Source: The Malta Independent
by George M. Mangion
<!–b><br–>Article published on 20 November 2011

Monday was Budget Day but it has been and gone¸ with very few solutions – particularly for solving our debt problems. Still¸ what can a cash-strapped minister do when faced with so many demands on the national purse¸ given the recession that is brewing over the horizon? The country is more fixated on the blotched national bus reform – which has monopolised our thoughts and aspirations – rather than the budget speech (which happens to have been longer this year).

The Finance Minister reminds us how fortunate Malta is to have been spared the austerity measures that are hitting other countries. Malta is so lucky to have been able to avoid cuts in public sector jobs – while the entire public sector maintains the three-month summer half-day job routine (as if the world owes it to us). Ask the man in the street about the horrors of Greek or Irish austerity measures and he/she will coolly reply that while they sympathise with the people; it is not our problem. We do not need to feel contrite for our sins of the past decade – principally the profligate way we have continually lived beyond our means (ie¸ borrowing to finance our deficits until the cows come home).

Some blame the euro for our acquired taste of profligate living. The promise of easy living across the eurozone and the transparency of pricing that permits price bargaining was wired into our psyche so that we believed that joining the euro would lead us to the pot of gold at the end of the rainbow. That part was all fiction¸ although quite honestly Malta did gain generous funds from the EU which¸ together with our co-funding¸ helped us in no small way to begin caring for our environment and improving our roads infrastructure.

Back to the budget¸ Lino Spiteri (a highly respected economist and finance minister under the last Labour government) said: “Overall¸ in social terms¸ it’s a positive budget¸ in particular with regard to small businesses and measures regarding the family¸ which are welcome. In economic terms¸ there are new measures to help small businesses but in the macro (general) sense¸ there is not enough emphasis on direction. As regards the forecast of revenue for 2012¸ this seems to be overly optimistic under various headings.”

Obviously this was a general comment by Mr Spiteri¸ since what can be considered optimistic in these times of acute financial uncertainty is anybody’s guess. To start with¸ one can pontificate that if Greece and Italy overcome their fiscal problems with effective discipline – albeit achieving marginal growth levels – then our budget prediction of reaching a generous 2.3 per cent growth looks possible¸ considering that in 2010 we chalked up a 3.7% growth rate.

The dark side of the equation is what happens if Greece’s coalition government falters¸ as it is likely to do¸ and Italy stumbles – as is quite possible¸ given the political tensions and fractiousness in the Italian parliament. In the event of