Karl Stagno-Navarra
Finance Minister Tonio Fenech will have little room for manoeuvre as he returns to his desk this morning to finalise the pre-Budget document, as the EU’s Council of Economic and Finance Ministers last night insisted that Malta reigns in its excessive budget deficit by the end of next year.
Already touted as a “cautious” budget, Tonio Fenech is reportedly preparing a financial plan that must put public finances back in order within a short space of time, and moreover implement corrective measures at a time when most local economic sectors are facing severe difficulties.
The social partners have already warned government to be “considerate” in its approach to next year’s budget, insisting that no new taxes must be introduced as this would cause further damage to an economy that this year has seen zero or negative growth.
Speaking to this paper from Brussels, Tonio Fenech played down Ecofin’s decision to keep Malta’s public finances in check, explaining that “this is a measure that shows that Malta is likely to be able to correct its deficit by 2010.”
Ecofin’s decision is based on a government deficit of 4.7% of GDP in 2008, a year when the Maltese economy “experienced a number of extraordinary expenditures which remain exclusive to 2008 only,” he said.
The minister added that these measures range from the voluntary termination schemes for Malta Shipyards Employees; late payments of corporate taxes in the last quarter of 2008, and the substantial subsidy granted to Enemalta that “cushioned” the impact on consumers from the high international energy prices in 2008.
The Finance Minister however made no mention of fact that a general election held in March 2008, and that expenditure appears to have skyrocketed in the preceding months.
But as Tonio Fenech explained this, he was cautious on how he will be getting around to balance it all.
In its decision, the Ecofin Council called on the government to “ensure that budgetary measures planned for 2009 are rigorously implemented, whilst avoiding any further deterioration in public finances, and to spell out new consolidation measures in order to bring the deficit back below the 3% of GDP in 2010.”
Tonio Fenech wants the 2010 budget to focus on competitiveness, job creation, or at least to protect the present state of the labour market.
As government revenue continues to preoccupy due to the economic downturn, Tonio Fenech must find the finances to correct his deficit.
He confirmed that an exercise is currently under way to review all governmental departments and ministerial expenditure, in a bid to be able to review all possibilities of diversion of funds to other priorities.
Fenech however denied having informed his fellow ministers that an across-the-board reduction of funds was expected for their ministries through next year’s budget.
“The current global economic situation is affecting the Maltese economy and so while committing ourselves to address the excessive deficit, we must be very careful not to take measures that could make a potentially bad economic situation even worse,” he said.
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