EU orders for €40 million in cuts will dampen recruitment drive and government programmes.
Labour MEP Edward Scicluna has said government will have to wipe off as many as 500 jobs in a recruitment freeze to save millions in spending on the European Commission’s orders.
Prime Minister Lawrence Gonzi announced Friday a 0.59% cut in government spending, after European Commissioner Olli Rehn informed the Maltese goverment on 11 November – three days before the last Budget – that Malta will have to meet its target for a deficit that is lower than 3% of gross domestic product.
Economist Edward Scicluna said the €35-40 million cut in spending will leave the government with little room for manoeuvre.
“It will mean pain. When the government is tied by so many wage agreements with the unions, assistance to industry and various legal obligations, the government has very little room for manoeuvre.
“The first lever the government suggested is a sort of freeze on recruitment and on overtime. I reckon some 400 to 500 jobs need to be wiped off the government sector and the suppression of 400,000 hours or so. That leaves €30 million to go.”
Finance Minister Tonio Fenech said the cuts will take place in recruitment and overtime, operational and maintenance expenditure, programmes and initiatives, and government entities.
But Scicluna says the cuts come a mere eight weeks after the Budget was announced. “It would have been better to come up with a credible and sustainable budget in the first place.”
The MEP contends the €40 million gap will provoke a political fall-out if any, “because the electorate will have to bear the economic brunt of these painful cuts.”
A spokesperson for the Commission told MaltaToday that Rehn will in the coming days communicate the EC’s definitive assessment of the latest measures announced by the government and their impact on the excessive deficit procedure.
Malta, Belgium, Cyprus, Hungary and Poland were told to take corrective steps by mid-December if they wanted to avoid sanctions under the new rules. Malta is aiming to reduce deficit to 2.3% of GDP in 2012. The Commission gives member states adequate warning before issuing sanctions. “We want to have some clarification to make sure they will meet this target and that it will not have to trigger another step in the excessive deficit procedure,” a spokesperson for the EU told Bloomberg News on Friday.
The EU’s new governance rules give the Commission the power to impose financial sanctions on member states that do not abide by deficit and debt rules. The sanction amounts to a deposit of 0.2 per cent of a country’s GDP, which can be turned into a fine if the member state ignored Brussels recommendations to rein in the deficit.