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There but for the grace of Zeus Observers of the Greek financial crisis put most of the blame for the soaring deficit and public debt on the previous conservative government, which employed about 100,000 additional civil servants and boosted public spending by more than €20 billion during five years in office. Greece must now take drastic measure to tackle cronyism and cut back on waste in drastic ways.To his credit, Greek Socialist Prime Minister George Papandreou accepts that his party is also partly responsible for the mess: “It is overwhelmingly a problem of the opposition, but we’re not innocent – we also governed for a very long time,” he said, referring to the socialist administrations of the 1980s and 1990s which also filled the ranks of the public sector with their own supporters. Reforms of the tax and pension systems and measures to open labour markets to reduce the role of the bloated public sector and free up resources for growth will plunge Greece deeper into recession, with the economy set to contract during the next two years before growth hopefully turns positive in 2012. Out in the streets of Athens, the crowd is restless. Many say that they should not suffer because of tax evaders and those who are guilty of corruption should be put in jail. Yet this smacks of the ‘Why me?’ culture so common even in Malta, where many think it is all right for them to cheat on social services and that discipline should start with someone else! Money from the IMF and Greece’s eurozone ‘partners’ is urgently needed to repay money borrowed through bonds. Defaulting on these bonds would mean an unthinkable sovereign default by a eurozone national government. The serious problem is that much of the money borrowed by Greece purchased unproductive assets, not new factories or universities. Billions were poured into programs that allowed public-service workers to retire at age 62. Those pension euros, funded by borrowing, have created no wealth and never will. The lesson is clear: using newly borrowed cash to pay off old debt on low-value assets leads countries into poverty and bankruptcy. Seeing what is happening in Greece, I cannot but recall the Karmenu Mifsud Bonnici government employing 8,000 persons – most of them illegally – with the public sector and lavishly spending millions in uncontrolled ‘special projects’ in the run-up to the 1987 elections. Not just that. Ever since the 1987 change of government, the Labour Party in Opposition – and its GWU lackeys – kept hounding the various PN administrations with accusations of excess and unnecessary taxation and demands for more unproductive subsidies to make life easier for the ordinary man in the street. The useless controversies on the increases in the water and electricity tariffs come to mind, let alone promising people that they will get back the VAT paid on their car registration fees. On one hand, Labour accuses the government of dangerously increasing the national debt – that we now know is much more manageable than Greece’s, or even that Britain’s – while on the other, it insists on measures that would lead to increases in this debt rather than to its being curbed. In government, Karmenu Mifsud Bonnici seemed to have followed the script of the Greek tragedy that has unfolded in recent years. In Opposition, Alfred Sant continually criticised the government for not adopting this script to relieve the ‘working class’ from burdens that it allegedly cannot carry. Joseph Muscat simply shifted the reference to the suffering masses from ‘working class’ to ‘middle class’ but the rhetoric was practically unchanged. In an interview published recently in this newspaper (21 March) Muscat was asked what measures he is proposing to reduce the burden of utility bills while at the same time fulfil his commitment to reduce taxes. In other words: how does he intend to sustain the welfare state, while at the same time slashing government revenue on two fronts? His reply is worth looking into: “There are two ways to raise government revenue: one is to milk the economy as much as possible; the other is to make the economy grow as much as possible. Today, the government is just flogging a horse that is increasingly tired. Its only idea is to increase old taxes, and invent new ones. Our idea is to collect more, not by increasing taxes, but by expanding the economy...” Although expanding the economy would increase the amount of tax collected without any increase in tax rates, this is true only up to a certain extent and it certainly does not lead to an open-ended commitment for spending. Ironically, when more tax is collected as a result of economic expansion, the Labour propaganda machine keeps on moaning about the increase in the amount of tax collected, spinning this statistic to make it seem as an increase in tax rates! Perhaps the biggest achievement of successive PN governments is the ever-shrinking public sector as a share of our economy. This has been carried out not only as a result of privatisation and the official reluctance to replace unnecessary jobs with the state or its entities when these decrease through natural causes, but also because of a real increase in private investment that has led Malta to a situation where as a result of the continual restructuring of the Maltese economy, more jobs are being created in the private sector than are being lost. This is ignored by Labour while its diehard supporters yearn for a Labour victory, hoping that unwarranted jobs with the state will become once again the order of the day. Most Labour MPs, in fact, dread the day their party assumes power as they envisage the queue of supporters forming in front of their doors, all demanding comfortable well-paid jobs with the state. Labour has failed to educate its followers in this regard and it will eventually reap a backlash of gargantuan proportions. Muscat goes on: “To guarantee a functional social framework – offering healthcare, education, etc., for free – it is not enough for welfare to exist only on paper. The services have to really be there. This is not happening at the moment. It all sounds fine, until you look into things and discover that you do not actually qualify for anything (or at least, not for everything) because you are earning a minimum wage. As if anyone can get by just on minimum wage these days...” The mentality behind such utterances is neither moderate nor progressive and it can only lead to higher expectations from the ordinary citizen who is lured by the promise of standards attainable only if Malta lives beyond its means. Look at Greece today: Malta could have been there even before – but for the grace of Zeus. Any comments? |
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Managing editor Saviour Balzan | Tel. ++356 21382741 | Fax: ++356 21385075 | Email
Managing editor Saviour Balzan | Tel. ++356 21382741 | Fax: ++356 21385075 | Email