UPDATED | Recession prompted by high government spending, increased national debt – PL

Adds finance ministry's statement at 2:34pm

Labour's chief spokesperson for finance Karmenu Vella said NSO data issued yesterday establishing that Malta was in a recession, had confirmed the feeling on the ground for many families and businesses.

The stats show a decline in real growth of 1% between January and March 2012, after a 0.3% decline in the last quarter of 2011 when compared to the same quarters in previous years. Two consecutive quarters of negative growth are a textbook definition of recession.

"The rate at which GonziPN has escalated the national debt has left no room for our financial policy to withstand this type of recession," Vella said.

"The facts show economic growth is far less than 2%, as Gonzi predicts. The growth target has decreased, national debt has gone over the original target, and it looks like public finances are heading downhill," Vella said.

The Labour MP pointed out that household consumption in the first quarter of 2012 had declined by 4.5% over the same quarter in 2011, while government spending increased by 10%. "The increase in government spending has increased national debt without an increase in economic growth," the MP said.

Vella also accused the government of refusing to heed critical voices, and said there was no contingency plan in the case of failed targets. "Government must declare its plan in case this situation worsens. Labour has been insisting that economic growth, not austerity must be the government's priority, by the exaggerated utility tariffs have left their mark on real consumption, profits and economic growth - not a good sign for the future."

Tonio Fenech has insisted that the decline in growth was prompted by some €22 million in losses at Enemalta after the increase in the international price of oil, which was not passed on to the consumer in the form of increased utility tariffs.

But Vella claimed the 'GonziPN government' was too busy painting a positive image of the economy despite the warnings of the IMF and Brussels, as well as credit rating agencies. "GonziPN must be brave enough to recognise these financial problems instead of rewriting the past," Vella said.In reaction, Finance minister Tonio Fenech insisted that "the guarantee of a better quality of life for families is job creation and improving the quality of jobs"

"Month after month local and European statistics indicate that Malta is creating more jobs and our unemployment rate is now below the 6% mark, among the lowest rates in Europe."

Fenech added that statistics published yesterday confirm that wages are also on the up. He also noted that the International Labour Organisation (ILO) said that when compared to the period prior to the 2009 international crisis only six countries saw an increase in job creation among the most developed countries, and Malta was among them.

Repeating the claim that the government has created over 20,000 jobs, Fenech said NSO statistics also show that many different economic sectors were growing and becoming more productive so much so that wages had increased by four per cent when compared to the last quarter last year.

"This is the direct result of measures the government has taken in favour of industry," he added.

Fenech also pointed out that families and business have also benefitted from lower taxes with a recent European Commission report confirming that Maltese workers were the least taxed in the EU.