Editorial | Sunday, 28 September 2008

Shhh, don’t say there’s a crisis...

In view of the ongoing economic meltdown on Wall Street, Republican presidential candidate John McCain this week suggested postponing last Friday’s debate in order to discuss measures to safeguard the US economy. On his part, Democrat candidate Barack Obama refused, arguing that now is precisely the time when the people of America need to hear their prospective leaders’ voices on the issue.
Without entering the merits of this particular US electoral controversy, it is worth pointing out that things in Malta have proceeded on a surprisingly different tack from the rest of the world when it came to dealing with the same issue. News that the Lehman Brothers investment bank filed for bankruptcy - followed closely by the collapse of Merrill Lynch, and the subsequent revelation that the US government intended to bail out AIG Ltd - made hardly a ripple locally, despite the fact that Malta has spent the better part of 20 years bombarded by the message that we are now part of a “globalised economy”.
At a glance, it is hard to recognise any symptoms of globalisation in our reaction to the crisis. In a press conference heralding public consultation ahead of Budget 2009, Finance Minister Tonio Fenech sought to reassure the public by claiming that the Central Bank of Malta and the Malta Financial Services Authority had carried out an evaluation to establish what impact the meltdown have on the assets of local financial institutions.
“Although the evaluations show there is an impact, it is minimal. When looking at the portfolio we have in terms of bank assets it’s a small percentage,” he said.
This may sound reassuring to some, but given the astonishing dearth of information regarding local investments, it would have been infinitely more helpful had Malta’s main financial regulators – which are supposed to be independent authorities in their own right – informed the general public themselves, rather than dutifully reporting to the Finance Minister.
Besides: as things stand, the above words shed little light on the local situation. Fenech has admitted that there will be an impact, albeit minimal. But how minimal? And what’s the percentage? These are legitimate questions, and the Maltese public has a right to answers. These include the shareholders of Malta’s financial institutions, who would naturally be most affected by any snowball effect. They also include depositors and every Maltese citizen who has a mortgage with a bank... which extends to include the vast majority of the country.
In fact it is arguably a measure of this lack of reliable information, that in the same week as world markets recoiled from the havoc on Wall Street, an HSBC bond issue in Malta was oversubscribed within days.
At a time when investors the world over are being cautious to the point of paranoia, Malta proved willing to invest €75 million in spite of the bleak economic outlook. One could always argue that this a reflection of the extraordinary confidence the Maltese continue to place in financial institutions - which, to be fair, appear to have been commendably cautious in their investments. But is this confidence based on sound advice and accurate information? Or is it merely the fruit of a patiently cultivated impression that Malta is somehow uniquely shielded from the ups and downs of the global economy?
After so many years of being force-fed the message that we are living in a “globalised economy”, we are now expected to believe that we can continue to have our cake and eat it. The subliminal message is that Malta is connected to the global economy insofar as the connection proves beneficial. The moment the global economy appears to founder, we are suddenly not connected at all.
Considering the apparent failure of the nation’s financial institutions to live up to their responsibility to inform the public, this duty falls instead to the media. But a cursory glance at the headlines in the past two weeks suggest that, as in so many other cases, the country’s newspapers appear only too content to dutifully report the minister’s words, without raising too many questions.
Given the prevailing international situation, it is little short of astonishing that Central Bank governor Michael Bonello and MFSA chairman Joe Bannister have so far maintained a “wall street” of silence. It is equally astonishing that the Maltese investor has not been more vocal in demanding reliable information.
One can only wonder how long Malta will continue to persist in the belief that it is immune to all the world’s woes.

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