Government, Opposition clash on Enemalta levies

Additional reporting by Jurgen Balzan

The government and the Opposition found a bone of contention in the €66 million Enemalta levies, with Prime Minister Joseph Muscat saying these have been included in the 2012 government revenue while Opposition leader Lawrence Gonzi claimed otherwise.

In separate press conferences held at the end of the Budget speech, Gonzi argued that the €66 million amounted to 1% of GDP, hence increasing the deficit from the PN administration estimate of 2.3% to government's 3.3%.

However, Muscat said the opposition's argument was "completely incorrect" after the finance ministry's technical team confirmed that the levies were included in government's accrued accounts.

"The oppositions is technically and factually incorrect," Muscat said, standing by Finance Minister Edward Scicluna's confirmation that deficit to date amounted to 3.3%.

Gonzi claimed that he "couldn't understand why the Labour government failed to include the €66 million fuel duties in the deficit" and went on to question whether the government had opted to waive off the debt.

"This has only translated in Malta risking to fall under the European Commission's excessive deficit procedure," Gonzi said, describing the decision as "extraordinary".

Former finance minister Tonio Fenech explained that he had sanctioned the delay of the payment given Enemalta's precarious financial situation, also because no bank was allowing loans to be issued to the state utility, in the absence of a formal confirmation of the interconnector permit by Italian authorities - a permit which was only issued late in March.

However, when quizzed by the press, Muscat denied government was waiving off any debts.

"If we want Enemalta to improve its credit rating we cannot go on waiving its debts. To make Enemalta viable, it must pay its debts. It is also imperative that the state utility's business model changes," the Prime Minister said.

Turning to Malta's risk of an EDP, Gonzi said a higher debt would lead to Malta entering the Commission's excessive deficit procedure, risking direct orders from Brussels to control and cut its expenditure.

The government is however arguing that by end of 2013, deficit would be reduced to 2.7%.

"We are already in talks with the European Commission and our case will be that, through the economic growth we are projecting together with the estimated revenue, deficit can once again fall under the 3%," deputy prime minister Louis Grech said.

Grech added that the short timeframe - a month - would also make it useless for Malta to enter the excessive deficit procedure.

According to the financial estimates, debt is projected to grow by €600 million from last year's €4.9 billion to €5.5 billion in 2015. Muscat explained that with debt increasing with deficit, the government would be taking a cautious approach in reducing deficit while slowing down the rate of debt acceleration.

Muscat argued that debt could only decrease once deficit starts decreasing and reiterated government's commitment to gradually reduce the deficit which would reflect in a reduction in the government's debt.