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“How can people believe that there is a priority to control costs when the Prime Minister blandly announces he has authorised an expenditure of over Lm 9 million for the purchase and refurbishment of a new embassy in Brussels when another such building had been bought only four years ago or so and is now being rubbished as inadequate?” – Alfred Sant
Hi, Martin.
Hello, Joseph; didn’t know you have taken up golf. Welcome to the club.
I haven’t, though I wish I could manage some time for leisure which you expats never miss. Relaxation is a luxury we, political appointees, can never afford to enjoy in this country. Except for stand-up receptions, of course, which never seem to abate even in this hot weather.
What brings you here, then, Joseph?
Thought I would have a word with you in strict confidence, away from secretaries and assistants writing down minutes for the record.
Oh, it must be quite serious once it couldn’t wait till Monday. Let’s stray awhile from the course to ensure no big ears. My golf partners hardly know you from Adam.
So, out with it.
Excellent, Martin. I should really have approached your chairman, but the post is only ceremonial, no authority - he reads out what you write down for the public’s consumption, even if it is only hogwash. Otherwise why would such a foremost entrepreneur refer to net profits of Lm 20 million for six months (equivalent to Lm 26,000 per each of your employees per annum) as having been obtained ‘despite a relatively weak economic climate,’ instead of ‘because of the gilt-edged lending policies and myriad charges introduced by us and quickly followed by the other players in all the banking sector?’ But you, Martin, you are a man of action, especially with a newly-arrived CEO who still needs to be broken in, in our bad habits.
Ha, ha, ha.
I am truly intrigued, Joseph. Surely you are not going to discuss our latest fantastic half-yearly results? Yours to follow should be no less exciting, I bet. Everything is going so well with both of us: in five years we have already recouped from profits almost what we paid your government for the shareholding. Quite a payback, I must say. Admittedly, we have been piling on clients every imaginable charge, and you have followed suit. We swim freely in excess liquidity, but parch the economy and starve it of the nourishment it rightfully expects from the banks. We continue to suck most of the people’s savings which, curiously, have again been increasing lately, but channel very little in productive investment.
No, no, Martin. Nothing curious or unusual in such a phenomenon. As an economist by profession, and not really a banker, I can tell you that what you noticed about growth in savings is no more than a symptom of stagnation, probably exacerbated by a perceived oncoming inflation rise in a no-growth environment. Unless we manage to attract new exporting investors, our real growth curve will stay flatpan or, as happened a few quarters ago, even dip, bending under the pressure of government’s inevitable pruning of its spending over the next three years for fear of sanctions from the EU’s council of Economic-Finance ministers (ECOFIN). Incidentally, where are the new investments you indicated as likely to follow in the wake of your Mid-Med Bank takeover?
Come, come , Joseph. You are not frightened of an impending recession, are you? And, please, stop reminding me of the productive investments which haven’t yet materialised. That’s for my masters at home to worry about. Or, rather, do nothing about. Promises are not commitments. Otherwise, politicians would vanish. And then ?......
Ok, Ok, I get the drift. Best is to retain the status quo. We have a bankers-friendly administration. Indeed, we should be thankful that the other miniature banks have not been encouraged to expand and challenge our joint dominance. The grapevine whispers efforts to set up a ‘people’s bank’, possibly roping in Volksbank, the Austrian unit already with a foothold in Malta. I won’t be surprised if it bids for the 25 percent holding my government still holds in my bank and, together with Banco di Sicilia who has held on to its holding all along, would provide the right strategic partner the government is waiting for to privatise it completely. If and when this happens, I am out in the cold. And that’s not good for the banking sector or for you, Martin; don’t you agree?
I do, yes I do very much. But what exactly brings you here during golf-time? Surely, it must be something important and urgent.
Absolutely, Martin. Just listen carefully and leave your comments till I have finished. Every move by the government in this country becomes enmeshed in hot controversy. Whichever party is in power. You must have observed this during the years you have lived here. Currently, the two most vehement are the eco-contribution/tax and the Brussels ‘imbroglio,’ quoting the Opposition leader.
Please, Joseph. Don’t involve me in your politics.
Martin, I begged you to wait till I have had my say. What’s come over you Brits? You used to be ever so patient. It’s business, not politics. Let me proceed. The government’s financial position has been described as ‘cash-strapped.’ This is not true. So long as the government continues to obtain funds from lenders, ‘strapped for cash’ is inappropriate. The Maltese public, for political motives of course, is not taught the difference between ‘spending’ on recurrent expenditure and ‘investing’ for the future. Indeed, the government has been ferociously attacked for allocating Lm 9 million to buy and refurbish a block of offices in Brussels to house our embassy and several other functions. The EU’s economists, stupidly, will regard this outlay as an addition to the year’s fiscal deficit and, consequently, also to the country’s national debt. Accountants would not.
Try as it has, the government has not succeeded in persuading the vocal public that it makes business sense to save having to pay a rental of Lm600,000 each year for the next 27 years, at the end of which there will be nothing to show for it. An accountant, discounting at the rate government is today managing to borrow, would work out the present value of the rental at a higher level than the Lm 9 million. Let me just quote you from a newspaper leader to illustrate my point: “How can government justify lavish spending in certain areas – the recent purchase of a property in Brussels is a case in point – and simultaneously expect the ordinary citizen to bear the brunt?”
You and I, Martin, owe the government a moral obligation to jump to its rescue from a political embarrassment and, in the process, also make a worthwhile business deal for our shareholders. A few months ago we invested heavily in the European Investment Bank’s bond issue of Lm 10 million at 3.8 percent p.a. for 5 years. Why can’t we behave in a similar manner with the government to which we owe so much more by way of gratitude? On Lm 9 million, 3.8 percent equals only Lm 342,000 p.a. which is 43 percent less than the Lm 600,000 the government was prepared to pay each year for 27 years if it opted to lease rather than buy.
Between the two of us we can earmark Lm 9 million, buy the property as a joint venture investment and lease it to the government for, say, Lm 400,000 p.a. This would put an end to this senseless hullabaloo and the cruel accusations akin to those levelled when you bought Mid-Med. After all, it was your very same chairman who, acting in the capacity of a benevolent consultant to the government, advised that the purchase deal made business sense. Why can’t we bankers capitalize on this pathetic national controversy? It’s not that we can’t afford it…
Umm..smells exciting. Will have to think how to sell the idea to my masters in Britain. I wonder if my chairman would be as convincing with them as he must have been with your government?
To the rescue, Martin. On with your golf. Bye.
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