Budget 2021: More of the same... hoping COVID-19 will vanish into thin air

The decrease in the approval rate of the current administration must have influenced government’s thinking. Many interpreted the decision to extend the scheme to March 2021 as an indication that an election will be called about that time

The tritons must have had some trouble to avoid laughing without dropping their saucer!
The tritons must have had some trouble to avoid laughing without dropping their saucer!

A piece in a recent edition of The Economist compared the different approach to the problems in the labour market during the COVID-19 pandemic as adopted in Europe with that adopted in the USA.

European countries adopted an established short-term working scheme that existed in Germany – known as ‘kurtzarbeit’ – to avert mass unemployment. This meant that governments subsidised workers’ income so that they do not lose their jobs by means of furlough schemes. In such schemes, employees do not technically lose their job, with employers giving them an unpaid leave of absence even though they actually cease working for their employers. The idea is that this is a temporary arrangement with the state forking out money until workers will one day be able to return to their jobs.

This meant that employers facing temporary cash problems, as a result of the pandemic shut-downs and other restrictions, do not sack their workers so that the eventual recovery would be a seamless one.

On the other hand, the US went in another direction – letting the labour market work freely without any tweaks while increasing the generosity of unemployment benefits.

While the unemployment rate in Europe was technically kept under control, in the US the rate swelled from about 3% in February to 14.7% in April. The US unemployment rate, however, fell from its peak in April to just below 4% in September.

Meanwhile, in the countries that adopted the furlough system, there are still some 11 million workers on job-retention schemes. In Britain alone, 15% of workers were still furloughed in July – a fifth of whom worked in the hospitality industry.

Some economists, moreover, have calculated that about nine million furloughed workers in Europe – mostly working in the tourism and hospitality sectors – will eventually lose their job.

This scenario indicates that the longer employees are furloughed, the more likely it is that normality is not restored.

In last Monday’s budget speech, the Finance Minister announced that Malta will extend Malta’s furlough scheme. In short, this is more of the same, with the so-called ‘COVID wage supplement’ being extended up to March 2021.

This scheme will be sustained thanks to the infusion of €120 million from EU funds.

According to the finance minister, this scheme has saved some 100,000 jobs with over 20,000 employers. He added that now that there is more information on how the scheme is being implemented, it is in a position to modify it to assist sectors that need financial aid more than others. The minister promised that an evaluation of the scheme will be carried out towards the end of March 2020, with the assistance of the social partners.

Other measures that will remain in place include tax deferrals, moratorium on money owed to government, bank loans and subsidy on interest.

Still more of the same... obviously backed by the assumption that the COVID-19 pandemic soon will vanish into thin air. Back where it came from, I suppose!

Is this a sound plan for the COVID-19 era, as many observers in the media have said?

Apart from everything, the decrease in the popular approval rate of the current administration must have influenced government’s thinking. In fact many interpreted the decision to extend the scheme to March 2021 as an indication that an election will be called about that time.

I doubt it.

I think that Robert Abela is trying to build up a government with fresh faces working for some more time. Fresh faces such as Miriam Dalli and Clyde Caruana that have been co-opted as MPs will soon be part of a revitalised Cabinet. Clyde Caruana is set to become the first hands-on technocrat to be appointed minister without ever having been a political candidate in the general election (he was once mayor of Haż-Żabbar). That is positive, of course.

Rumours have it that Caruana will soon be appointed Finance Minister replacing the academic Edward Scicluna who proved to be a very useful fool during the Joseph Muscat administration.

A vision for the future

The PN leader, Bernard Grech, has criticised the budget as one that lacks a vision for the future. He is correct in this; but Robert Abela’s government has more urgent matters on its hands and, at this stage, Abela can hardly set out such a vision while trying to patch up the mess he inherited from his predecessor.

I credit Robert Abela for seriously trying to do just that. Bernard Grech can hardly do this, of course.

Visions for the future are normally concocted by parties in opposition who do not have the pressures that all parties in government normally have – let alone Abela’s inherited problems.

Fashioning a vision for the future is what the PN should have been doing since it lost power and became the Opposition.

Instead, it wasted some eight years, first trying to justify whatever the Gonzi administrations had done; then overestimating the political clout of its fight against the corruption prevalent under Joseph Muscat – irrespective of the moral implications; and finally getting lost in a three-year internal battle that did more harm than good to the PN.

Instead of complaining that the budget has no vision for the future, Bernard Grech should seek to engage the help of some of the best brains in Malta – not the politicians who put him in his seat, but genuine technocrats – and fashion a really fresh vision of the future.

This is what Eddie Fenech Adami did as soon as becoming PN leader.

Are they kidding?

I do not know who is the bright kid who decided to propagate the slogan adopted for this year’s budget – first by writing it on the ground in front of the Parliament building and then by raising it from its supine position and erecting it in front of the Triton fountain outside the entrance to Valletta.

The tritons must have had some trouble to avoid laughing without dropping their saucer!

Robert Abela allowing this kind of mentality to manage the propaganda for his party in government is a step backward to the KMB days. That type of hype does not persuade voters to vote for the party in government but only puts to ridicule the government that wastes taxpayers’ money in this way.

Is Labour having a resurgence of the North Korea syndrome?

More in Blogs