Scicluna rubbishes Opposition’s ‘ridiculous’ arguments on deficit, debt

Finance minister dismisses Mario de Marco's claims that deficit being reduced through one-offs, hits out at Opposition's 'prophecies of doom' 

Finance minister Edward Scicluna delivers a speech in Parliament
Finance minister Edward Scicluna delivers a speech in Parliament

Finance minister Edward Scicluna has dismissed the Opposition’s fears that the deficit has been reduced through one-offs events and that Malta’s economic growth is reliant on public expenditure.

“It’s a ridiculous declaration,” Scicluna said bluntly in a parliamentary speech to debate the Budget. “How can the economy be reliant on government expenditure, and the deficit consistently decrease at the same.

“If a government loses control of public expenditure, then it consequently loses control over the deficit.

 Malta’s deficit is expected to fall to 1.6% of the Gross Domestic Product by the end of the year, down from 3.7% in 2012.

Earlier in the debate, PN deputy leader Mario de Marco claimed that the decline was due to one-off events that boosted government income – namely the sale of the BWSC power station to Shanghai Electric Power, the payment of Enemalta’s arrears, the imposition of an excise tax on fuel, and the sale of citizenship.

However, Scicluna insisted that not a cent of the SEP investment or the payment of the Enemalta’s arrears went towards financing the deficit reduction.

“If the economy truly grew through public expenditure, then I suggest that de Marco tell [Italian, Greek and Spanish prime ministers] Renzi, Tsipras and Rajoy that he has found the solution for economic growth – simply increase public expenditure,” the minister quipped.

He hit out at the previous administration, who he claimed cause Malta to lose credibility with the European Commission after re-entering excessive deficit procedures twice in quick succession.

He dismissed the Opposition’s arguments against public expenditure , insisting that the rise was partially due to schemes such as healthcare and education investment, stipend increases, and free childcare.

“By making childcare free, the expenses appear on statistics as public consumption,” Scicluna said. “Shall we reduce stipends or remove free healthcare? The public sector will decrease dramatically afterwards.”

He reacted strongly to de Marco’s warning statement on the ever-rising absolute figures of national debt, questioning whether the Opposition is suggesting that the government stop borrowing money and cause an economic crash.

“Not even the austerity programmes imposed by the Troika on Ireland, Greece and Portugal had suggested slashing off the deficit in a single year,” Scicluna said. “We would rather adopt a growth-friendly fiscal consolidation, a model that the European Commission has encouraged.

Citing Eurostat figures, he said that in the second quarter of 2015, Malta witnessed the second highest debt reduction rate as a proportion of GDP out of all EU countries.

‘PN suffering from a credibility problem’

Scicluna had harsh words for the PN, both in government and Opposition, arguing that several of its prophecies of doom that haven’t come to pass have now left them suffering from a credibility problem.

“As PN deputy leader, Simon Busuttil had warned that Labour’s plans to reduce electricity tariffs would cost the Budget a bomb that the country couldn’t afford, and that it would increase the deficit to over 3.6% for several years,” Scicluna recounted. “The public will judge on whether those words proved prophetic or not.”

He similarly recounted how the PN Opposition and its media had cooked up a storm ahead of the partial privitisation of Enemalta to Shanghai Electric.

“They had claimed that the government was betraying Malta by selling off Enemalta to a country non grata, that China would control Malta’s economy, and that it would have a finger on Enemalta’s switch.

“Now they’re investing in the Hinkley nuclear power station in the UK, with a state guarantee on top.”

He similarly dismissed the Opposition’s argument about the rising number of people at risk of poverty.

“Statistics released in 2014 that were compiled for 2013 show that the number of people at risk of poverty remained stable at 99,000 people when compared to 2012. We managed to stabilize the numbers of people at poverty in our first nine months in government; the next step is to abolish it.” 

More in Budget 2016