PM pleased with reaction to economic plan

Prime Minister Lawrence Gonzi said the social partners had reacted "positively" to the convergence plan presented to them at a Malta Council for Economic and Social Development meeting yesterday evening.

But the social partners expressed disappointment over the "lack of consultation", saying the MCESD meeting had been reduced to a mere rubber stamping exercise.

The convergence plan was last week presented to the Ecofin Council of the EU's finance ministers, who approved it. It sets down the government's financial and economic targets for 2004-2007 aimed at coming in line with the Maastricht Treaty. It provides for, among other things, reducing the current deficit to lower than three per cent, a government debt whose ratio to GDP must not exceed 60 per cent, and inflation and interest rates close to the EU average.

The council has asked the Maltese government to indicate by not later than November 5 the detailed measures it intends to implement during 2005 with a view to rein in the deficit.

"It was a very good meeting and a constructive one too," Dr Gonzi said. "The discussion was not just limited to the convergence plan. We discussed how the deficit and public debt problems should be addressed, and how we should stimulate the economy to create wealth."

Dr Gonzi said the social partners had asked for some clarifications while some representatives suggested that the measures could have been more "aggressive" and stringent.

He himself had a different opinion on the matter: "I think we need to adopt a more prudent approach," he said, adding that the convergence plan was a document that updated the country's position drawn up in another document published in August last year.

"The indications are that if we keep moving along this track, we will be reaching the economic targets: an increase in government revenue and the reduction of public expenditure projected for 2004."

The Prime Minister said more control to curb public expenditure was needed. Another required reform was of the health sector, since this was eating up a large share of government expenditure.

"The government will issue a White Paper on pensions reform in the coming weeks and one on health reform at the beginning of 2005," he said.

He said the economy was being affected by external factors that were beyond the government's control, such as the fluctuating price of oil.

Asked if the welfare reform issue had been discussed during the meeting, Dr Gonzi said it had, and that the reform was important for three main reasons: "First, the government has to ensure that the system is sustainable for the next 15 years. Secondly, we have to make sure that pensioners get an adequate sum that enables them to live decently. Thirdly, the reform needs to take into account those aspects of the system that are discouraging people from working. For example the present National Insurance contribution system discourages sections of the population from entering the working world."

Asked to give a guarantee that taxes will not be raised, Dr Gonzi said he was not ready to give such a guarantee. The targets projected in the convergence plan, however, ensured that the whole "package" would not increase.

Tony Zarb, the secretary general of the General Workers' Union, which had called the meeting, said it had been "useful".

"Whatever the targets projected in the convergence plan, we believe that the burdens should not be carried by workers, families and pensioners," he said.

He said the GWU also reiterated its position that the social partners should not be used by the government to rubber stamp decisions that have already been taken.

"The government's report projects a growth of 1,000 jobs in the country between now and 2007. We think this target should be increased," Mr Zarb said.

Union Haddiema Maghqudin secretary general Gejtu Vella said the UHM expressed disappointment at the fact that the government submitted its convergence plan to the EU before having consulted the social partners.

"The MCESD should be the main forum where the economy, job creation and social justice are discussed. This attitude shows that the government has no real interest in including the social partners in economic reforms," Mr Vella said, adding that the UHM still believed in effective reform through dialogue.

The UHM noted that, as specified in the convergence plan itself, the government had consulted the Central Bank, the National Statistics Office and a number of ministries before submitting the report to the EU, but had left the unions out completely.

Vince Farrugia, director general of the Malta Chamber of Small and Medium Enterprises, GRTU, said the aim of the meeting was to speak to the Prime Minister about the real needs of the country.

"The convergence plan was nothing special. It contains projected targets that are not even too difficult to achieve. The challenge would be to agree on the policies that will help us achieve those targets," said Mr Farrugia.

The GRTU said it was useless to discuss targets for 2007, if the current situation was not dealt with properly.

"Both unemployment and taxes are on the increase and small and medium-sized enterprises are suffering because the economy is not moving forward. Something effective needs to be done. New taxes are no solution because they will further discourage investment," Mr Farrugia said.