A man called Atlas

Like the Greek mythological figure Atlas, who carried the earth on his shoulder, Prime Minister Lawrence Gonzi has taken it on himself to not only administer this country but also to ensure government’s finances are brought into line. It is a tall order indeed

It’s going to be hard for ministers to find an excuse to justify their misdemeanours because in the Prime Minister’s words, they have been given the “clear message” that only the highest ethical, political and moral standards are acceptable.
“These are the standards that I personally expect and the standards laid down by the code of ethics for ministers,” Lawrence Gonzi tells me when I ask him whether his ministers are continually under scrutiny.
It is the parting comment of a Prime Minister engrossed in work and about to leave for the crucial mid-week meeting with the social partners at the Malta Council for Economic and Social Development.
I meet Gonzi on Wednesday, forty-five minutes before the MCESD meeting. The first impression I get is that of a man with much on his shoulder. No informal small talk. I am summoned to his desk. Given the short time frame, we immediately kick off with the interview.
With government launching the bill introducing eco-contributions on that very same morning, it is inevitable that I raise the issue.
“It is not a wide-ranging tax on a lot of things,” Gonzi interjects to my question as to whether the economy can handle a blanket tax of the sort. “It is a contribution levied on a very restricted list of products limited to the items mentioned in last year’s budget speech.”
He insists that the “contribution” has been phased in.
“This is a restricted list of products it does not include plastic bags, plastic cutlery and containers, which is waste that we have to treat in any case. We are either going to pay lip service to the environment or else do something about it,” he stresses.
“The rate does not cover all the expense required to collect and treat the waste. It is a very low rate. Importers can be exempt from paying the tax if they create schemes to collect the waste. The scope is not to generate more revenue.
“The scheme will allow consumers to make a choice between products that are more detrimental to the environment and others that are less.
“It also gives importers the incentive to organise schemes to collect the waste. If, however, no collection schemes are organised government will organise them itself.”
Gonzi says the impact of the eco-contribution on the retail price index has been calculated at 0.84. “It is a relatively small impact when compared to the advantages the scheme can reap,” he adds.
Gonzi’s first hundred days in office have been characterised by a cost-cutting exercise across all government departments and agencies.
“We have been meeting every minister and permanent secretary individually discussing each item in that ministry’s vote, identifying which expenditure areas can be trimmed and determining the impact that could result from cost cutting.
“Our aim is to control government’s recurrent expenditure. Everybody seems to agree in this country that government has to control expenditure, although I sometimes get the impression that when initiatives are taken people just back out.
“We cannot cut by simply applying a blanket provision like Alfred Sant did when he trimmed expenditure by five per cent across the board.”
Gonzi says that even recruitment with government agencies and departments is under scrutiny with the finance ministry evaluating the necessity of any new appointments.
He explains that the review exercise has led to an increase in expenditure in some areas such as the purchase of medicines by the health department. Similar expenditure hikes were registered in certain areas of social welfare.
“The exercise has the scope of instilling a sense of ownership of the problem throughout the civil service and there are consequences on those entrusted with the onus to reduce expenditure as agreed.
“Performance bonuses will be reviewed accordingly. There is an absolute determination to reach the fiscal targets set for this year,” Gonzi says.
How can government reconcile this cost cutting drive with the purchase of a lucrative embassy in Brussels for Lm6.5 million, which has since been revealed to be closer to Lm9 million?
Gonzi defends the decision arguing that the embassy is an investment. “We bought a property. Malta has an asset it did not have previously. It is an immovable property with a value that can only go up. We could have decided to rent but all calculations and the advice we received suggested it was more expensive to rent rather than buy. This property allows us to house under one roof all embassy services and the different agencies in Brussels. There are rents that we can now terminate. It was a good thing.”
Deficit control is a priority area for the administration, Gonzi insists. Only if the deficit is under control can the country attain international credibility to attract investors, he argues. The issue is also linked to the introduction of the Euro in a couple of year’s time. The Prime Minister says that if Malta lags behind the Maastricht criteria, the country would end up adopting the Euro after other Member States with the consequence that the country could become uncompetitive.
Despite the negative mood in the country at large, Gonzi sees a silver lining. He is cautious about interpreting statistics but insists that the indications for the first six months of the year look positive.
“In terms of government revenue and expenditure, things are looking good even if I am not yet happy with expenditure control. I say this with great caution, but in certain aspects the economy looks as if it is recuperating even if it has not performed as well as we wanted it to. Tourism is of maximum importance and we need to have our eyes trained on that sector. It seems as if we had some positive results in tourism during the second quarter of this year. The indications give us courage for the coming months.”
Government sees potential growth in three key areas of the economy: the financial services sector, tourism and pharmaceuticals. Gonzi insists Malta Enterprise is focussing its energies on attracting potential investors in these sectors.
A widely criticised move was Gonzi’s decision to take under his wing the finance ministry. Unfazed by the argument, he says that for at least the next two years it is necessary for the finance ministry to remain “under the control of the Prime Minister.”
He would not be drawn into saying whether the arrangement will stay in place for the rest of the legislature.
As for the Nationalist Party’s heavy defeat at the European Parliament polls Gonzi argues that the result was predictable.
“I had declared beforehand that government was taking decisions related to restructuring that had a negative impact on a number of people. The decisions were required for the national interest and although I appreciated that people were negatively hit I had to put the country’s interest first and foremost.”
I insist with him that restructuring of government entities like PBS, Air Malta and the drydocks were decisions the middle class expected. Was restructuring the only reason for the mass exodus from the PN?
“The measure announced in last year’s budget to change the way we taxed profits derived from the sale of property coming from inheritance irked the same middle class that expected restructuring in government entities. The issue was misrepresented and today I realise that as a government we did not explain that measure enough and there is wide misconception of what it truly entails.
“There are people describing it as a tax on inheritance, which is absolutely not the case. The tax is only paid when inherited property is sold and not when property is inherited. Government did not explain the issue correctly, what its aim was and why it was necessary to introduce such a tax.
“I received emails, letters and met people who told me that they did not vote or voted differently because of that particular measure. Similarly, the increase in VAT to 18 percent did not go down well with people. The decisions we took were in the best interest of the country and I am convinced we will reap positive results in the medium term. Nonetheless, that was the result of the election and I accept it.”
After 16 years in power government is open to criticism that it has become arrogant and detached from the people. Gonzi is not so convinced by the argument. He insists that politicians have to be careful not to detach themselves but cautions against blurring the distinction between arrogance and leadership.
“We have to also be leaders. If we politicians simply occupy positions of responsibility and don’t take the decisions that matter for the country, I personally feel that I would not be repaying the trust of those people who voted for me.
“People put their trust in this government because they believed it would take the necessary decisions that would improve their quality of life. Our country enjoys a high quality of life thanks to subsequent Nationalist governments and not to somebody else. Every time this country had a Labour government this country suffered as a consequence of bad decisions taken. The track record of the Nationalist Party in government has always been one of positive change in the quality of life and we always raised people’s expectations.
“Having said that, we have to maintain contact with the people and explain to them what we are doing and why. It is one mistake we repeat. We do not bring people on board by explaining to them clearly what we are doing. Even if people are going to be hit negatively we have to explain that it is in their interest in the long term.”
Gonzi pledges to do his best to make sure his government does not fall into the trap of arrogance. “But to have the courage to take difficult decisions even on the eve of an election with the risk of achieving a negative result and still go ahead with that decision, is leadership not arrogance,” he says.
I bring up the smoking ban issue. Even if government was right in taking such a decision, the lack of consultation with entertainment establishments gave the pro-smoking lobby the chance to raise hell with the consequence that government appeared weak when it decided to extend the timeframe before the introduction of the ban.
Gonzi smiles, “you can never win,” he tells me. “The first question to ask is whether government was justified in introducing the smoking ban because if we were justified then people should say so.
“I agree that measures should be introduced after widespread consultation. But there are different methods to consult people and one of the methods is to publish a legal notice six months before it comes into force. Let me concede that it wasn’t the right thing to do, government did not stamp its feet and go ahead. We re-opened discussions and after extending the deadline we were criticised for making a u-turn. For heaven’s sake what else… you can’t win.
“Who doesn’t want a smoking ban please speak up but as a Prime Minister I’ll answer that I don’t agree with such a position because we need it. My interest is to protect people’s health.”
Does he feel burdened with problems that have been accumulating for 16 years?
“No, every prime minister inherits a situation and acts on that situation, taking the necessary decisions accordingly. Naturally, a country develops from one phase to another and each phase has its own realities. When in 1987 the PN was in government the priority was to save this country’s democracy.
“Nobody could talk of restoring our fortresses because we had to restore a much more important fortress, that of democracy. But once that was restored we could start to discuss other issues. The country’s priorities adjust themselves according to the changing realities. At one point a priority for our country was to have water in our taps.”
Without going as far back as 1987, I suggest that problems related to Air Malta, PBS, the drydocks and other agencies have been brewing since 1998. Government is often accused that it simply bought industrial peace because it preferred not to rock the boat.
“I don’t agree that government bought industrial peace. The priority for government between 1998 and last year was to re-open membership talks, recuperate the lost two years under Labour and negotiate membership with the best conditions possible. This was a priority and there was a national effort to move forward in that direction. We had our difficulties and I was also involved in the industrial unrest at the time. I can vouch that we negotiated agreements that were important for the country. It is good to note that at one point there was industrial unrest at the airport and we also went in front of the international labour organisation’s tribunal. What industrial peace did we buy?”
I point out that it was his fellow minister Austin Gatt, who admitted after last year’s election that in certain aspects government procrastinated on certain decisions because the focus was attaining membership.
“I prefer to describe the situation in a different way,” Gonzi says. “There are times when the country has different priorities. This does not necessarily mean that we were procrastinating decisions.”
It is almost four o’clock and with Gonzi’s aides signalling that it was time to dash off to the MCESD meeting, I manage to pop my final question. Did Gonzi accept John Dalli’s resignation because the former minister broke the code of ethics or because he broke government’s financial regulations?
“John Dalli offered his resignation and I accepted it. I already said it was a political decision,” Gonzi replies.
But according to what John Dalli wrote in the annex to his resignation letter, the former minister insisted he did nothing wrong. I ask Gonzi to be more specific.
“Fair enough, but John Dalli offered his resignation and I accepted it. Mine was a political judgement. In the circumstances I feel it was the right thing to do.”
I insist one last time: did Dalli break the code of ethics?
With no further ado Gonzi sticks to his standard reply. “I made a political judgement. That is the long and short of it.”