Higher public spend sent debt off-target by €258 million – Labour

Labour MP and shadow finance minister Karmenu Vella today accused the government of failing its 2012 debt targets by €258 million over the targeted €4.5 billion spend it had earmarked back in the budget of October 2011.

"Clearly government has failed its target, and the increased debt has seen increased spending on debt servicing, specifically going up by €35 million over the same six months in 2011 to €110 million by the end of June 2012," Vella said.

Vella is insisting that justification by finance minister Tonio Fenech that the government's debt had been affected by EFSF guarantees and the early issuance of government bonds, did not give the entire picture of the government's increased dependence on public debt.

"The EFSF guarantees were already factored in the last budget at €45 million, even though these increased to €56 million in March this year. As for the issuance of government stock, I challenge the minister to guarantee he will not be issuing any further stock to the public over and above what was earmarked last year," Vella said.

On his part, Fenech accused Vella of deliberately misinterpreting government statistics.

Fenech said the government had already issued 65% of its €700 million in the first half of the year, while payments under the European Financial Stability Facility would only be effected once the European Commission approves such payments to applicant countries.

"The Opposition wants to keep putting doubt on our country's economy when we have already gained the confidence of the International Monetary Fund for the action we took in addressing our finances.

"Vella knows what the new rules of the EU are on public finances: had we really gone off-target, the EU would take the necessary measures to intervene," Fenech said.

The finance minister reiterated claims that the government had 'created' 20,000 workplaces - a figure that includes jobs guaranteed through state aid apart from 9,800 new full-time and part-time workplaces - and that the government would be providing 90% of necessary guarantees for credit facilities under the MicroGuarantee scheme for businesses.

Vella also said that deficit targets last year were to reduce the deficit by €50 million, down to a shortfall of €145 million by the end of 2012. "These figures are contradicted by the NSO, whose latest data shows the deficit was at €284 million, having increased by €139 million over the 2012 target. To bring it down to €145 million, government needs a surplus of €139 million before December."

Vella accused Fenech of being unable to rein in government's recurrent expenditure, saying this had increased by 11% or €118 million in the first six months of the year over the same period in 2011.

"This increase in spending is worrying since it is far greater than the rate of economic growth in the first quarter of 2012, which was just 1%," Vella said.

Vella also said that government's efforts at controlling spending would be focused on reducing capital spending, with exception made for the City Gate project. "The last budget foresees an increase of €122 million in capital spending, but the first six months of the year saw only an increased €34 million in capital spending, and that includes €20 million in aid to Air Malta."