Before the government faces the House of Representatives to discuss next year’s budget, it hurriedly announced a downward revision of the student stipend scheme. It increased the price of fuel, including petrol, diesel oil and kerosene, and gave notice that the electricity surcharge has to go up.

These measures were announced notwithstanding the fact that tax revenue last year amounted to Lm638 million, an increase approximating Lm50 million over 2003.

The PN administration has been in office since l987, practically without interruption, and the end result is an economy in distress, burdened by a skyrocketing public debt bill, which at last count totalled Lml,410,595 million (it stood at Lm87 million in l987). This bill has to be serviced at an annual cost, approximating Lm80 million per annum, which has to come out of taxation for many years to come.

The government’s predicament is of its own making. It is the end result of persistent deficit spending, propelled by the slogan “money no problem”.

Convergence Programme

obligations

A stage has been reached where the Gonzi administration has the European Union breathing down its neck, demanding compliance with a Convergence Programme designed to scale down both the deficit as well as the Public Debt Bill. This calls for stern discipline as well as undisguised austerity.

It is by the standards established according to this Convergence Programme, and not in the budget, that government policy has to be assessed.

In the light of continued persistence in spending well beyond its revenue, the Gonzi government is like the sorcerer’s apprentice whose frantic efforts to throw bucketfuls of water away couldn’t cope with the rising flood.

The deficit and the public debt burden are only the rotten fruit of this administration. But it is the tree that is most dangerous. And we must look at the roots of the tree.

Under the prevailing regime, we have reached a stage where very many citizens are falling behind at a precipitous rate. The system is becoming increasingly incapable of healing all its people in due time, transporting its people, teaching its people, keeping its people properly informed and, above all, keeping its people in a clean, unpolluted environment.

In layman’s language

Many people feel this. A good many of them do not understand the plot. It has to be explained in layman’s language.

On taking over in 1987, the Fenech Adami administration spoke in the language of the market economy. But it did not immediately scale down the bloated public sector. It launched a public investment policy – a new civil airport, a new power station and so on – relying on local borrowing.

Initial plans were sometimes half-baked and hastily drawn up – those were the money no problem years. The government’s main consideration was the ‘feel-good factor’, which was to become the keystone of the EU-accession campaign. The ploy worked.

Millions of liri in savings were progressively mopped up, to be instantaneously frittered away, not only to sustain a bloated public sector, but also to finance grandiose schemes and fanciful plans like the Mater Dei Hospital Project, the Brindisi fiasco, the purchase of Avroliners for Air Malta and of Dar Malta in Brussels, to mention a few examples. Another big commitment on a grand scale was the public service reform, which cushioned the higher civil service without significantly upgrading its efficiency and performance in vital areas of management.

The end result

The end result was that a billion and a half of Maltese liri were siphoned off to serve the ends of PN policy – mainly political in nature – and deflected from productive use. We were living off our own fat, with the government voraciously eating our seed corn in the interest of its own survival. And, the more Ministers smile, the more confidence erodes.

The borrowed money is used largely to keep the public sector going. n many cases, it incidentally lines the pockets of the faithful – mainly, entrepreneurs and contractors, whose financial stature has gone through an impressive transformation since l987!

Instead of making it to the top, ‘productivity’ found itself in the backyard despite the fact that it has been, and continues to be, the password that would open the doors to prosperity – to those sunlit uplands targeted by Finance Ministers everywhere.

Calm analysis of the mythology of the past 18 years highlights promises of sound finances, of an EU cornucopia, of an ‘early spring’. Today, each promise is a distant, if enticing, mirage that never materialised.

The economy did not bounce. It faltered. In certain vital sectors, it began to wither away and to stagnate. We are left with mounting taxation, rising living costs, investment fatigue, and the real threat of more and more austerity.

There is no way out of this trap unless enterprise is provided with incentives and given its head to attract foreign investment, and, somehow, to boost productivity. The government has to come round and discipline itself by cutting its coat according to its cloth, and to rein in its running costs.

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