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The news, as yet unofficial, that Malta qualifies for objective one EU funding is welcome and a sigh of economic relief in an otherwise difficult business climate. The resultant funds linked to project developments will hopefully upgrade the country’s infrastructure and help to boost the economy.
Beyond this potential future shot in the arm to the economy, the financial situation in the country is in dire straits. An analysis of the report of the London based think-tank shows that our country is lagging in competitive terms behind the remaining EU members.
We are indeed near bottom of the league. We have fewer women in the work force, our children leave school at too early an age, our tertiary education numbers are low, our rate of economic growth is low, the number of patent applications insignificant, greenhouses emissions high and we have a high deficit. In short the country is not on a sound economic footing (“Finanzi fis-sod”), a far cry from the infamous electoral poster so proudly displayed by the Nationalist party.
We are simply not competitive. We have only excelled in information technology. This is no coincidence, but the consequence of a fully focused ministerial policy and commitment to the expansion of IT in the country. People are concerned, the mood is rock bottom, strapped for cash and paying an ever-increasing amount of taxes and government induced price hikes. There is far less confidence in the market place.
There is a crisis, no matter what is stated by the Prime Minister.
Further to this, there is a general feeling that we do not have the medication to address this crisis.
Dr Lawrence Gonzi must take note and act fast. He must also act to utilise those individuals from his elected members of parliament who can give added value. He could use such a much-needed approach to mend fences.
We recognise that gone are the days when governments can simply kick-start the economy with some magical wand but something must be done and quick.
This government, more than its predecessor - that was only focused on presenting a rosy economic picture to help its electoral chances to win the EU referendum - is more conscious of the need to take the economic bull by the horns.
Accordingly, it has initiated a restructuring process in many of the state owned companies; it has pruned certain expenditure and has removed holidays falling on a weekend. Yet in spite of this, for many, expenditure is still increasing and revenues are on the decline. There is a growing feeling that government measures are just not working. People are not seeing the proverbial light at the end of the tunnel.
The blueprint for change must be based on the premise and acceptance that in implementing measures governments’ popularity will take a beating. What needs to be done will hurt but in the national interest it still needs to be done. Making Malta competitive goes far beyond erasing holidays that fall on a weekend. Dr Gonzi ever focused on reducing the deficit, a laudable target, needs simultaneously to address the issue of growth. The one is not in conflict with the other. Indeed growth is the quickest way to reduce a deficit that can only be erased in the short-term with a surplus budget, however unlikely this appears in the foreseeable future. The shortest route to growth is via an increase in earnings from the tourism industry, the further expansion of the financial services sector and the attraction of foreign direct investment. It is all of these three sectors that should be attracting the prime minister’s attention. Addressing the deficit and ignoring growth is clearly a short-sighted policy.
It also gives a sense of dejà vu of the short-lived Alfred Sant government. More than ever, observers are comparing Dr Gonzi’s first year to Dr Sant first year of government.
Attention should be given to kick-starting the economy.
Leaving more disposable income in people’s pockets is the surest way for this to be done. This is the very antithesis of what government is doing currently: proving itself to be mighty efficient in introducing and collecting taxes yet very lacking in the improvement of public services. The feeling of people and companies being cash strapped is having a detrimental effect on the economy.
People are not spending because they are not optimistic about their future earnings and are far too stuck with their monthly commitments.
The measures taken so far are far too few and are being introduced far too late.
Dr Gonzi must carry on introducing further much-needed reforms whatever the electoral fallout and must address the equally important issue of growth without painting a landscape of doom and gloom. Deficit control and stimulating growth at the same time is the difficult way forward.
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