The honeymoon is over

An air of despondency seems to have overcome the spirit of the Maltese people. Nothing is inspiring people with the hope of a better future while the number of families that are living in poverty or on the edge of poverty is increasing.

The importation of non-EU foreigners to fill the vacancies in the least earning and humdrum jobs has pushed many Maltese out of employment in this level. The distribution of wealth and income has in fact worsened under this supposedly socialist government.

NGOs such as ‘Repubblika’ and ‘Graffitti’ organise protests against several actions or inactions of the current administration. These protests are many times justified and needed if our democracy is to survive but there is an unintended consequence of their actions: they indirectly add to the despondency of the common citizen because they do not inspire the hope of a better Malta in the future.

Meanwhile, the Opposition, that should be inspiring people to look forward to times when the country will shed our current worries, is doing nothing of the sort. Indeed it is nowhere to be seen even though Abela’s fresh government elected only last March has already gone stale. The honeymoon is over.

Robert Abela’s administration is facing huge problems with the negative effect of inflation on the government’s overall performance. This is not a local problem that can be solved by the Maltese government.

Inflation is rearing its ugly head all over Europe and the western world. The European Central Bank has raised interest rates again to fight runaway inflation. Concerned that sky-high inflation is getting increasingly entrenched, the EU’s policymakers are scrambling to keep a lid on the bloc’s most damaging bout of price growth in nearly half a century as it eats up household savings and weighs on business output.

In Malta, fuel and electricity are being heavily subsidised by the government. Even so, the Cost of Living Allowance (COLA) is expected to be over €9 per week. This would be the largest increase ever. This amount is being opposed by employers and business associations, even though many moons ago - and in different circumstances - they had agreed on how this annual increase is to be calculated.

Such a hefty increase will probably lead to a general increase in prices all over Malta - an increase that would lead to another high level of COLA in the subsequent year, creating a never ending spiral of increases in the cost of living provoking an increase in salaries and wages, which - in turn - provoke another increase in the cost of living.

Maltese consumers depend on the importation of most goods. A report in The Times last Tuesday quoted the CEO of a leading logistics Maltese company saying that the cost of trailers transporting goods from Europe to Malta is bound to increase. This means that the cost of consumer goods in Malta will increase not only as a result of increases in the cost of consumables at their origin, but also because of the increased cost of the transport of these goods to Malta.

This is already evident to people who regularly go to Sicily for various reasons and are in a position to compare prices of goods in Sicily with those in Malta. The last time I went to Sicily, a friend asked me to get him some over-the-counter medicines which in Sicily are sold at a price that is about one fourth of their retail price in Malta. The already felt substantial gap between retail prices in Malta and Sicily will continue to increase. The Maltese are already starting to go to Sicily to buy essential goods from there because of their high cost in Malta. This price gap is bound to increase.

The situation would have been much worse without the heavy subsidies that the state is dishing out to maintain our low prices for fuel and electricity. I think that these subsidies are not sustainable in the long run and the government that has promised no increase in taxes will have to allow an incremental increase in the rates consumers pay for fuel and electric power. Technically, this will not involve an increase in taxes but a shift to the consumer of a part of the subsidy that government is forking out every day.

A few weeks ago, the Minstry of Finance announced that all projects that are not part financed by the EU were on hold. The money has to come from somewhere. The projects promoting open spaces announced in Labour’s electoral manifesto a few months ago will be probably scrapped.

It seems, however, that most ministers and parliamentary secretaries have not accepted to suspend their favourite projects - some of which were even announced in this year’s budget.

Moreover, Cabinet members are looking at their personal interest in projects that they promised to their voters and are all behaving as if their pet projects will not be affected. This is inducing more confusion in the people’s minds with government sending conflicting messages to people who are not yet wary of the gravity of the financial situation in the long term.

In normal circumstances, the end of Robert Abela’s honeymoon should signify an increase in the popularity of the Opposition, more so as mid-term approaches.

But in actual fact, the Opposition is still in a self-induced coma.

And the people’s frustrating despondency is bound to increase even more.

Meanwhile in Britain

The new British Prime Minister, Liz Truss, has capped soaring consumer power bills and decided to promote new sources of energy.

With Britain facing a lengthy recession sparked by a near quadrupling of household energy bills, Truss has said she will take immediate action to protect consumers.

But the jump in government borrowing to fund the support package plus a pledge by Truss to cut taxes has rattled financial markets.

On Wednesday, sterling fell against the dollar to levels last seen in 1985.

The British government is also expected to seek new sources of energy supply including the issue of some 130 oil and gas exploration licences in the North Sea and the scrapping of a ban on fracking.

British charities have warned that millions of households face destitution this winter if the cap on average energy prices were allowed to jump 80% in October and again in winter.