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The hallmark and leitmotif of this budget was supposed to be its euro label. All decisions taken were motivated by the government’s main focus and target of entry into the euro zone.
Joining the euro was a decision sanctioned by the people by means of the referendum decision. Once the people voted for Europe they were also voting for the euro as the latter was conditional on the former. As a result, any attempts to rethrow the euro issue into the political fray is merely playing politics. The question facing the country now is simply will we qualify to join? The interview published in this Sunday’s edition with Professor Edward Scicluna highlights the magnitude of the task. He adds that the budget aims at soothing the electoral core rather than addressing the criteria for adopting the euro.
In March government will have a nod or a thumbs down from Europe followed by a final decision in June.
Hence the explanation why 1 June was chosen as the date to reduce the departure tax by Lm10. Apart from the administrative difficulties it would create for local travel agents, chosen as the date to reduce the most unpopular departure tax, introduced by a Labour government and increased by two successive Nationalist governments. In all likelihood, Europe will decree this tax as contrary to fair trading practises and refunds may have to be forked out. Government is treading on slippery ground.
Government had little room for manoeuvre in this budget; its hands are tied to operating within the strict European Commission’s rigid economic parameters. It was straight-jacketed since all measures taken are now analysed diligently by a European Commission ever vigilant and ruthlessly insisting that sound economic management is not prejudiced. We are in the EU now and no Maltese government has the easy facility to spend and borrow. Those days are over.
It is crucial that we reach the Maastricht conditions to join the euro and all attempts to ensure that we do so are to be encouraged. Failure to do so will leave us as a less attractive country for foreign investment with consequent repercussions on the value of the Maltese lira. It is to this extent that we understand many of the measures taken. Government’s control of the deficit is praiseworthy indeed this may long be seen as the major achievement of the Gonzi government. Other measures and all attempts to include more women in the labour force by means of tax breaks and childcare incentives are laudable. As is the increased amount of money being thrown into tourism, which we augur are wisely spent, and the beginnings of a commitment to research and development, and venture capital for enterprise.
Unfortunately too little has been done to address the decreased purchasing power with lower income earners.
Where we disagree with government is its simplification that the worst is behind us and we have turned the economic corner. This is simply not the case and risks being seen as simple electoral rhetoric on the final lap of the forthcoming electoral race.
Government finances are simply not on a sound economic footing yet. Regrettably government spending is still high and increased yet again this year. Trimming of government expenditure is the surest way to put our finances on a sound footing. We appreciate that yearly increases in pensions and wages ups the cost of running government but other ways of reining in expenditure must be found. Herein lies the key to turning the economic corner. This budget did not go sufficiently forward to putting the further necessary economic blocks in place. Hard decisions still need to be taken and no doubt will not be taken till after the general election. This will only serve to weaken and not to fortify government finances.
Sound economic management should motivate any government. Accordingly incentives to make the public sector leaner, the immediate implementation of the pensions policy, the removal of all trade practice restrictions, the commitment to a reform of the rent laws, and the fortifying of the auditor’s office scrutinising government, expenditure should equally have been included in the budget.
Lawrence Gonzi is happy to cite economic records achieved by his government, he also appears to be concerned about the lack of sufficient women in the marketplace and research and development. The inclusion of measures to address these issues in the budget augurs well. Entering the euro zone should remain the country’s top priority.
This newspaper will carry on emphasising with the government not only to have the willingness to reform but the raw courage to change things. Lagging behind all the new members of the EU is an indictment.
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