and 2010, there was a five per cent increase in salaries and a 9.5 per cent increase in inflation.

Mr Vella referred to the anticipated reduction in the price of oil, saying the government should reduce utility tariffs accordingly.

He accused the government of giving a misleading picture of the financial situation and mentioned, among other things, the revised statistics regarding economic growth. In 2009 the government said there was 1.9 per cent drop in economic growth, but it later turned out that this figure had actually been that of 3.5 per cent.

Talking about the EU’s warning on Malta’s public finances, the Labour MP referred to the government’s use of “creative accounting”, saying it needs to be honest about the country’s economic and financial situation.

“The PL will have better priorities and will work on beneficial capital projects rather than projects such as the new parliament building.”

Charles Mangion spoke about the need for the government to explain whether any progress has been made with respect to its promise to reduce bureaucracy. He said structural weaknesses need to be addressed, particularly with respect to the implementation of plans and strategies.

He referred to the challenge regarding work force qualification, quoting the European Commission as saying that Malta should improve the overall qualification of its workforce if further progress is to be achieved.

The rate of early school leavers affects the quality of employment, he said, adding that apart from having one of the lowest rates of labour participation in the EU, 50 per cent of Malta’s working population has a lower secondary or primary level of education (the EU average is 20 per cent).

Malta’s GDP per capita decreased from 86 per cent to 78 per cent of the EU average over 10 years, and this is confirmed by the government’s National Reform Programme, said Dr Mangion.

He also referred to the need for a reduction in government-induced costs, as specified by the CEOs of three of Malta’s largest exporting factories, Trelleborg, Playmobil and Toly.

MEP Edward Scicluna, on his part, focused on the warnings from the European Commission, saying that Malta is one of five countries that have been warned to control their debt and deficit.

Referring to the implementation of the EU’s economic governance ‘six pack’ rules, Prof. Scicluna said this new agreement gives the European Commission more power to take punitive and precautionary action against countries moving in the wrong direction with respect to debt and deficit limits.

The government’s debt increased from 67.8 per cent in 2009 to 69 per cent last year and it is expected to increase to 69.6 per cent this year, 70.8 per cent next year and 71.5 per cent in 2013.

“What Moody’s said about the debt dynamics not being convincing at all is therefore worrying. Malta has never managed to stabilise its debt since 1987, and would not have managed to reduce it were it not for privatisation and sale of assets.”

Prof. Scicluna noted that the European Commission’s comments often refer to a lack of convincing plans as the Maltese government fails to explain how targets will be met in a concrete manner.

In his warning letter, European Commissioner Oli Rehn clearly said he expects convincing evidence by the end of December with respect to the way the deficit will be controlled in a sustainable manner.

PN reacts

The Nationalist Party reacted to the PL’s news conference with a statement issued yesterday afternoon. Repeating the word ‘għaqal’ (good sense), the PN said Malta has been doing well, despite the world facing the worst economic and financial crisis in 80 years.

The government has created an economic climate that attracts investment, and thousands of new jobs have been created, record numbers were registered in the tourism industry, thousands of jobs were saved and the people have shown that they are flexible, courageous and determined to turn challenges into opportunities, said the PN.

The party also referred to Malta’s unemployment rate of 6.6 per cent (compared to the EU average of almost 10 per cent) and said the country has been investing heavily in the education sector by providing stipends and scholarships and building new schools.

The government also strengthened the social benefits system and continued investing in a high quality health system that is free of charge, said the PN, hitting out at the Opposition for being “populist”, “irresponsible” and “inconsistent”, and for lacking political substance.

The party said it is confident in the capabilities of the Maltese people and tomorrow’s budget will be good for the people and for the economy, as it will include measures aimed at attracting investment and creating jobs.