The world economy this year is in a better shape that last year, so it is no use saying hat Malta's ailments are the result of a bad international economic climate . The biggest headache is how to reduce the structural deficit in the public finances, known as 'il-hofra' (the hole) among the Maltese people. Even though the sale of Mid-Med Bank to HSBC has filled the hole in part, the deficit is till huge, estimated at Lm1,000 million (US$2.5 billion).

The only way to start reducing this deficit is to increase teh government's revenue and decrease public expenditure. Fiscal policies will continue to stress on the importance of paying up due taxes. The government should do its utmost to collect taxes, fines and other contributions without increasing the amount of taxation. The Value Added Tax rate should go up for luxury items such as luxury cars, yachts, jewelry and travel. On the other hand, items which are necessary for everyday life would have a reduced VAT rate.

All beneficiaries of social benefits will be screened. Abusers will be prosecuted and wherever possible social benefits are to be made available only to particular social and income groups. The pensions systems is a very dangerous time bomb that is going to explode in the coming years. It is imperative that a solution is reached over the future of pensions. All the social partners will be invited to participate in decision-making process on the future of the pensions system.

The price of petrol and diesel has to go up again to increase revenue but also to discourage motorists from using their car unnecessarily. This would result in less cars in our congested roads and greater use of public transport.

The amount of employees in the Public Sector will be gradually decreased in a staggered way over a number of years. Employees who are reluctant to retrain will be considered as redundant and offered an early-retirement package. Production in all departments has to increase. The reform in the Public Sector will be accelerated and the power of Information and Communications Technologies will be harnessed to this end.

To boost the creation of jobs, in the light of possible redundancies as a result of the restructuring process, more incentives will be given to the local industry. Small and medium-sized enterprises will be given much needed assistance. A new marketing strategy will be drawn to attract foreign investment which is seeking a foothold to penetrate the European market. Malta's position in the centre of the Mediterranean should be exploited to the full with the hub concept, with Malta providing key services to these companies operating across the three continents of Europe, Africa and Asia.

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