Last Wednesday we breezed through, quite unobtrusively, the 14th anniversary of the 1998 election that brought the PN back to government after a short break of 22 months in Opposition following two terms between 1987 and 1996.

That election of 5 September 1998 brought to a premature end the solid mandate Alfred Sant had won for Labour in 1996 and brought to power the present PN government for three consecutive terms, which seem to be drawing to an end as we approach an election.

The Prime Minister discretely celebrated this anniversary when he gave an impressive speech to the EPP political group, stressing that, in politics, values must come before votes. The problem, as Obama is finding out as he struggles for re-election in the US presidential campaign, is that great speeches without concrete action don’t impress, they don’t deliver the bacon – they keep the electorate asking where the beef is.

In 1998, Alfred Sant gave the most tangible demonstration that for serious politicians who see their role as a mission to improve the lives of their people, values must come before votes. When it was clear that his majority in parliament was conditional and unstable, he put aside all calculations of risk to his own political career and restored the mandate to the people.

It is hard to reconcile Lawrence Gonzi’s assertion of values before votes with his action when faced with a similar or worse situation of parliamentary instability. Rather than adopt Alfred Sant’s gentlemanly way out and restore the mandate to the people, he actually mocked Alfred Sant for taking such a route and, in fact and in deed, is still doing whatever it takes to hang on to power even though shorn of a parliamentary majority. Can anyone honestly believe that in so doing the Prime Minister is putting values before votes? To me – and to whomever has eyes to see – it appears that for the PN, votes and power come before everything else, even before the interests of the country and the parliamentary stability needed to safeguard it.

The Prime Minister remains in denial of what is obvious to everyone. Not only does he have no parliamentary majority, but he cannot even rely on the vote of all the 34 MPs that put government on the same count as the Opposition in parliament.

It would seem inevitable that circumstances will soon eject the government out of its denial suite. Parliament is due to be recalled on 1 October and without a majority, and with rebel MPs calling for votes of confidence and tabling controversial private motions, the government will find it inevitable to go for an election this autumn, probably in the first half of November before presenting a Budget for 2013, or at least without voting on it after its presentation.

Equally in denial is the Finance Minister. This week he had Moody’s pulling his ears for strong evidence that government finances are suffering serious fiscal slippage during 2012, a typical performance in an election year when governments throw fiscal caution to the wind and try to spend their way to re-election.

Moody’s warning is well placed and supported by NSO data for government finances for the seven months to July 2012. The deficit, rather than narrowing compared to the same period in 2011 (so as to even out seasonality in the flow of government revenue) widened by 40 per cent, from €238 million to €333 million. The assurances from the Prime Minister and the Finance Minister that the performance in the last five months will recover lost ground so that the government will hit the projected deficit of 2.3 per cent of GDP seem to have impressed no one, certainly not Moody’s. Indeed, the Finance Minister seems to have not even convinced himself. Soon after Moody’s report, he changed his tune somewhat, saying though we might not hit the 2.3 per cent deficit, we would certainly stay within 3 per cent.

To stay within 3 per cent of the GDP, the end-of-year deficit has to reduce to about €195 million, meaning that in the last five months of 2012, the government will have to register a surplus of some €140 million. Is this realistic?

It is true that government revenue flows are much stronger in the last five months, not least because this period captures two instalments of provisional tax payments in August and in December, where the bulk of the annual tax payments fall due. But taking the performance of the last three years 2009-2011, the average surplus for the August to December period amounted to €45 million.

So even to hit the shifting target of 3 per cent of GDP (which in itself involves a deficit increase of €45 million over the original projection in the 2012 Budget Estimate) would require that this year, during the five months August to December, the government will generate a surplus more than three times higher than the average surplus for the same period in the last three years. This leaves me with no doubt that the Minister is either living in denial or that, knowing he will not be presenting a budget before the election, he considers it is safe to take risks with assertions that will only be tested after he has gone.

The only way that the Minister can come anywhere close to the revised 3 per cent deficit figure is by leaving a tray full of unpaid invoices for his successor.

For me, the deficit has never been below three per cent and will not be for quite some time. Enemalta remains a serious deficit hole: up to last year, Enemalta was hiding the government deficit by transferring the shortfall on its books which was then borrowed commercially against government guarantee. This year, Enemalta has run out of its borrowing capacity – even with government guarantees and all. The tide is turning. Enemalta does not even have enough liquidity to pay the excise duty and government is having to extend temporary loans or grants to keep it afloat. This explains a good part of the deterioration in government financing this year which before was being buried in Enemalta’s books and is now resurfacing on central government accounts.

Enemalta is a wholly owned state enterprise. Its capacity to raise revenues by charging higher utility rates is very limited by the political implications involved. It has a massive capex budget yet to finance and banks have turned on the screws on its borrowing.

Measuring government deficit and debt without consolidating Enemalta’s position gives a very incomplete picture. Whoever is elected will face the Enemalta problem in the urgent tray. A blue print for a long-term plan on how to restore Enemalta to health can be found in my contribution in this series of 11 March 2012 entitled A dockyard in the making. In solving Enemalta’s problem, values need to come before votes. This is unusual in the run up to an election.

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