Government ignored EC warning, and had to resort to ‘austerity cuts’ - Labour

Labour's spokesperson for finance Karmenu Vella said the European Commission had proved the Opposition right when it ordered a deficit cut of 0.59% of gross domestic product, or €40 million in government spending.

The Commission informed Malta on 11 November, three days before the Budget, that the government's deficit figures were not tallying with its own estimates for the deficit and economic growth.

Lawrence Gonzi yesterday said the EC's acceptance of his spending cuts was a "certificate" acknowledging that his government was on the right path to deficit reduction.

But Karmenu Vella today said the Opposition was right all along when it said Gonzi's budget estimates had been over-optimistic.

"This was supposed to be a budget of financial consolidation and economic growth. The government projected growth at 2.3% when the EC said this was expected to be 1.3%. Government projected the deficit going down to 3% when the EC said this was going to be 3.5%."

In its forecast for Malta and four other member states, the EC warned the countries had to speed up their deficit cutting measures and that Malta's deficit was expected to widen to 3.5% of gross domestic product in 2012 and 3.6% in 2013.

"Government was deceitful with its estimates, and now it has to explain where the cuts in recruitment and maintenance will take place," Vella said. "We want to know where the cuts in recruitment and overtime will be, when government is bound by a collective agreement this year."

The 0.59% cut in government spending is expected to result in restraints in recruitment (0.1% of GDP), overtime (0.04% of GDP), operational and maintenance expenditure (0.07% of GDP), programmes and initiatives (0.21% of GDP) and government entities (0.17% of GDP).

Vella said €14.2 million will be cut from government programmes, while Labour MEP Edward Scicluna says government will have to wipe off as many as 500 jobs in a recruitment freeze and stop 400,000 hours in overtime.

"This is a €3 billion budget, and yet the €40 million cuts were not done there and then," Scicluna said. "And now the Prime Minister is going for cuts in public sector salaries, not cuts in his expenditure on the parliament building. Had the government heeded the Commission's warning, this would not have happened."

"Government is always hiding the real state of the economy," Karmenu Vella said, While it is carrying out €40 million in spending cuts, the expenditure of €80 million on the new parliament building is being hidden from the national accounts," Vella said.