Central Bank of Malta Governor Josef Bonnici.

Malta has lost a lot of its financial credibility in European Commission circles and must strive hard to regain trust, Finance Minister Edward Scicluna told the first meeting of Parliament’s Economic and Financial Affairs Com-mittee yesterday.

Prof. Scicluna said that although the Nationalist government had repeatedly said since November that the 2013 Budget had been agreed with the Commission, Economic and Monetary Affairs Commissioner Olli Rehn had told him on the phone on Monday that this was not exactly so.

The EC was not buying Malta’s ever-changing figures on the fiscal slippage concerning the deficit.

On another occasion, the minister said that while Malta was still negotiating with the Commission not to be drawn into the Excessive Deficit Procedure, this could still happen not just because of the deficit but also because of the burgeoning national debt.

On stress tests in the banking sector, he said banks were now also being tested on the quality of assets, not just exposure.

The EFAC is chaired by Labour MP Silvio Schembri, with Mr Scicluna and government MPs Michael Falzon and Charles Buhagiar and Opposition MPs Tonio Fenech, Robert Arrigo and Kristy Debono as members. The first meeting was largely taken up by a presentation from Central Bank of Malta Governor Josef Bonnici on the concluding statement of the International Monetary Fund’s consultation for 2013, which has already been extensively covered in the media.

Introducing the meeting, Mr Schembri said the committee’s setting up was a fulfilment of a Labour electoral promise.

The committee would preferably meet fortnightly on Tuesdays and invite bodies for presentations in keeping with its work.

It would be keeping in constant contact with the Central Bank, and in fact its members would soon be paying a courtesy visit there.

Mr Arrigo said the Opposition would strive to be constructive and participate meaningfully.

Mr Buhagiar suggested that the committee scrutinise not only the economic and financial sectors but all other sectors whose input could be small but important.

Dr Falzon said he was looking forward to a proactive committee, not just reactive.

Mr Fenech observed that in 2012 the national economy had grown largely through exports for an unusually positive balance of payments at the end of the year.

It would now be helpful for the committee to be appraised of the Government’s economic plans.

Dr Debono asked how the Government would heed IMF warnings to identify new niches.

Prof. Bonnici said it was important to react swiftly to developments overseas.

There was an ongoing exercise of internal devaluation in various countries.

Prof. Scicluna agreed that internal devaluation was effectively undercutting Malta’s competitive efforts.

In March and April, buoyed by the fact the election was finally over, month-on-month consumption had edged higher. The Government was insisting that the deficit was of a temporary nature but the EC was not convinced.

Mr Fenech countered that the EC went by facts, not statements.

The real preoccupation was that the Government was forecasting two years of deficit of over three per cent, with the national debt in the same period soaring by some €600 million.

Prof. Scicluna pointed out that before the election the previous government had signed various collective agreements that increased both government expenditure and the deficit, coupled with reduced revenue, for an overall difference of €66 million.

Mr Fenech had failed to keep his promises to the EU of cutting down expenditure by €40 million and not replacing natural wastage in public employment.

Mr Fenech said he had never given the impression that the EC rubber-stamped the Budget.

Malta must now win back the confidence of the EC, which was forecasting deficits of 3.7 and 3.6 per cent for this year and next.

The EC would only believe the Government if it came up with clear policies and targets.

It was useless for the minister to put the blame on the first three months of the year; he still had nine months to turn things around.

Prof. Scicluna said he was working on new rules of governance on statistics and hoped the Government would go to a system of accruals.­­­