Moody’s downgrade ‘a sign’ that government must heed - Muscat

Update: The Nationalist Party reacted to Muscat’s criticism over Malta’s credit downgrade by credit audit agency Moody’s by dismissing it as "puerile" and pointless.

Earlier: Reacting to the recent Moody’s credit downgrade which undermined confidence in both the government and the previously solid Maltese economy, Muscat said called for perspective.

“The downgrade is not an unrecoverable tragedy, but a sign that needs to be paid attention to. Anyone cannot responsibly bury its head in the sand and ignore it,” Muscat said.

He said that the Labour Party believes that if the government heeds this sign, the country is still in time to ward off the negative forecast that the downgrade report it lays down.

Muscat added that given how the government often wastes no time in taking the merit positive reports which emerge from time to time, “it cannot now dismiss a negative report and blame it anything but itself.”

“What is more worrying is not the downgrade, but the second part [of the report], which is the negative outlook,” Muscat however said, where Moody’s analysts predicted that unless changes happen, Malta’s economic performance could take a turn for the worse.

“That is the most salient point,” Muscat said, “especially when considered in the context of what Prof Edward Scicluna said with regards to an ongoing revision by the National Statistics Office on 2009 economy figures.”

He said the reason behind this revision was due to concerns that the economy contracted much more than it was thought to have during 2009, and statistical revisions are underway to ascertain whether this is true or not.

Muscat referred to statements by Prime Minister Lawrence Gonzi where he said that he would not be doing anything differently. “Gonzi is saying that he will leave everything the same and will keep doing what he has been doing – this is worrying.”

Muscat said that this stance shows the Prime Minister is in denial. “The first thing when solving a problem is to admit that there is a problem. He doesn’t even want to admit it and recognise the problem for what it is.”

“This is also disappointing given how we are in situation when it is ideal to come clean,” Muscat says, calling for honesty and transparency, “not so that we can grumble about the situation, but so that everyone knows where the country stands.”

He added that government’s insistence on not reviewing the way it has handled the country’s economic progress means that “there is the potential to commit the same mistakes that led Malta to this situation and this economic outlook to begin with.”

He however conceded that a part of the situation is dictated by the international financial instability as well as the Euro zone crisis. “Nobody is denying this,” Muscat said. “But the Moody’s report is also throwing considerable emphasis on the way the country is being managed.”

Muscat went on to say that aside from analysis and predictions, Maltese families are already feeling the pinch on a personal level.

“The people have downgraded the government long ago, based on the pinch they are feeling and how they cannot make ends meet,” he said.

Muscat also hit out at government over exorbitant utility prices, the substantial interest that the country pays every year on its national debt, spiralling costs of living, and also the Delimara Power station extension technology shift to gas from heavy oil.

Muscat said that unless Lawrence Gonzi changes the his government’s way of doing things, he will also keep up with ‘one-off’ measures to balance the books, which the Moody’s report determined as unsustainable and not part of a long-term economic vision.

He also said it is useless for government to boast about job creation when the jobs being created are not worthwhile due to bad working conditions and low wages which do not allow families to live comfortably.

Muscat was speaking during a call-in on One Radio on Sunday morning.