Vince Farrugia | Sunday, 03 May 2009

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When the nation calls

It is really unfortunate that we are celebrating Malta’s fifth anniversary as an EU member state under the dark clouds of an economic recession. These five years served to bring forward a new generation of young Maltese qualified in all matters EU and who had to build their muscles practically on their own as they responded to all the exigencies imposed by EU membership.
For the EU’s smallest member state this was no mean feat. But today we have the institutions and the structure and the legislation that should serve Malta well for the next five years. We are still climbing the stiff learning curve, but I believe that Lawrence Gonzi in Malta and Richard Cachia Caruana in Brussels have every reason to feel proud on May 1, 2009. It’s a job well done.
Eddie Fenech Adami enjoys the pride of landing us there. But Lawrence Gonzi worked his heart out to ensure that our European experience is successful. It’s so easy to criticise this or that. I can list so many things that do not function well, so many people who are really on cloud nine, but overall we should be so proud of what our country has succeeded to achieve. In the EU we are respected and Brussels has a high opinion of the quality of our people and the seriousness of our endeavors.
I honestly feel proud that I am contesting for a seat in the European Parliament. I believe that my experience at local and EU level should serve me well to be an effective MEP. I am happy the PN has given me the opportunity to contest as I believe that it is by far the party with the strongest EU credentials. And this is true here in Malta and at EU levels as well. People here and in Brussels still remember the silly things said by Labour to denigrate the EU and its institutions. Many here and in Brussels still believe that when it comes to EU matters, the Labour Party is a grey area.
We all now have to make a tremendous effort to make the next five years really successful. I believe we can, and we should. It is up to us to have the right policies and the right people in the right places. It cannot be that as participants in an internal market of 500 million we cannot attract more investments, more orders for our enterprises, more work for our people, more tourists, and more financial institutions. Investment promotion, business development, procurement of orders and work that is home ground to me. I feel I can turn an experience in the European Parliament into more work for the Maltese. This should be our main task in the five years ahead of us.
As I said it is unfortunate that we plan to move forward when this year we’re pulling backwards economically. The usual political snipers are quick to blame it all on our economic managers. The truth, however, is that our economic restructuring was working more than most had thought or wanted to say only up to a few months ago. If this restructuring did not materialise we would today have faced a very sorry state of affairs indeed. To quote just one figure. The Labour Party candidate Prof Edward Scicluna had predicted on last December 16th, that for every 2% drop in exports the Maltese economy should shed 1,000 jobs directly and another 500 jobs indirectly, that is up to 1,500 jobs. If the restructuring did not work and government was as asleep as Joseph Muscat and the GWU keep saying, then that should have happened. The truth is that over a 12-month period, and not the six months since the European economies on which we depend went into recession, we have lost only 900 jobs. The job situation is now more or less at a plateau level.
We need to be careful but the truth is that our economic managers are not the dupes Joseph Muscat and his economic advisors are making their people believe. The top level Task Force led by Lawrence Gonzi himself is working hard to identify the firms, and the problems that besiege them are coming out with solutions that should – if the recession abroad is not of very long duration – bridge our little economy from here till the next push forward.
The major problem that beset us is the budget deficit. We all know it’s a problem that hangs around our necks. But who honestly wanted government not to give the income tax relief, not to spend on a new hospital, not to sustain pensions, not to build new roads or to spend on saving our environment? Everyone sermonizes about the budget deficit but when it comes to raising new taxes or cutting on expenditures everyone screams, “but not in my backyard”. I’ve been close to the budget managers for donkey’s years and I’m always full of suggestions as to what savings we can make, what taxes we can cut and what new projects we should promote. But at the end of the day the Maltese exchequer is what it is. We’re a small land with a very limited Budget and it is so hard to make a surplus when the tendency is for all of us to push for spend, spend, spend and no tax, no tax, no tax.
We are now running a budget deficit of 4.5% of our GDP. Most Euro Area member states recorded negative growth rates in the last quarter 2008. Over the last quarter 2008 and in the first quarter 2009 world trade has fallen by 20%. In 2009 world trade is expected to decline by another 13%. The most recent economic forecasts indicate an even worse outlook than at the beginning of the year. The March 2009 OECD forecast shows a decline of around 4% in GDP for the Euro Area compared to a decrease of around 2% in the European Commission’s January 2009 interim forecasts. The outlook for 2010 is also more pessimistic with the OECD expecting a marginal drop of 0.3% in the Euro Area’s GDP. The OECD forecast shows that unemployment will rise to around 10% in 2009 and to increase to 11.7% in 2010. Inflation is expected to slow down significantly to around 0.6-0.7% in 2009-2010 on the back of declining commodity prices and slower wage growth.
Is there anyone out there who believes all this is of no relevance to us?
Our rate of economic growth has slowed down to 1.6% in 2008 from around 3.5% in 2005-2007. Luckily for all of us the domestic sector, that sector for which I have fought to relieve from excessive bureaucratic burdens and to obtain for it more space to grow, for so many years, has continued to contribute positively to GDP growth reflecting buoyant consumption, whilst investment contracted. The contribution of the external sector was a minimal 0.1% in 2007 as both exports and imports fell by more than 13%.
Tourism is suffering greatly as the international economic and financial crises are negatively impinging on the travel trade worldwide. The Maltese tourism industry has been hard hit by these developments, with tourist departures declining by around 10% and gross tourism earnings falling by 2.7% during 2008. I could go on giving figures for the financial institutions and for the Freeport. As an economist I know the situation is serious, but I know also that contrary to the professors of doom now dominating the Labour party in Malta, solutions do exist and serious people are working on them.
The point is however that we all need to understand that it is all loose talk that we continue to speak as if we really do have much room to maneuver. We’re a small economy. The budget deficit forces us not to spend lightly and to prioritise. That is what the Maltese government is doing. Our job is to provide possible input in the national economic debate in one big effort to protect jobs and lay the grounds for the next economic expansion.
Inventing silly issues like the GWU is doing at the Freeport and throwing around loose economic proposals as the Opposition is doing, is simply not good enough. It’s not credible. People like Prof. Edward Scicluna need to look again at many of their predictions and many of their solutions. They cannot simply shoot here and there and stop short of serious recommendations. With a 20% drop in exports according to his predictions we should by now have already suffered 15,000 job loses. The country would have been in a state of panic were this prediction to have come through. We need now to face the truth of our limitations and act together in a more professional way.
Most of us in the constituted bodies are worried. Of course, we are. But we’re holding tight and offering our full co-operation. Not as a political ploy. But because that’s what the country and our people want from us under these difficult situations.
And the going may be tougher, before it gets better.

Vince Farrugia is Director General of GRTU and is a PN candidate for the MEP elections

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