Fenech does not exclude Excessive Deficit Procedure was 'intentional'

Nationalist MP Tonio Fenech "did not exclude the possibility" that the Labour government had intentionally entered the EU's Excessive Deficit Procedure to use it as an excuse and refrain from implementing certain measures.

"I don't exclude that the government wanted to intentionally enter Excessive Deficit Procedure (EDP) as an excuse not to implement certain promises and then blame the European Commission for the restrictions," Fenech said.

Saying that this could be the government's intentional strategy, Fenech added that it was "evident there are certain electoral pledges which the government cannot finance."

According to the former finance minister, the government has "miscalculated massively".

"The government wanted a buffer zone to spend more - as to spend more it had to increase the deficit benchmark. Maybe Edward Scicluna thought that 'knowing' the Commissioner for Economic Affairs [Olli Rehn] they could reach an agreement... but the European Commission doesn't base its decisions on friendships," Fenech said.

Addressing a press conference on the European Commission's decision to put Malta back into EDP, Fenech blamed it on the Labour government's inertia in taking concrete steps to ensure that the deficit does not surpass the 3% threshold. He argued that slightly surpassing the Maastricht criteria did not automatically place a Member State into EDP.

"If a government presents the Commission with a concrete plan on how to address deficit and the Commission analyses those figures and sees the result will be positive, it would not implement the EDP," Fenech argued.

However, he said, the EC was expecting a deficit of 3.7% for this year and a 3.6% deficit for next year.

"The Labour government is not understanding the repercussions of what EDP would mean to Malta, even in international fora and how foreign companies would perceive it. While he [Joseph Muscat] is still in time to prepare a plan to reduce deficit, he is content with telling the Commission that Malta will reduce it to 2.7%," Fenech said.

According to Fenech, the high deficit was the result of "wrong decisions" taken by the government such as increasing exponentially the expenditure through the salaries of a larger Cabinet and an "excessive intake" of staff employed with the 14 ministries.

"This alone will increase government's expenditure by €6 million every year," he argued. He refuted suggestions that he had any responsibility to shoulder on the result insisting that the Budget 2013 as presented by the Labour government differed from the one he presented in November.

"As Finance Minister Edward Scicluna said, the framework and positive measures were retained while government's income and expenditure were revised," he said, adding that the decision to revise the deficit from 1.7% to 2.7% meant the increase to a €600 million debt over three years.

Fenech also defended himself from Prime Minister Joseph Muscat's accusations that he had "badmouthed" Malta with representatives of the International Monetary Fund (IMF). While Muscat had refused to name Tonio Fenech as the "former minister badmouthed Malta", media reports referred to Fenech as having been the one.

"Like any other agency, the IMF meets with both government and opposition representatives. When the then Labour opposition used to accuse government of hiding its debt with the IMF, we never accused it of incitement. I hope Muscat doesn't want to take us back to the Mintoffian years were criticising government would be considered as treason," he said.

Challenging government to say where he had badmouthed it, Fenech said he told IMF that Malta's banking system was sound and that, if the debt level remains as is, it is sustainable.

"This however would change if government continues to increase its debts," he said.