Budget to be implemented in full, despite EU’s call for spending cuts

Finance Minister Edward Scicluna has dispelled any suggestion that the government may stop short of implementing measures of Budget 2013, despite reported calls by the European Commission to cut back on public expenditure in view of a project budget deficit of over 3% of GDP by the end of the fiscal year.

"All the measures included in the 2013 Budget will be implemented by the present government," Scicluna told MaltaToday. "These include the additional agreements entered into between November 2012 and March of this year for which provision was made in the approved budget."  

Budget 2013 was unanimously approved on 10 April, after having previously been rejected by in a December 2011 vote which precipitated the March 9 election.

Presenting a revised version of the same budget last month, Scicluna explained that expenditure and revenue targets had to be amended due to the previous administration's stewardship of public finances. As a result of these revisions, the finance minister announced a deficit target of 2.7% of gross domestic product by the end of 2013 - down from the Commission's earlier projections of 3.7%.

He also said the government would be aiming for a deficit-reduction programme over the coming years of 0.6% every year to achieve a balanced budget.

However, the Commission has expressed doubts regarding the present government's projections, and will today initiate Excessive Deficit Procedures on the basis that the budget implemented last month will push Malta's deficit figure upwards of the 3% of GDP stipulated by the EU's Stability and Growth Pact.

In particular, the Commission is understood to be urging expenditure cuts in two specific areas - namely health and pensions, both of which are considered socially and politically sensitive areas.

Before entering the political arena, Scicluna himself had variously hinted at reforms to these areas - a fact which was seized on by the Nationalist Party during the last election campaign. However, the incoming Labour government has emphatically denied harbouring any plans to introduce means testing or any form of payment schemes to Malta's national health service.

This commitment remains in place despite the excessive deficit procedures which will commence today.

"Whilst the Government remains fully committed to ending 2013 with a deficit below the 3% threshold, the Excessive Deficit Procedure (EDP) strengthens the Government's resolve to ensuring that it will not miss this target," he said yesterday: the day before the European Commission will initiate EDP against Malta.

Apart from mismatching projections for Malta's deficit, there is also disagreement on projections for economic growth. In presenting the original budget last December, former Finance Minister Tonio Fenech had predicted an economic growth rate of 2.3% by the end of the coming year, against the Commission's projection of 1.5%.

When still opposition leader, Joseph Muscat had likewise criticized the PN for basing its electoral manifesto on 'unreralistic economic growth projections" - the same projections that lie at the heart of the budget his own government has now committed itself to implementing.

Moreover, unlike the European Commission's doubts and his own party's open scepticism regarding Fenech's economic growth projections, Edward Scicluna remains confident that Malta will manage to rein in its budget deficit to within the required 3% by the year's end, while also implementing a budget his own party had criticised for increasing public spending across the board.