The discussions were announced by Prime Minister Lawrence Gonzi in his press conference on Thursday.

Dr Gonzi clarified the basic principles on which the forthcoming Budget would be based. Although he would not be drawn into guaranteeing there will be no new taxes or increases in the tax burden of people, he made it clear the Budget exercise will be focusing much more on what can be cut from government expenditure.

Government, he said, will be looking closely at all government-induced costs especially as a result of bureaucracy and will be seeking to increase its efficiency.

As a case in point, he added, the recent Paceville upgrading serves as an example. It was done by government employees, it was completed before the scheduled time and for a lesser cost.

Dr Gonzi, who will be meeting the MCESD on Wednesday, said that government will be keeping the unions and employer associations informed of its plans for the forthcoming Budget, apart from discussion the changes in the pensions system about which a White Paper is due to be published by government in the coming months.

Dr Gonzi listed factors which show, as he put it, that the economic situation is looking up: the number of unemployed, at 7,350, is decreasing; there has been a 4 per cent increase in manufacturing output over the past four months. Three new companies have opened up in June, while two more companies are due to start operations with a Lm15 million investment. Malta Enterprise has approved 11 letters of intent in June which may bring about 500 new jobs.

As regards the fiscal deficit situation, this has been cut by 18 per cent by May, although one needs to be prudent and to await the end of year figures before one can make a better assessment.