Economic growth is the key for financial stability, says PM

Reporting the outcome of the European Council meeting and Euro summit held over the weekend in Brussels, Prime Minister Lawrence Gonzi reiterated Malta’s commitment in surpassing the current economic crisis.

“We are not isolated from the rest of the world and we are facing great challenges. Our policy has always been clear and simple: the key for the solution is economic growth which not only creates but also safeguards existing jobs,” Gonzi said.

“We are determined to overcome this crisis,” he added.

Referring to the Greek crisis, Gonzi said the situation has worsened and an urgent decision is required to retract the risk of affecting the Europe’s financial stability.

“Government is committed in facing this moment with the greatest responsibility and take all necessary steps to safeguard workplaces and the workers.”

Saturday’s European Council centred on economic growth and insisted on financial stability. European Commission President Jose Manuel Barroso proposed five main priorities, aimed at reaching this goal.

These included: a final solution to Greece’s problems; a better protection mechanism against crisis in the eurozone; a stronger banking system; priorisiting guidelines aimed at promoting stability and economic growth and a stronger economic governance.

“It is clear that more needs to be done to create a business-friendly environment and also that structural funds could help in the creation of more work,” Gonzi said, adding that the Commission is expected to make proposals on the use of structural funds by micro-enterprises.

Gonzi said that Europe’s priorities for an inclusive, intelligent and sustainable economy were four: a Single Market which is the key for the creation of jobs; the establishment of a Digital Single Market by 2015; the reduction of administrative burdens by 25% by next year and structural reforms aimed at safeguarding financial stability.

Referring to the current situation of the banks, Gonzi said the final decision over the recapitalisation of the banks will be taken next Wednesday.

On the Stability and Growth Pact, Gonzi said government is in favour of the application of the pact and that it believes the EU should make use and apply its instruments to the full.

“After all this instrument is to the benefit of the economy and Europe’s financial situations. If it then results that these instruments are not enough, government would be in favour of discussing and exploring other measures,” Gonzi said.

On the Euro summit, Gonzi said the 16 governments discussed the strengthening of Greek programme; the involvement of the private sector, the increase in the EFSF’s efficiency, the European Stability Mechanism and the strengthening of the bank sector.

On the next meeting of the G20 in Cannes, the European Council agreed that the priorities should be six: the reform in the international monetary system, the strengthening of the supervision and regulation of the financial sector, the price volatility of basic needs, the promotion of an inclusive sustainable growth, the protection of international commerce and climate change.

Answering questions put forward by Opposition leader Joseph Muscat, Gonzi said that he stressed with the European Union that member states should focus on economic growth rather than look for changes in the Stability and Growth Pact.

He explained that if the changes were major, some member states would have to go for a referendum: “I recommended that we find solutions which do not necessarily require a change in the treaty.”

He added that the way forward was to make changes which would strengthen the Pact: “Our aim is for a stronger Europe, a stronger economy, keeping Europe a strategic partner in the Mediterranean, with the Middle East and the Arab World.”

Gonzi denied that Malta is in favour of fiscal federalism. Muscat asked whether Malta would be following suggestions put forward by Germany and France which favoured the harmonization of the fiscal policy. Gonzi said Malta's principle was to see Europe's economy move forward, but was not in favour of creating fiscal federalism.

The Prime Minister also said that Malta's departure point is to see a constructive Europe and as such there are parameters which should be respected. He however said that it is important that sovereignty is respected adding that Malta will constantly monitor what Europe decides on its taxation policy.

During the ECOFIN meeting on Saturday, to which Finance Minister Tonio Fenech also attended, Europe’s finance ministers analysed a report aimed at addressing Greece’s problem and agreed upon the sixth tranche of loan to the country.

The Minister also agreed that more sustainability is needed in the banking sector, which should be co-ordinated on a European level. The proposals will be discussed next Wednesday during the European Council.