We cannot allow businesses to fail | Claudio Grech

The economic effects of the coronavirus emergency have already started being felt. Opposition spokesperson for social policy CLAUDIO GRECH argues that the severity of the impending crisis depends on actions taken by government today

Nationalist MP Claudio Grech
Nationalist MP Claudio Grech

While the current emphasis remains on containing the spread of COVID-19, we must also contend with an inevitable economic crisis. How serious (and long) do you envisage this crisis to be, and how severely do you expect it to impact Malta?

In effect, we are already living the initial shock of the crisis. Due to the fact that social distancing is the primary mitigation tool for the spread of this virus, we are already feeling the socio-economic implications arising out of the radically altered behavioral patterns of locals, and the abrupt halt of the inflow of tourists.

It’s hard to foresee the duration of the crisis: this will be largely influenced by the pace of the sustained transmission of the virus, and how our health services will react to care for those that need hospitalisation. Moreover, once the health crisis starts subsiding, the country will need to shift its focus to start picking up the pieces that this will leave behind it.

I am a firm believer that – if we act diligently and with sufficient foresight - the crisis which we shall go through will be temporary, both from health and economic perspectives. Having said that, the coming 10-12 weeks will be very hard in economic terms; and after that, the major challenge will invariably be the market psychology, and how people will adjust to the post-crisis climate.

This is why we have been stressing from day one that, as a country, we need to do our utmost to ensure that our businesses do not fail over the coming weeks. As evidenced by the reactions of the constituted bodies, the weak response of government has placed thousands of jobs in jeopardy.

Our argument for government aid is to support the employers safeguard their employees’ jobs. No employer is keen to let go any of his employees, but no business can sustain a zero-income scenario for more than a few weeks

We cannot allow our local enterprises to fail, as we would be failing our society at large. It is unthinkable that after years of boasting of being the best in Europe, with record-breaking economic growth and the “best of times”, at the first hurdle our economy falters, large-scale lay-offs are made and families are made to pass through the worst of times.

Some of these effects are already being felt. Foreign workers have been told their permits will not be renewed (and at the time of writing, they were being threatened with deportation). The PN has long argued that Malta relies on too much imported labour. Do you think the present scenario vindicates your party’s past position?

At the first roadblock in its economic game-plan, this week the government unceremoniously told foreign workers in Malta that, since we’re in a crisis, they might as well pack up and leave.

Now this needs to be framed into a context: up to a few months ago we were being told that this country couldn’t survive without a sustained influx of foreign labour. We were being told that tens of thousands of workers were needed to retain our “best of times”, with numbers set to reach 70,000. When we used to point out the massive flaws in this public policy, and how it was eroding the liveability of a highly densely populated country, we were told that we had no idea of how the cosmopolitan vision works. We were also told that we should thank heavens for the foreign workforce as they would be paying for our pensions.

Today we realise how flawed, myopic and harmful this approach was. The Labour government fuelled the economy with an unsustainable overdrive in the attraction and importation of foreign workers.

Now let me set the record straight. The PN has, is and will always be a political party which embraces the vigour of a multi-cultural workforce, particularly in those sectors in which the foreign workforce can raise the bar in terms of skills set, value added and wages. However, we are steadfast against the cynical utilisation of foreign workforce to inflate economic figures and to keep the labour costs of entry-level jobs at ridiculously low levels through labour arbitrage.

Thanks to Labour’s policies, Maltese workers were driven out of entry-level jobs because there were foreign workers willing to undercut the real value of that job and take it on at below par.

The government’s solution was to crowd out these workers from the private sector and put them on a state payroll, bloating it to yet another unsustainable degree for which we shall need to pay through our noses for generations yet to come.

So, do we feel vindicated? Not really. We feel sad for the future of this nation, and for the price our children will have to pay for these gross mistakes which have eroded the fabric of our society.

Opposition leader Adrian Delia has been calling for a total lockdown. PM Robert Abela replied that the economic effects of a lockdown would be more harmful than the virus itself. The health authorities agree with him, but others (including MAM) do not. Where do you stand on this issue?

First of all, the position of the Leader of the Opposition is a position of the Nationalist Party, adopted and endorsed by the whole Parliamentary Group, hence also my position.

Secondly, one has to understand the process leading to our position. At the onset of the crisis, we set up an internal dedicated task force to focus exclusively on this issue and work towards proposals not mere criticism. We discussed with public health experts, healthcare professionals, economists and planners to map out the policy options and our proposed solutions. At each step of the way, we announced the measures we were recommending and explained the rationale.

Thirdly, one has to define what lockdown is. Central to our position was the immediate closure of flights, allowing only for repatriation of Maltese to return to Malta. Up to this week we were witnessing the baffling scenes of tourists coming to Malta, only to learn from their hotel that they would have to stay in quarantine for their whole stay!

Government kept on dragging its feet on keeping these flight channels open, for reasons it knows best; certainly not public health reasons. This is further proven by the relatively large share of patients diagnosed with Covid-19 who had travelled out from Malta in the beginning of March, well after the global crisis had already got out of hand.

Contrary to what the government said, a lockdown is not a house arrest. A lockdown is a structured framework of measures, agreed to with the social partners, which enforces social distancing so that we avoid infecting those amongst us who are most vulnerable.

Our proposed approach is backed by the evidence emerging from other jurisdictions: which clearly shows that when governments act too late, the ramifications are fatal.

Our healthcare system cannot cope with a massive wave of hospitalised cases; and we believe that, at any cost, we should never come to a point wherein we cannot provide care to our sick people.

Four employers’ associations have urged government to take measures including funding 50% of workers’ salaries, and 75% of self-employed income. Do you agree with government intervention to that extent, and... is it sustainable?

The PN’s anchor proposal to safeguard employment is for the government to fund 50% of the employees’ salary that the private sector commit to retain through this crisis, even if on reduced basis. The underlying premise is to ensure that the employers and the employees stick together in their enterprise for the temporary period. The 50% would be capped to an amount which is agreed with the constituted bodies to ensure that the support granted is focused on middle- to low-income earners.

Government’s proposed measures are highly inadequate considering the extent of the crisis. Rightly so, the employers’ associations did not mince their words in labelling the measures as “disappointing”, and pathfinders for “massive lay-offs”. The government has this illusion that businesses have reserves of super-profits, or are sitting on cash piles. Clearly, this is the strongest indicator of being completely out of touch with the financial and liquidity reality in which industry operates today.

Our argument for government aid is to support the employers safeguard their employees’ jobs. No employer is keen to let go any of his employees, but no business can sustain a zero-income scenario for more than a few weeks. And this is why we cannot allow these businesses to fail. After all, we heard seven years of the pro-business mantra. Now, businesses – small, medium and large – are asking: where has the pro-business government gone?

You described the government’s response as ‘weak’; but what measures would the PN be contemplating to mitigate the economic crisis, if it were in government today?

Certainly the first measure is to adopt a radically different style. The PN would place teamwork at the core of its approach: teamwork with the other political forces and the social partners. PN governments have gone through difficult economic periods, such as the 2009 global financial meltdown and the regional Libya crisis. In all these situations, the PN led a national effort to converge ideas, resources and talent to ensure that the best of us comes out in a time of crisis.

Secondly, we would introduce measures (which we announced in a timely manner) to ensure businesses are not allowed to fail by joining them in the primary mission to safeguard jobs. What we would certainly not do is to tell businesses that they have benefited from the “best of times”, and hence they can now take this hit alone.

Thirdly, we would focus to ensure that the cash flow impact on businesses for this crisis period, and the three-to-six months afterwards, would be softened to the largest extent possible. Rental costs, utility bills and loan repayments apart from tax dues would be put in place on day one, to ensure that employers can focus on how to retain all their employees.

Fourthly, we would send signals of hope, and not resignation that the situation cannot be turned around. This needs to be translated into measures applicable for each industry and each sector, supporting those which are mostly in need, most aggressively  hit and which would take longer to recover.

The PN has been criticised for ‘politicising’ the issue. How do you respond to that criticism?

I haven’t noted or heard that criticism. Quite to the contrary, the social partners, employers and employees have clearly told us that they appreciate the efforts we have made and for being a voice for those that have been forgotten. We have certainly not politicised anything when asking the government to include us as an integral part of the effort to coordinate options and solutions, to simply have the door slammed in our face, on the spot.

At any rate, the PN acted in line with our Constitutional role as the main Opposition party in Parliament. I hope that no one expects that the we simply sit back as spectators on such a situation without putting forward our proposals and critique.  Moreover, we have a duty – not just a right – to point out issues not being done well, such as the excessive delay in stopping flights which has contributed to an irrational risk exposure of our healthcare system.

Come what may, we shall not accept that the employees bear the brunt of the first real economic hurdle being faced by this government. The economic success of the country was built by the people; and the wealth generated needs to be returned to the people.

More in Interview