Scicluna in Brussels to explain deficit-reduction strategy for 2013

The Maltese government and the European Commission will continue with technical talks on the economy's forecasted 3.7% of GDP deficit, announced today by Commissioner Olli Rehn.

The figure is a far cry from the 2.7% forecasted by finance minister Edward Scicluna.

Scicluna, who presented his first budget in April, said 2012 was closed on a budget of 3.3% and not below the 3% threshold as claimed by his predecessor.

Today's EC forecast prompted a meeting between Scicluna and deputy prime minister Louis Grech with Rehn, in which the Maltese delegation explained its economic strategy to address the fiscal imbalance and economic growth.

"The positive elements of the forecast shows that after the elections, employment in Malta remains stable and consumer confidence has increased. Also forecasted is continued job growth and a decreasing rate of inflation through forthcoming cuts in energy prices," Scicluna said from Brussels.

Technical discussions between the EC and Malta will continue.

Malta's deficit will widen to 3.7% of gross domestic product in 2013, EU forecasts released today indicate, with a slight improvement in 2014 of 3.6%.

The deficit reached 3.3% of GDP in 2012, up by 0.5%, due to higher social benefits and increase in public sector salaries through the renewal of collective agreements in health and education.

Scicluna says he is committed to keep the deficit below the 3% threshold, and end 2013 with a deficit of 2.7%, as announced last month in the budget. "It must be recalled that the 2013 approved budget is the same budget submitted by the previous government in November of last year and which forecasted a deficit of 1.7%. The Nationalist government had then stated that the budget for 2013 was evaluated and endorsed by the European Commission," Scicluna said.

"The only addition to the 2013 Budget was the inclusion of a number of collective agreements and other firm commitments undertaken by the previous government at the beginning of this year prior to the elections, and for which no financial provision was made in the budget estimates."

But he insisted that the deficit for 2013 will end in the region of 2.7%. "Despite the Commission's disappointing forecast, this government remains committed to closing 2013 with a deficit of 2.7%... this further confirms how unrealistic the previous administration's budget projection of 1.7% truly was and that Government was correct in revising it upwards when it presented the 2013 Budget in April."

On its part, the Nationalist Party said that Joseph Muscat's decision to increase the size of his Cabinet and secretariats had led to an explosion in spending. "The Opposition expects the government to shoulder its responsibility, as it will be responsible for nine months of this year's expenditure and it cannot blame the previous administration," the PN said.

Joseph Muscat's enlarged Cabinet of 14 ministers and eight parliamentary secretaries has shot the cost of Malta's political offices up by 23%, or €1.9 million over and above the €8.1 million that Lawrence Gonzi's Cabinet was estimated to have cost had it been re-elected, an analysis by MaltaToday suggests.