Isolated in more than one sense

The results of the Greek elections have been interpreted as a major disruption of the economic direction in which the eurozone – of which Malta forms part – has to date been steered

Cartoon by Mark Scicluna
Cartoon by Mark Scicluna

Prime Minister Joseph Muscat has expressed concern about an apparent dearth of local interest in the current international scenario.

“Maltese people often take things for granted and don’t realise the effects that international events can have on their everyday lives,” Muscat told the Labour Party’s general conference at the weekend.

“The lack of local discussion on recent events, such as the European Central Bank’s quantitative easing decision, and the drop in the euro’s exchange rate, worries me... It’s as though we live in a vacuum, when in reality, we’ve become part of the global world and we don’t yet know how the results of the Greek elections will affect us.”

On the face of it, the Prime Minister has a point. The results of the Greek elections have been interpreted as a major disruption of the economic direction in which the eurozone – of which Malta forms part – has to date been steered. 

The victory of radical left-wing party Syriza represents an outright rejection of the unpopular austerity regime spearheaded by the likes of German Chancellor Angela Merkel and Commission President Jean-Claude Juncker. Incoming Greek prime minister Alexis Tsipras intends to challenge the economic vision of the so-called Troika – the European Commission, the European Central Bank and the International Monetary Fund – and it would seem that similar sentiments exist elsewhere, and are poised to create similar results in countries such as Italy, Portugal and Spain.

The long term implications are serious. Unless a compromise is reached in the case of Greece alone, the country may default on its 280 billion euro debt: with far-reaching ripple effects on the euro as a whole. There are foreign policy implications, too. Tsipras to date has only the elections result as a bargaining chip – no small thing, as it represents the sovereign will of the electorate in a democratic EU member state. But the odds are still stacked against him: other EU countries – including Malta, which also contributed to the Greek bail-out – are less than enthusiastic about a re-negotiation of debt owed in part to them.

Already there are indications that Tsipras may use his country’s good relations with Russia as additional leverage, at a time when Russian-EU relations are already at a nadir. Time will tell if this may precipitate a political division, to add to the existing economic chasm that now defines the EU.

Meanwhile, it is true that these events, and the implications for the future stability of both our currency and also the EU as a whole – have not been discussed at very much depth in Malta. This may indicate nothing more than a penchant for navel-gazing that has very much been at the heart of popular discourse for decades. One is reminded of the discussion programme on TVM some years ago entitled ‘Malta U Lil ’Hinn Minnha’ [“Malta, and what lies beyond”]. There is, and has always been, a tendency to consider our country as the fixed, unmoveable centre of the universe.

But there are other reasons to account for this apparent lack of interest. Muscat is right that these and other events have a direct impact on Malta; but their impact has not, to date, been felt at street level. Malta has so far proved particularly resilient to the effects of the eurozone crisis. Part of the credit has to go to the economic management of previous administrations, and their efforts to protect jobs. But there is also a level at which the dynamics of Malta’s economy are less exposed to such risks than those of Greece and elsewhere.

Most economists would agree that Malta’s financial fortunes are in part attributable to the fact that our national debt is held almost exclusively by local creditors. Effectively, this means that repayment of that debt – unlike in so many other countries – is directly re-injected into the local economy… as opposed to being absorbed by overseas debt holders.

This situation has stood Malta in very good stead, but it also represents a potential threat. The buoyancy provided by this ‘safety net’ will not withstand the broader ramifications if, for instance, the euro implodes altogether… as some economists predict as a worst-case scenario. In a sense, then, the perception that Malta is ‘immune’ to such events is dangerously illusory. The very fact that our economy is performing well within this context may also lead to a false sense of security. So yes, there is undeniably a need to discuss these issues at a greater depth than we have so far done.

At the same time, however, the political class – Muscat’s PL included – has not traditionally distinguished itself by any major interest in the affairs of the world. Even now, with an earthquake of popular discontent threatening to shake the EU to its foundations, the political discourse to reach our ears today remains provincial. It is hard to reconcile Muscat’s complaint with the ongoing banter regarding whether fuel prices are 1c or 2c cheaper in Bulgaria or Poland, for instance. There is a level at which our politicians, too, give the impression that they are fiddling while Rome burns. 

Certainly it would help confront any future crisis, if all parties – including political parties – gave this issue more thought.

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