Not many will have realised that the budget for next year was a strategic one which looks to 2012, the year in which the current EU agreement on public debt expires.

The new EU fiscal governance rules will kick in then in terms of debt, whereby members can face stiff sanctions if debt levels exceed 60%. At present, Malta’s debt level is something in the region of 70%.

Many people will be looking at the three cents increase on excise levied on fuels, the 3% increase on cigarettes, the 13% increase on alcohol, the car scrapping measure (copied, but welcome nonetheless), the VAT increase on holiday accommodation and the €9 levy on every tonne of cement.

But the reality of this budget is that it is gearing up for reducing deficit as a percentage of Gross Domestic Product in the short-term, and reducing public debt to below the 60% threshold in the longer term.

Finance Minister Tonio Fenech pointed out that the government, through the budget plan, intends to reduce deficit to 2.8 per cent next year and to 1.7-odd% the year after. That takes us to 2012 – the year the public debt agreement expires.

The 1995 measures agreed on in Maastricht to ensure sustainable growth stipulate that the deficit (or shortfall every year) must not exceed 3% of what an economy produces every year (GDP). But that 3% is still an incurred debt. In other words, if we are ever to address the issue of public debt, Malta must aim for a surplus in the very near future.

Let us look at it in terms of figures (but not in a scientific manner). If we have a debt of 70% of GDP and government is looking at reducing deficit to 1.7% by 2012, our levels of public debt will increase to something in the region of 75% of GDP.

In other words, although we have weathered the recession quite well, and expenditure has been increased to stimulate tourist arrivals and increase jobs in terms of quantity and quality, we are still increasing our debt.

If all goes to plan, reading between the lines, the government will attempt to bring the deficit down to close to 0% of GDP for Budget 2013. The new EU rules stipulate that if a country is in violation of the debt agreement (as we are) it will incur no sanctions or penalties if it can prove that the situation is being rectified.

The plan is sound. But it all depends on the numbers. If Malta can show that it is on track to reduce its deficit to less than 0% in 2013 (a surplus) it will, by default, mean that public debt is to decline.

If something goes wrong and our numbers are derailed, then the whole strategy will go up in smoke. But all in all, when one looks at the measures, they are not harsh. No one can complain at the increase on ‘fags and beer’.

What this newspaper does take some exception to is the ‘government’s bit’. Minister Fenech said government plans to cut 2% costs across the board, while at the same time increasing efficiency by 2%. The mere fact that something is being done in that regard is positive, but it is far too little and perhaps far too late. The endemic rot which has set in within government departments will take a lot more than a ‘collective’ 4%. Targets should have been set higher, shock and awe should have been used. All in all, technically, it is a good plan. All we need now is good weather to go with it.