A lot of effort is invested by the Government in the fabrication of an image of economic competency. The present government is very keen to project itself as an exceptional performer in this area. Speakers make continuous refers to the absence of any full blown crisis, trying hard to convince everyone that they should take all the credit for this.
It is relatively easy to officially generate positive economic growth rates. The real test is whether the common people are sharing or not the eventual benefits spoils of an expanding economy. GonziPN is continuously repeating the tale of 20 thousand jobs. This must surely goes down as one of the greatest fabrication in the last decade as even official figures published in the Economic Survey clearly shows that the net jobs created is less than half the amount.
This election campaign has witness different government spokespersons repeatedly emphasising the soundness of public finance. This is reminiscing of the 2008 election. We are being presented with yet another “finanzi fis-sod” (sound finances) slogan and yet again a promise of a budget surplus by 2016.
The problem for GonziPn is credibility. During the last budget speech less, the Minister for finance stated that the economy for 2012 will increase by 4.2%. A presentation by the same minister, given last week, shows that the economy for 2012 is projected to grow by 3.6%.
The irony is that on the same day that the latest “finanzi fis-sod” billboard was erected the credit rating agency Standard & Poor published its report on Malta.
If there was any need for confirmation this was it. The report was damming in its conclusions. While choosing its word carefully it made no attempt to hide the real issues at play. It stated that “Given its high government debt burden, Malta possesses limited fiscal space to counter prolonged periods of lower growth. We view its contingent liabilities as relatively large. They stem from Malta's sizable financial system (estimated at 600% of GDP) and Enemalta, its ailing energy utility. Recent progress on Enemalta's restructuring could reduce the amount of government guarantees and reduce the overall stock of contingent liabilities. However, we anticipate that Enemalta will remain loss-making over the foreseeable future. Support for Enemalta and other public-sector entities had led to general government debt increasing at a rate above the government's reported budgetary deficit since 2009. The Maltese government guarantees debt worth almost 20% of GDP issued by state-owned enterprises, on top of an estimated gross debt burden of 75% of GDP in 2013.”
This type of wording leaves little to interpretation. It clearly says that the debt accumulated is reaching critical levels. It points the finger towards the sustainability of Enemalta with its 700 million guarantee debt.
The report does not stop there. The credit agency makes it clear that the figures presented by the government are not achievable. The reports states that “we expect that the 2012 deficit, at just under 3% of GDP, will exceed its target of 2.2% of GDP”. This reconfirms that view of the both the IMF and the European Commission where both of them expects the deficit for 2012 to be more elevated than that projected by the government.
The doubts about the fiscal deficit are not limited for 2012. It is clear that Standard & Poor has serious reservation about the proportion of government revenue going for the payment of interest on debt. It states that “We could lower the ratings if we see the government's borrowing requirement widening substantially beyond our expectations of close to 2.5% of GDP in 2013. We could also lower the ratings if the government's interest burden as a proportion of government revenues were to continue to trend upward and surpass 10% for several years; to give this context, we estimate that this ratio was 8.2% in 2012. We could raise the ratings if we saw contingent liabilities decline, the government's debt burden begins to fall materially, and economic growth strengthens without a return to the sizable current account deficits of the pre-2011 period.”
While this took place, a local newspaper published documents claiming to show that a member of Enemalta’s oil procurement board had sought commissions from a company that supplied oil for the power stations. This is another hat in GonziPN and goes a long way to help us to realise to what extent this country has allowed itself to plunge into.
GonziPN wants another 5 years from you. He is promising the same receipt used over and over again. The same receipt that international agencies describing as unsustainable. The same receipts which is explicitly associated with falling standards. Another 5 years might be just too much.