‘Changing government is first solution to country’s economic problems’ – Labour

Labour's spokesperson for the economy Karmenu Vella this morning insisted that government was "part of the country's economic and financial problems".

"The first solution to Malta's worsening debts and deficit is changing government, because this government is part of the problem," Vella said when pressed over the Opposition's solution to national debt.

Flanked by Labour MEP Edward Scicluna and the PL's spokesman for the finances Charles Mangion, Vella insisted that government's debt had reached unprecedented levels under the Gonzi administration.

Asked what would be Labour's solution to the country's problems, Vella said that the PL had several solutions.

"The first step in the right direction is Tonio Fenech's continuous call for the PL to state its solutions... at least he's finally recognising he has a problem," he said.

"But it's not becoming to expect me to come clean up after [his] mess... only ducks do that," Vella said.

"We cannot keep throwing money at the problem or all you'd be doing is increasing debt and inflation," he said.

Echoing calls made by entrepreneurs during a Labour business forum on Friday, Vella said the solution for economic growth was 'letting business work'.

"This government first broke them down with red tape and increased costs and then it talks about setting up workshops and schemes. That is not the solution," he said.

Vella also pointed out that the economy was facing structural problems, clearly being under Brussels's excessive deficit procedure and struggling with shifting its national debt onto other entities, like Enemalta.

"Whereas government forecasted a deficit of €154 million, this is today standing at €333 million... to reach its deficit target, government needs the impossible surplus of €184 million. The finance minister is on his own saying government will reach its targets. Economists see this as highly improbable."

Vella said that government's debt has already reached 75% of its gross domestic product (GDP).

"For government to reach its economic growth target, it needs a growth of 4.6%. Yet the finance minister insists he will reach this target without explaining how, or how this will be attained sustainably," he said, adding that today's debt levels surpass even those projected for 2014.

"Traditionally, the Maltese culture was never one to hold debts. This increased under the Nationalist government. Between interests and loans Malta is paying €1.5 million a day. Every day, the taxpayer forks out €230 million to cover the interest accumulated on government debt," Vella said.

Charles Mangion pointed out that retail sales and wages had dropped, while government operating costs went up by €40 million in the first half of the year, coupled with a three-point decrease in private sector income to 13% of GDP from 2008.

"A positive growth was registered in exports. However, in the manufacturing sector, the increase was registered through the re-importation and re-exportation of fuel and lubricants," he said.

Mangion said that Malta's rate of inflation during July and August placed the island among the countries with the top rates among the 27 EU member states. "The increase in prices took place in the most essential products, such as food. No one benefits from inflation, except for government who receives more revenue from taxes."

Mangion said government had to reduce bureaucracy, control induced costs, facilitate investment and address the skill mismatch problem.

On the other hand, Labour MEP Edward Scicluna proposed to have heads of statistical agencies appointed by parliament, just like the Auditor General was an office of the House of the Representatives.

"A second proposal is for the creation of a code of conduct for heads of statistical offices. It is clear that euro crisis was the result of countries hiding their debts and deficit. How was it possible that the Eurostat didn't realise that it was being fed misleading information?" Scicluna said.

"I want the EC's reassurance that Malta's financial statistics are realistic. I don't want our country to end up like Greece. This is not 1996 when a financial sinkhole in Malta's coffers was discovered," Scicluna said.

Scicluna said Malta's emergence from a recession earlier this year, with a 0.9% growth in GDP in the second quarter, was part of what he had earlier termed a twin-economy: a private sector in recession while the public sector grew. "Malta's situation is unique as even during the recession, its inflation continued to grow."