Q&A Tonio Fenech | 'Malta is no Greece'

On the eve of budget day, Finance Minister Tonio Fenech found the time to answer questions about salient questions related to financial management.

Enemalta pays 25c per unit generated as opposed to the 16c1 that is charged through our utility bills for oil prices
Enemalta pays 25c per unit generated as opposed to the 16c1 that is charged through our utility bills for oil prices

Over the last months, there has been great emphasis on the economic management in Malta when compared to Greece.  What distinguished Malta to Greece?

There is absolutely no comparison between Malta and Greece. For a number of years, Greek political parties competed through extravagant promises, which were implemented, resulting in substantial deficit and debt levels. The Maltese Government has never shied away from taking the politically difficult but responsible decisions, such as removing subsidies where these incentivised waste.

This did not mean we haven't provided fiscal incentives, which support the economy - we have reduced income tax three times in the past five years; we have provided various tax credits for small businesses, for women returning to work, amongst other. At the same time, we have always maintained financial rigour with identifiable targets.

Our commitments remains that of a balanced budget - a target, which we had to postpone in 2009 as safeguarding, jobs throughout the crisis assumed priority. Now that we are experiencing growth once again, and in consideration of a second-dip recession in Europe, we need to improve financial sustainability, which is necessary to allow us the room for manoeuvre should such crisis, happen.

Unfortunately, this room for manoeuvre was non-existent for Greece.  While Greece's hope for the future is dependent on a second bailout, Malta deficit in 2011 will be under the 3%, enabling us to move out of an excessive deficit procedure.

The issue of special purpose vehicles is similar in Malta, Spain and Greece and Italy.  This had led to the debt facing these entities not to be included in government budgets. However this changes when banks call in the government guarantees. What is the real debt for SPV? Does this not worry government? And why would we be different from Greece in that case?

There are very stringent rules with the way the EU classifies special purpose vehicles as Government Debt or not, these vary from the level of decision making independence from Government, whether or not the vehicle is supported by a guarantee from Government, does it have independent revenues.   We have not gone into the details of what type of SPVs Greece has, and therefore cannot comment further on the Greek case.

The Finance Company that Government will establish to fund the City Gate Project will allow private investors to participate and which will be listed on the Stock Exchange having its own independent revenues to meet future commitments.

The issue of energy and water tariffs is being touted as the main problem facing industry competitiveness and consumer confidence.  Why does the government ignore the possibility of 'green technologies' offered to it by venture-supported companies, technology which could decrease the cost to the consumer and industry?

Government is not only not ignoring the potential of green technologies but is significantly investing in such technologies, both through the support given to industry and households and by pursing national projects like that of is-Sikka l-Bajda and other proposals that Government regularly receives and more importantly the gas pipeline link to the European Grid.

Unfortunately it is a fact that most green technologies supply energy at far more costly results then conventional energy. There are no silver bullets in this sector: when Government receives the initial proposals, the claim made to capture Government's attention is generally that the cost will compete with conventional energy, or even be cheaper.  When the detailed studies are carried out it many times transpired that effectively these are costlier as all cost factors are taken into account.

This can be demonstrated on what is happening on a smaller scale: incentivising photovoltaic panels through the feed-in-tariffs is indeed an important scheme that reflects the importance we give to green technology; but Enemalta pays 25c per unit generated as opposed to the 16c1 that is charged through our utility bills for oil prices. We are investing substantially in extending the Delimara Power Station which will be a much more efficient plant, as well as in an interconnector which will reduce our dependency on fossil fuels.
This current year has underlined the precarious situation at Air Malta. What measures will be taken to ensure that Air Malta is restructured in time?
We need to urgently conclude with the Unions, as this could derail the whole process and jeopardise the restructuring plan as discussed with the Commission.
How useful has MCSED been in formulating government policies for the next budget?

MCESD has played an important role...unions and civil society have presented a number of proposals which we have taken on board, while at the same time we have presented a clear picture of the economic and financial scenario to put such requests in perspective- this has led to a fruitful discussion: it will never be possible to make every proposal happen, also because of conflicting views on the Council itself. However it brings our positions closer.  

In terms of the pension reform and welfare gap, how crucial will this be in the future to balancing the budget?

The pension reform-working group is addressing this.

The slump in the property market is expected to extend into next year, how conscious is the minister of this and what measure could help to remedy this situation?

Government will continue supporting all sectors of the economy. Data available shows that property contracts being signed are again on the increase.

Year                 Contracts

Jan-June 2009   5,620
Jan-June 2010   6,028
Jan-June 2011   6,509

The situation in the property sector has been brought around by excessive construction in previous years, particularly with regards to apartments, and Government cannot be expected to directly remedy such situation. However, Government is injecting significant national and EU-funded capital in major infrastructural projects -such as the Capital City project, restoration of bastions, new roads, new schools, the Oncology centre... these are supporting the construction industry in remaining an important contributor to our economic growth.

How can consumer confidence be revived?

There is a partial role in that can be played locally. No matter what happens locally, we will be affected and confidence will suffer from the continuous barrage of negative news reaching our shores from abroad.

Locally, top priority remains safeguarding and creating new jobs. While tax relief can indeed stimulate consumer confidence, ultimately the security of a job is most likely to be the major factor of stability and confidence within a household. Hence, this budget will focus again on the job market - with initiatives ranging from job creation, investment attraction and importantly on training so as to enable people - particularly our young persons, our unemployed and persons with special needs - to acquire the necessary skills in the sectors that are generating growth and jobs.

How has the conflict in Libya impacted on the local economy?

A number of companies which had (and hopefully still have) strong trade links with Libya have suffered from the prolonged Libyan crisis. In 2009 Maltese exports to Libya surpassed €83m while almost 8000 Maltese have travelled to Libya mostly on business. Around 300 Maltese worked in Libya. Therefore there is inevitable a degree of impact on the Maltese economy. While obviously the Libyan crisis has impacted negatively these companies, the impact on the general economy was minimal - and this is confirmed by the sustained growth rates experienced in the first two quarters and by the creation of thousands of new jobs that have reduced unemployment to the fifth-lowest level in the EU.

The only Greece Tonio knows is spelt GREASE.
The problem with Greece was a conservative government like Malta's who ruined the economy then was inherited by a Labour government. As regards City Gate project which business man wants to invest in a parliament, in political party that has no shame to return favours yes.
One of the main problems with Greece was that they were giving out false financial to the EU. We pray that this is not the case with Malta. Or is it?
Luke Camilleri
Oh ye! And a few months ago he commented that Italy is no Greece!