Editorial | Wednesday, 26 September 2007

A bi-partisan approach

The newly published Moody’s report highlights that “the ramifications of a potential MLP victory for Malta’s economic policies would likely be far less dramatic today than they were the last time labour took office in 1996”.
The report qualifies this assessment by stating that “the risk of economic disruption from the political cycle is far less than it has been not least because of the heavy constraints on economic policy that are imposed by Malta’s membership of the EU and its imminent adoption of the euro”. In two simple paragraphs, the report has recognised the benefits of EU membership to Malta, extending them also to the effect it has on economically constraining the Malta Labour Party. The value of European membership is that the country is finally anchored economically. Past politically motivated decisions such as the freezing of our EU application and the dismantling of VAT, both of which entailed such dire consequences, cannot be repeated. There is also much economic value in Labour’s commitment to maintaining Malta’s EU membership, joining the euro zone and respecting the Maastricht criteria for economic performance. Such a declared repositioning of the Labour position augurs well for the economy, whatever the election result.
This repositioning of Labour has significantly narrowed the policy differences between the two sides. This certainly increases Labour’s chances of being elected and helps steady the ship of state, reassuring all foreign investors interested in putting direct foreign investment into Malta. Hopefully this will also have a tranquilising effect on local investors and businesses which traditionally slow down their investment decisions on the eve of an election. This newspaper believes that it is in the national interest to have a bi-partisan approach to the economic management of the state finances. It welcomes Labour’s repositioning. This joint commitment is crucial to maintaining our standard of living especially since the economic situation is still in sensitive. It would be disastrous if the governing party were to loosen its economic policy in the forthcoming budget out of political expediency considerations. Equally disastrous would be Labour’s retention of its commitment to implement a reduction in the surcharge by half, without evidence of how the revenue lost will be recouped. The trajectory of oil prices is a fact of life, and never have they been as high as their present levels. Keeping the fundamentals of the state economy in place is of paramount concern to all.
The Moody report recognises the great strides our economy has taken since recovering from the recession in 2003. It classifies us as an A2 country with a positive outlook, praising our achievement in entering the Euro zone as positive, since it will eliminate the risk of a currency crisis and eliminate the costs related to currency transfers. The greatest achievement is that the requirements of the stability and growth plan will continue to provide the country with a strong policy anchor which will enhance fiscal consolidation, narrowing the government’s deficit and inevitably reversing the previous upward trend in public debt.
The maintenance of steady economic fundamentals as a common approach to economic management is fundamental. This presupposes that when one side takes a hard decision, it is fully backed by the opposition, rather than being irresponsibly criticised. This takes statesmanship. Clearly, our economy is not sufficiently competitive.
Accordingly, a number of hard decisions need to be taken to get us into line with our main competitors. Amongst the decisions that require support from all the different shades of the political spectrum is the further reduction of the public sector: not just by carrying on the privatisation process, something Labour has misgivings about, but also by reducing sectors where over-manning exists, like in the lower rungs of employment.
Another avenue is a process whereby government subcontracts as many services as possible, with a commitment from the operator to take on personnel from off the public sector pay list. It is absurd that months after the Gozo heliport was closed, staff is still on the government pay roll. Equally absurd to retain the employment of staff at the Gozo abattoir despite its closure.
Government should also create incentives for companies to spend more on research and development; to further liberalise the energy sector; to encourage more women to go out to work; and to pave the way for even more students to carry on tertiary education as the key to the country’s economic growth.
The country needs a bolder pension reform and needs to tackle the problem of rising healthcare costs. The service as it stands today is unsustainable. A joint approach is called for.
The only way forward is a common bi-partisan approach to the management of the country’s economic affairs.