EDITORIAL | Wednesday, 05 December 2007

Biting the bullet

‘The media regularly carry suggestions for still more handouts an others measures that would result in even higher consumption rather than investment.’
These were the words of Michael C Bonello who was speaking at the Annual Dinner of the Institute of Finanical Services held last week. In his speech the Governor admitted that the Maltese economy had come a long way, this was best evidenced by the convergence of the Maltese economy to the euro.
Mr Bonello’s statements are very correct but perhaps he mistakenly took the media to task when the real culprits are the politicians and their puppet media.
It is unfortunately the politicians who continue to give the impression that as soon as the fiscal situation is slightly improved, we can return to our old ways.
A case in point was the retrograde decision to extend children allowances to even more wage earners and doing so exacting a direct hit on a reform that had slowly moved away from an age old belief that the state supports all.
Mr Bonello had words of wisdom when it came to this particular aspect he said and we quote: ‘There is also a need for a wider acceptance of some basic truths, for example that it is an illusion to believe that something can be had for nothing, or that government can fix a grievance.’
Tough words but words that should perhaps sink into the psyche of politicians who continue to promise fiscal benefits without seeing the long term effects.
More importantly Bonello points to the targets that need to be attained to be competitive in a growing world economy. He underlines the high labour costs that continue to rise, citing the fact that labour costs in 2007 compared to 2000 rose by 18%.
He calls for greater flexibility in the labour market.
A clear reference for the need to welcome an Anglo-Saxon approach to labour employment and contractual criteria.
The Central Bank governor also talks of the need to adapt training and education programmes to the needs in the economy. This he says will guarantee a competitive work force.
Very significantly Bonello makes direct reference to two euro zone members, Portugal and Ireland. He argues that whereas both countries had a very similar income per capita income was not very different in the early 1990’s, what happened afterwards is instructive to say the least.
By 2006, the income per capita in Ireland had increased by 131% whereas in Portugal it had only grown by 67%.
The main reason for this was the fiscal discipline exercised by Ireland.
There is something to learn from this reality.
There is no doubt that there is gradual tendency to slacken whenever things start looking up.
Michael Bonello’s words need to be taken into consideration by our political class, who are unfortunately hell bent on promising more give-aways and freebies to their electorate.
Unfortunately without realising that these actions erase the economic gains
It is perhaps sad that more often than not, the words of individuals with no agenda are ignored if not discarded.