The release by the European Commission last Friday of its Spring prediction regarding the Maltese (and other EU Member States’) economic performance this year, was followed by a statement by the Maltese government which said:
“The government remains committed to keep its deficit below the 3% threshold, and honouring its pledge to end 2013 with a deficit of 2.7%, as announced last month in the 2013 Budget.
“The government notes the European Commission’s concern that the approved 2013 Budget ‘is expansionary’ and as a consequence, ‘the deficit in 2013 is expected to widen to 3.7% of GDP’.
“The Minister for Finance Prof. Edward Scicluna said ‘it must be recalled that the 2013 approved Budget is the same Budget which was submitted by the previous Government in November of last year and which forecast a deficit of 1.7%. The Nationalist Government had then stated that the Budget for 2013 was evaluated and endorsed by the European Commission’.
"’The only addition to the 2013 Budget was the inclusion of a number of collective agreements and other firm commitments undertaken by the previous government at the beginning of this year prior to the elections, and for which no financial provision was made in the budget estimates.
“’The government is committed to honour collective and other agreements entered into by the previous administration prior to the elections,’ he added.
Prof. Scicluna also noted that estimates carried out by the Ministry for Finance indicate that the deficit for 2013 will end in the region of 2.7%.
“Despite the Commission’s disappointing forecast, this government remains committed to closing 2013 with a deficit of 2.7%, as was originally pledged in the 2013 Budget speech, and is confident that this can be achieved.
“The government also notes that this further confirms how unrealistic the previous administration’s budget projection of 1.7% truly was and that the government was correct in revising it upwards when it presented the 2013 Budget in April.
“The government now intends to determine on what grounds the Commission reached its conclusion and is now forecasting a deficit of 3.7%, which is one percentage point higher than the government’s own revision.”
The next day, Saturday, another DOI statement informed us that Deputy Prime Minister Louis Grech and Minister Scicluna had had a meeting with Commissioner Olli Rehn in Brussels.
The government statement did not state who asked for the meeting, but it would seem that following the publication of the Spring economic forecast, the Maltese government felt it was its urgent duty to explain the Maltese economic and financial situation to the Commission and to explain this government’s strategy to address the fiscal deficit and generate growth.
One notes immediately that the tone used in this latter press statement (and hopefully used by the government delegation in its talks in Brussels) is markedly different from the partisan tenor of the Friday statement.
In this regard, it is undoubtedly true that the predictions by the previous government were too optimistic, as the Commission itself had remarked at the time, and it is also true that the uncertainty generated by the political situation last year and the many (electoral) commitments undertaken in the intervening months, such as collective agreements, employment with government and/or agencies etc have increased the public bill.
But then so too have been the many commitments made by the present government, in particular its promise to cut the electricity bills. So too, one may also add, the massive intake of staffers for the vastly enlarged Cabinet and the forced removal of senior civil servants while they are still on their contract. And so on.
If the government thinks it can fool its way with the Commission in the same way it tries to fool the Maltese public by blaming its predecessor, it is mistaken.
Anyway, it is historically proven that an election in Malta is always hugely inflationary. The previous government spent some two years trying to retrieve the fiscal deficit back to acceptable numbers, and it was the same party that succeeded itself in power. In this case, there has been a change of government and while the new administration may blame the previous one as it did in 1996, this, in today’s world cuts no ice.
One also notes this government has not, so far, explained in detail how it intends to bring the deficit down from 3.7% to the promised 2.7%. Looking around us in the euro area, we note that those countries which have excessive deficits face sanctions by the Commission and are made to either cut spending or increase taxes. We however know that the present government has been elected on an expansionary programme.
The government can look at what is happening, for instance, to its poster boy, Francois Hollande, whom it has just visited at the Elysee. Not only has his 60%+ popularity decreased to 24%, nor just the fact that unemployment has shot up as factories close and entrepreneurs relocate elsewhere, but more than that is the sense of drift that has come over the entire country, that the country is heading down and that there is no solution.
The Maltese government must stop blaming its predecessor and get to grips with the real situation of the economy. The time of playing electoral games is over.