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Fenech warns of Malta’s high risk of falling back into excessive deficit procedure

Finance Minister Edward Scicluna says government doing all it can to convince the European Commission against EDP, but warns Malta has lost the Commission’s ‘trust’.

miriam
Miriam Dalli
21 May 2013, 12:00am
Finance Minister Edward Scicluna with deputy prime minister Louis Grech and European Commissioner for Economic and Monetary Affairs Olli Rehn
Finance Minister Edward Scicluna with deputy prime minister Louis Grech and European Commissioner for Economic and Monetary Affairs Olli Rehn


According to Finance Minister Edward Scicluna, the European Commission has lost its trust in Malta after the PN administration failed to follow the Commission's orders in January 2012 to cut the budget by €40 million.

With a deficit surpassing the 3% threshold, Malta risks falling under the Excessive Deficit Procedure. The government is currently in talks with the Commission in a bid to convince it that Malta will succeed in reducing its deficit under the 3%.

According to Tonio Fenech, the highest probability is that the European Commission will place Malta under EDP; according to Edward Scicluna, the government was doing all it could to avoid it.

"The European Commission is not believing us when we say that we are going to consolidate our fiscal slippage. Last year, the government had given its word it would cut €40 million from its budget. But it didn't keep its word. And now, we are in a weak situation with the European Commission. Whatever we're promising is not being believed," Scicluna told the parliamentary committee for economic and financial affairs.

But Fenech rubbished this statement, insisting that the Commission based its decisions on statistics not "friendships". He also asked whether the Commission had asked the government to review its €600 million debt projected for next year.

Scicluna also revealed that during phone calls held with Commissioner Olli Rehn, it transpired that the Budget 2013 as put forward by the PN administration "was never agreed to" by the Commission.

"We had been assured by the government of the day that the EC had accepted the budget as was. But yesterday Olli Rehn said this was not exactly the case. This budget targeted a 1.7% deficit but it was approved under different circumstance - three months late and after a general election," Scicluna said.

Fenech defended the Rehn accusation, insisting that the Commission doesn't rubberstamp the whole budget document but would approve the framework or government's plans. He added that the issue at stake now was the Commission's forecast of 3.7% deficit this year and a 3.6% deficit in 2014, "under no policy change scenario".

"In other words, deficit will not be decreased if the government doesn't change its policies," he warned.

Scicluna also argued that the fiscal slippage suffered in the first months of 2013 had been due to the election period, where consumers took a step back from making purchases of a certain value - for example cars and property - as they waited for a new government to approve the budget.

"While we know that this is a temporary issue - we are already noted increase in consumption during March and April - for the EC it makes no difference whether we were in election mode or not. While we argue that it is a temporary deficit, the Commission does not see it in the same way and we are trying to convince it otherwise," he said.

The parliamentary committee, chaired by Labour MP Silvio Schembri, was also addressed to by the Central Bank Governor Josef Bonnici who urged the government to diversify the country's economy to make it more resilient.

Referring to the concluding statements of a report of the International Monetary Fund which described Malta as "showing remarkable resilience" in the face of the economic crisis which hit Europe, Bonnici said Malta had a sound financial sector.

He also said that the full IMF report has not yet been published.
miriam
Miriam Dalli graduated in communications studies from the University of ...
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Joseph Borg
Fench is trying to deviate our attention from his BWSC fiasco, revealed in parliament !
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Judith Grech
Fenech who? The ex finance minister who brought all this on the Maltese people? For God's sake go hide and don't even dare show your face. IPOKRITA.
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John Zammit
the more fenech opens his mouth the more he makes a fool of himself. does this man who only yesterday was at the helm of maltese finances think the public is gullible enough not to know why the deficit may fall under edp.
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roderick degiorgio
You should lie to EU,it's been going on these last 5 years.
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George Muscat
Ghaliex ma tmux tinheba Sur Tonio Fenech? Il-Pariri messek taghjthom lilek in-nifsek u mhux trid tilghaba tal-bravu issa meta qied fl-oppozizzjoni. Jien daqsekk fdajt il-politikanti huma min huma sakem nara li tibda issir Gustizzja. Maz-zghit tridu taghmlu il-gustizzja? Dawn tal-moviment rebhu il-Gvern guq l-Ghajta tal-Guztizzja u Malta taghna ikoll. Jekk min seraq mhux sejjer irodd lura Malta ha tkun tal-Politikanti BISS ghaliex huma jieklu u jithanzru u l-poplu imut bil GUH. Ghaddew 73 gurnata u l-ebda politikant ma mar il-Habs, imam tal-moviment qedin jippremjawhom. Scratch my Back and I'll scratch yours.
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Jekk mux kapaci ghalfejn iprezenta ruhu il labour mux kapaci immexi.
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Janice Sant
Vera bla misthija dan il-ministru li gideb fuq l-arlogg ta l-iffansjar: ahseb u ara kemm se nemnuh fuq l-dejn li hallilna ma wiccna u kif nistghu nemnuh! X'misthija ta nies!
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THIS IS THE PROOF OF GONZI AND TONIO'S LIES,AT THE LIGHT OF THIS IMFORMATION THE PEOPLE IN MALTA SHOULD NOW START PLANNING WETHER IT IS SAFE TO LEAVE THEIR MONEY IN ANY BANK IN MALTA AND THAT INCLUDES FOREIGN BANKS LIKE BANIF AND HSBC THAT WILL BE THE FIRST TO SHUT DONE IF THESE CIRCUMSTANCES GET WORSE. DO NOT BELIEVE WITH THE BANKS STAY,BUT WHAT EVERY MALTESE SHOULD DO IS MATCH THE AMOUNT OF DEFICIT MALTA HAS WITH WHAT THE AMOUNTS OF MONEY THAT BANKS LIKE APS,AND BOV HAVE AS CAPITAL AND I CAN ASSURE EVERYONE THAT THERE IS NOTHING COMPARED TO WHAT THEY ARE SAYING THEY HAVE. KEEP YOU MONEY IN A SAFE PLACE TAKE IT OUT OF THE BANKS NOW BEFORE TOMORROW DONT BE BRAIN WASHED BY WHAT THE BANKS SAY.
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GODFREY FARRUGIA
And what does Tonio Fenech know? Was it him who brought Malta into this abyss of debt that will take a whole generation to repay? In the opinion of many, Tonio Fenech was the worst Finance Minister in Malta's entire parliamentary history, and stands out as a dunce especially following the ministerships of John Dalli.
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