The Malta Independent 24 October 2014, Friday

Fiscal compact finally ratified by Malta

Malta Independent Wednesday, 12 June 2013, 08:53 Last update: about 5 months ago

The House of Representatives has unanimously ratified the so-called European Fiscal Compact yesterday evening, bringing to an end a lengthy process, started under the previous government. Discussion on the ratification of the compact – officially called the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, was spread over numerous sittings in the previous legislature after the house agreed, on the insistence of former PM Alfred Sant, to discuss the treaty article by article.

Dr Sant and then-Finance Minister Tonio Fenech spent numerous sittings discussing the treaty, with Mr Fenech frequently betraying his frustration at the process. Ultimately, parliament was dissolved before the motion to ratify the treaty came to a vote. A fresh motion had to be presented by new Finance Minister Edward Scicluna, but this time round, the vote was held in a little over an hour. Mr Fenech re- called that the previous debate was one of the longest in Maltese parliamentary history, and that he had no desire to re- peat what had been said.

During the debate, Prof. Scicluna noted how a currency area had to meet certain criteria to ensure it was resilient to shocks, such as the global economic crisis which struck a few years ago. He noted that while eurozone countries could face excessive deficit procedures, these were not being followed to the letter – France and Germany had evaded sanctions when their deficit exceeded the 3% benchmark in the past. While it was easy to preach what had to be done back then, the minister said, the EU now had to ensure that the present situation is not repeated. Prof. Scicluna noted that the treaty included the “harsh” rule which con- strained governments to balance their budgets or achieve a budget surplus – the latter was last witnessed in Malta in the late 70s, he pointed out. In a brief reference to Keynesian economics, the minister noted that governments should have aimed to achieve a

surplus when their economy was going well, to be able to run into a deficit – and boost the economy – in times of economic slowdown. But Malta continued to run deficits even when it experienced double-digit economic growth, he observed, adding that governments either needed to accept that they had to raise taxes to increase expenditure or accept that public expenditure could not exceed a certain proportion. Mr Fenech similarly touched upon the background behind the treaty, and ad- dressed the criticism it has received by pointing out that it was only one of several measures EU members had agreed on to get the continent’s economy back on track. The MP also said that the treaty helped send a message that Europe was not only addressing immediate problems, but creating a stable framework to avoid a repetition of the present situation. He recognised that austerity measures were not exactly helping economic recovery efforts, but pointed out that these were hardly avoidable, since countries on the brink of bankruptcy could no longer spend what they did not have. In his address, Foreign Affairs Committee chairman Chris Fearne pointed out that the treaty was actually already in place, since this only needed ratification by 12 of the 25 EU members – the UK and the Czech Republic opted out – that signed it. Malta is the 21st country to ratify the treaty. But the MP added that it was nevertheless important for Malta to follow suit, noting that what was being discussed in parliament was ultimately being noted by the EU, international institutions and by credit rating agencies. In his own remarks, government whip Carmelo Abela observed, among other things, that controversy about Malta’s EU membership had completely ended, and stressed that any criticism concerning EU decisions should no longer be in- terpreted as being against the EU. By criticising certain decisions which are felt not to be in the national interest, he said, politicians are being pro-Malta, not anti-EU, adding that since Malta was part of the EU, it was appropriate to have a healthy debate about what happens in it.

The motion was followed by another one brought about by the eurozone’s financial crisis, which was also approved unanimously. The second motion concerned an agreement reached by eurozone countries to forego interest on Greek government bonds that their central banks hold, to help reduce the country’s heavy debt burden. This interest, Prof. Scicluna explained, amounted to €1.2 billion, and Malta’s share amounts to €1.7 million - €0.8 mil- lion due last year, €0.6 million due this year and €0.3 million due next year. All the Greek bonds held by the Central Bank of Malta mature in 2014, so no further interest payments will have to be foregone. In his own address, Mr Fenech noted how the collapse in the value of Greek stocks made it difficult for Greece to find anyone willing to lend money to it, making such measures necessary. 

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