Editorial

As realism takes second place to emotional analyses of the budget, the way ahead is likely to remain somewhat blurred for quite some time. With national discontent over the sharp rise in the electricity surcharge and fuel running so high, it may seem hardly appropriate on the government's part to preen in front of the mirror over the fact that it has managed to keep to its targets, though this is, of course, quite significant and important in the framework of any programme meant to take the country forward.

Right now few may be in any mood to pat the government on the back for its "achievements" except the diehard supporters of the party in government. And if an election were to be held tomorrow, few would dare suggest that the Nationalists would stand a chance of winning it. Of course, this is not the same thing as saying that Labour deserve to take its place but it is likely that the electorate would want to test Labour again, as it did, to its regret, in 1996.

Still, all this is hypothetical as the Nationalists are unlikely to step down when there is still so much time left up to the next election for matters to improve further. Whether they will or not is another matter but the government is convinced it is on the right track, even though its work has been dealt a severe blow by the rise in the price of fuel.

In truth, though, the economic situation is not as bad as it is generally painted by the government's political critics. The rate of growth is not shattering at all, particularly when compared with that being registered by the other new European Union members, but the economy is not stagnant either. In the third quarter, gross domestic product, in real terms, rose by 2.7 per cent and in the first nine months by 1.7 per cent. As for next year, the government is clearly remaining very cautious in its predictions. Its growth forecast is of just 1.1 per cent.

The government has met its deficit target figure for the year and for 2006 it is revising its target, from 2.3 per cent to 2.8 per cent, in order, it says, "to reflect better today's circumstances, particularly the effect of oil prices on government expenditure". Still, the government is confident it would be possible for the island to adopt the euro on January 1, 2008.

The country would now have to see what impact the electricity surcharge and fuel price rise, as well as the cost of living wage adjustment, are going to have on overall growth. One very important consideration, for instance, is the impact which the wage adjustment will have on industry and, indeed, on all other economic operators.

For how long can industry continue to absorb across-the-board rises that are not tied to productivity? Even though this point has been made many times over the past years, the trade unions continue to insist on keeping the status quo insofar as the traditional system of wage adjustment goes. Alas, if employers are unable to take the increased costs, the first to suffer are the workers.

Though many may find it difficult sharing the Prime Minister's views on the government's overall performance, particularly at this point in time, at the end of the day the country has no alternative but to roll up its sleeves and work harder and with greater efficiency in order to make up for the increased costs and to raise growth.