Caruana says government must spend wisely as he predicts longer-lasting inflation

A Europe-wide effort for countries to lower their deficit and switch to greener sources of energy means government needs to be wiser in its spending, Finance Minister Clyde Caruna said on Wednesday.

“The way government spends public funds needs to be more efficient,” Caruana said in parliament on Wednesday during a debate on the financial estimates for the year 2023.

Caruana started by speaking about the banking crisis which hit American and European banks over the past weeks.

The fallout from the recent banking crisis spurred by the collapse of two banks — and concerns about the health of a third — is bubbling up in the market for international commercial real estate lending, as borrowers fear that banks will pull back. That could slow increase the likelihood of a recession, analysts and real estate experts have said.

“Banks across the globe are facing major dilemmas, and the decisions taken in the coming days will affect the global economy,” he said.

Clyde Caruana in parliament on Wednesday

The finance minister said he predicts inflation rates to remain high over the course of the coming months.

“This means government needs to plan for a longer span of time in order to help people,” he said. “It also means government needs to be more intelligent in its expenditure, and this includes cost-cutting exercises which were started last year.”

He said European countries have been told that they need to lower their deficit.

“The general message during a meeting between member states finance ministers, the sentiment was that countries need to lower deficit and push for renewables,” he said. “Now that Europe has emerged from the pandemic and major shocks from inflation are over, there is a push for governments to balance their cheque books.”

He said Malta needs to be proactive in its transition to renewable sources of energy. “We do not want to the European Commission to come here and force us to do so at the eleventh hour.”

Caruana also said there is push for member states to adopt a minimum tax rate.

“Across the European continent, the determination of member states to enact reforms is stronger than before. I have never seen such determination, and I believe we have to make our efforts,” he said.