19 May 2004

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Cutting the deficit

According to a daily newspaper in English Parliamentary Secretary Mr Tonio Fenech has said the government plans to bring down the deficit to 90 million. That would be no mean feat. The decrease, he said, would be accomplished with further cuts in mind. He did not specify. Probably what the government has in mind is too difficult to transmit, more so when the elections for the European parliament are only four weeks away.
The young Mr Fenech has taken the mini role of the Finance minister.
He faces an uphill battle.
The first task is to cut spending.
In reality what he will discover is that the biggest chunk of government spending is related to three main areas.
The first are the salaries of the thousands of employees in government service.
The second is the social service and pension bill.
The third is the education and health bill.
In all these sectors, the government faces a dilemma.
Reducing the welfare state will require Mr Fenech to don some armour plating if he is too implement half the measure some of his counterparts in Europe have had the gall to bring forward.
Mr Fenech has avoided talking about the traditional approach to raising money: taxes.
It is not difficult to predict that Mr Fenech will be encouraged to introduce further taxes.
He will realise that the Finance Ministry is no easy job. He will have to make some very hard decisions, some of which will be very unpopular.
In our haste to balance the budget, the government may be carried away with its austerity programme.
At every point it must be aware of the repercussions on businesses.
These are handicapped by the overwhelming impositions by government; some of them archaic.
In a more difficult and competitive market, the business community must be given life and fresh air to operate, to create incentives and implement good business ideas.
Mr Tonio Fenech will have to consider all this when he sits down and comes up with new concrete ideas to kill the annual deficit of over 9 per cent.

The Israeli approach

An interview with the Israeli Ambassador in two daily newspapers would lead one to believe that the Israeli’s are the martyrs and that all the problems lie with the Palestinians.
History will support the claim that the Israelis act and continue to act in a manner which befits the worst and most cruel of rulers.
The Palestinians are a deprived nation. The policy of destroying homes is unacceptable but the international community has little by way of leverage with the policy in Israel.
The long-term sufferings of the Palestinians and the failed economies of the neighbouring countries continues to stall the economic growth in the region in terms of inter-regional trade and investment.
Malta can play its part, however small in underlining the importance of attaining a just solution for the Palestinians.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
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