Saturday, 28 April 2012

Let's get on with it!

Any debate on particular ministers or government functionaries has very little relevance at this stage of the political cycle.

What people want to know is not whether Minister Mifsud Bonnici is to be declared incompetent and forced to resign so that Dr Franco Debono can get his revenge and wear a flower garland round his neck.  It is not whether RCC has humiliated parliament by negotiating, discussing or co-operating with foreign governments on how Malta could take important foreign policy decisions without going through the parliamentary process.

What people want to know is whether this government still has a parliamentary majority to finish off its electoral mandate and if not when is the country going for elections to put an end to a public charade which has been going on for many months.

What is wrong with this government is not one particular minister or one particular functionary.   What's wrong is the whole set-up as is evident by the fact that we have now had a dysfunctional parliament  for more than four months and thank God there are two money bills with an expiry date on them that are going to force government's hand one way or the other.

These two money bills are extremely important procedurally but in their substance they are a travesty and a betrayal of reality.

Unless the bill for implementing the budget measures is voted into law by 14th May 2012 ,the whole budget for 2012 read in parliament last 15th November will become undone.   Now in reality that Budget is pretty irrelevant.   The EU has forced government to shave off EUR 40 million from the planned expenditure.  Government has committed itself to take upon its books some EUR 25 million expenditure normally carried by  Enemalta and now has agreed to subsidise utility bills to avoid further tariff increases due to the increase in price of imported fuel.    On top of all it is evident that economic growth will not match what was projected in the Budget.

So all in all it would have been more proper to consider the November 2011 Budget for 2012 as dead in the water and re-present a realistic updated new version thereof.    It would be comical if government were to  be forced to wind up parliament and go for early elections by losing a vote on a budget which in reality is already dead.

The other money bill is the transfer of assets and rights to the new Malita Investments so that the latter can finance EUR 80 million funding for the Citigate project outside the normal central government budget.    This is Malta's first venture in financial trickery called securitisation which has landed many other countries in the distress they are presently in.   Whilst countries like Italy Greece Ireland and Portugal are trying to clean their books so that they can call a spade a spade and force serious economic restructuring which has long been avoided while the securitisation trickery was hiding the perilous state of their finances,  Malta is moving in the opposite direction.

The reason is simple.  Government has no fiscal space in its mainstream budget and has to adopt financial deception by eating today tomorrow's lunch without appearing to be doing so.    And we have been warned.  This financial trickery will also be used to clean up Enemalta and possibly also Air Malta.

How are we eating tomorrow's lunch?  In the case of Citigate by committing future Maltese governments to pay a rent for using the new parliament and by channelling to Malita rental revenue from MIA and Valletta Waterfront which would have normally flown into government's hands.    Complicated as much as it seems in reality the principle is simple.    Spend today and pay later so that we can get the current glory of the spending and leave the stress of meeting the financial commitments to our successors.    It would be the same if the project were financed directly through the Consolidated Fund against straight government borrowing.  But by doing so it would raise the measured deficit and the debt and attract discipline from the EU and rating agencies.

So by creating SPV's  and resorting to securitisation, the projects can be completed and money spent today without the deficit and debt being captured in the traditional statistics.   But the technical deception does not change the stark reality that this debt has to be repaid from future growth.    What growth can be expected from City Gate project which is totally non-revenue generating?   What economic growth can be expected from Enemalta if the money has already been spent and the securitisation will simply change bank loans against government guarantees to loans by an SPV outside the mainstream budget but to which we will have to attach revenue streams that normally came into the budget (once Enemalta can never be reasonably expected to repay these loans from its own revenues).

Well Citigate at EUR 80 million is not exactly petty cash. But Enemalta's EUR 800 million is real money; an amount that if included in central government debt where it truly belongs would raise our debt to GDP ratio to very close what is generally considered as the debt trap threshold i.e. a level of debt which is so large that once reached can never be really repaid.

So the nation wants to know who is going to lead it out of this mess which if sustained could seriously prejudice the people's trust in the creditworthiness of their government and by implication also of its banks that are holding a large portfolio of government bonds.

The money bills in front of parliament are much more important than any motion of no confidence and calls for resignation of this, that or the other.  The money bills force resignation or confirmation of the whole set-up.

Obviously Franco Debono is much more interested in condemning this, that or the other rather than the whole government.   But I am confident there are other Nationalist MP's who are as fed up as anyone with the way their government is managing this country in general and parliament in particular and they have the grey stuff and the audacity to defend the interest of the country by forcing their government to end this farce and face the people at a general election.    I have more confidence in other PN MP's who have been showing their displeasure without Franco Debono style tantrums.  I have confidence they will stand up to be counted when the time comes by voting for the country not for their party.

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