Addressing guests at the annual dinner of the Malta Institute of Financial Services, Dr Gonzi said a smarter government is an essential component of a more productive economy, and a leaner government is a prerequisite for faster economic growth.

While recognising the importance of supportive public sector services, in the final analysis growth springs from private sector initiative. A sub-optimal use of resources in the public sector starves our industries of human and financial assets that can be put to more productive use.

In this context, the government is determined to meet the objectives set out in the Convergence Programme. “The budget that I will be presenting to parliament shortly constitutes a building block of the government’s fiscal consolidation programme, which is designed to place public finances on a sound footing and improve national competitiveness. In addition, this year’s budget will focus on growth underpinned by increased investments in the knowledge economy, education and sustainable development,” Dr Gonzi said.

The government is not alone in desiring these objectives, he added. There is general agreement across all sectors of our society on the need to reduce the size of the fiscal deficit and of the public debt. It is obvious, as well, that there is nobody who wants to have his or her tax rates raised. “The seemingly obvious conclusion is that in order to achieve our fiscal targets, we should cut expenditure and eliminate waste. Consequently, the government accepts its responsibility to put into effect a judicious and effective expenditure-reduction programme.

“Let us not kid ourselves into thinking that our fiscal deficit can be addressed by horizontal cost-cutting initiatives. Although such initiatives are continuously necessary and, indeed, result in reduced recurrent public expenditure, I strongly believe that our country’s fiscal prosperity strictly lies in our capacity to sustain increases in our GDP in sectors which are high in yield and added in value.”

A more sustainable fiscal deficit, nevertheless, will surely promote stability and growth in the economy. At the same time, a social pact – to which all representative bodies have expressed their readiness to contribute – will certainly facilitate the restoration of national competitiveness.

Expectations have been raised of a

successful conclusion of the current

discussions on a social pact and the country now expects meaningful results. “I recognise that all the social partners have expended much time and energy in the ongoing dialogue, but we need to redouble our collective efforts to achieve tangible results. Indeed, social partners, employers and trade unions alike, need to seize this moment of truth and transfer their interests to the national level such that the end result will reap benefits in the longer term to all their constituents,” Dr Gonzi said.

“Beyond the deliberations of the MCESD, we need to recognise the necessity of a deeper and more far-reaching culture change. There needs to be a broader public recognition that economic security is not a benefit that can be handed down by Government.

“Instead, economic wellbeing and improvements in living standards can only be brought about by sustainable economic growth which, in turn, depends on a vibrant and creative private sector. The government’s participation in the economy cannot, therefore, be one that discourages initiative, work effort, saving and investment,” the Prime Minister added.

This does not mean that the government should abandon its role in the social field. On the contrary, the government is committed to provide every citizen with a social safety net. However, any additional social services should be provided in a manner that does not promote dependency and

inefficiency, Dr Gonzi said.