Former finance minister Tonio Fenech has floated the idea that government may be “intentionally exceeding the deficit”, so as to have a case to ditch some of the pledges in its manifesto, due to the excessive deficit procedure.

He said that this may also lead to financial penalties from the European Commission and to a greater degree of interference from Brussels in the country’s  budget.

Mr Fenech made these remarks during a news conference this morning. Commenting with The Malta Independent online, he said that it may also be the case that government initially planned to inflate last year’s deficit just above the three percent threshold to have some financial manoeuvrability, but the plan went out of hand as the commission took the matter much more seriously and decided to take action against Malta.

Regarding accusations made by the prime minister that he badmouthed the country during a meeting with International Monetary Fund representatives, Mr Fenech said that this meeting was requested by the IMF and not vice versa.  Dr Muscat had made this claim on Wednesday during a media briefing in Brussels

The PN MP said that the IMF holds regular meetings not only with government but also with opposition MPs “as used to happen when Labour was still in opposition”.  Mr Fenech remarked that during this meeting he spoke about “the strong Maltese banking sector” but at the same time expressed his concern that if debt is not maintained at sustainable levels, the country will face consequences.

He said that when the PL was still in opposition, nobody from the Nationalist administration used to make similar accusations even though the PL used to level strong criticism against it. Mr Fenech dubbed the prime minister’s remarks as a throwback to “Mintoffian-style politics where those criticising government were considered as traitors”. He also challenged Dr Muscat to reveal what he had said to the IMF word by word.

Mr Fenech blamed government for not taking steps to reduce the deficit below the three percent threshold quoting the prime minister saying that “it appears that the decision to keep  the previous budget but change the projected deficit from 1.7 percent to 2.7 percent was not well received”.

He said that exceeding the threshold does not automatically trigger the deficit procedure, as government may be able to persuade the EU to keep its decision on hold if it presents a credible plan to reverse the situation.  According to EU forecasts this year’s deficit will surge to 3.7 percent and will remain well above the threshold at around 3.6 percent in 2014.

The former finance minister urged government to take immediate action, as it is still in time to avoid facing action from the commission. Mr Fenech said that if there is the need, government may consider presenting a mini-budget.

He said that government seems to be oblivious to the consequences that this will have on the country’s economy and reputation. At the same time he defended his track record as finance minister during the last three months in office saying that according to the National Statistics Office, in the first quarter the deficit went down by €57 million.

The former finance minister said that part of the increase in spending is the result of the huge cabinet “which will result in an additional expense in the region of €6million per year, to cover for the increase in staff in the various secretariats”. He also lambasted government for “rewarding” those who publicly endorsed Labour through its billboard campaign, remarking that the tax payers are now being forced to pay for the party’s pre-election commitments.

The former finance minister said that the upward revision of the deficit for the next three years means that, the national debt will increase by €600 million rather than  €150 million as had been originally projected. Mr Fenech said that these decisions contradict government’s pledges of keeping spending under control.

Nationalist MPs Robert Arrigo and Kristy Debono also addressed the news conference. Mr Arrigo expressed his concern that the tourism industry may suffer if government is forced to cut the Malta Tourism Authority budget. Mrs Debono focused on what she described as “lack of tangible replies from the finance minister on how he will go about to stimulate economic growth”.

PL says Fenech breaching all boundaries of political decency

In a statement the PL accused Mr Fenech of using perverse agruments and of breaching all boundaries of political decency by trying to tarnish the country’s reputation in international fora.

The PL said that people are fully aware of the reasons which led to the current financial situation, which the new administration is trying to address.

It added that Mr Fenech is making dangereous statements about Malta’s economy after he messed up completely the country’s finances. The PL said that the former finance minister has a lot to answer and is trying to blame others for his deeds.

It said that despite the clear verdict given by the electorate in March, both PN leader Simon Busuttil and Mr Fenech do not seem to have got the message that the time for old-style politics is over.