Opportunities from the economic crisis

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The European economy is passing through difficult times, but, as is the case with calm after storms, there are opportunities for recovery. Yet, clear political decisions are required for this to take place. Examples of such decisions include the need to help economies facing problems, and the need for tax on financial transactions.

In such a context, helping Greece is important not only to avoid collapse of its economy, but also to help bring about stability in the Eurozone. Lack of stability can lead to a lack of investment, with negative repercussions.

At the same time, the EU should ensure that member states, especially those within the Eurozone, conform to fiscal discipline whilst aiming for social, environmental and economic sustainability.

An alternative to this would be the dismantling of the Eurozone and the re-introduction of national currencies, as is being proposed by some Eurosceptics. This would effectively mean that certain economic achievements would disappear. I’m sure that businessmen, tourists and plain consumers remember the complexity of economic transactions in a context of so many different currencies.

The re-introduction of national currencies would also mean that artificial and short-termist economic policies such as currency devaluation would risk given priority over more sustainable policies such as those which encourage value-added investment.

Resorting to national currencies would result in a false sovereignty, where national egoisims and ruthless competition would prevail over having partners co-operating together with clear parameters, rights and duties.

Ultimately, this would weaken the EU, to the advantage of other global forces such as the USA, Cina and Russia. Is this what Eurosceptics aspire for, when the EU, with all its defects and internal differences – is characterized by the most progressive social, environmental and economic policies than those of other global forces?

The economic crisis shows us that if anything, we need more, and not less European integration. Solidarity within the EU should be strengthened not only as it brings more stability, but, even more so, because it helps bring about more equality and leveling out between different regions. An example in this regard is the EU-wide policy of cohesion and structural funds. According to EU figures, between 2004 and 2010, Malta, as a less developed region, obtained €354 million more worth of EU funds than it paid. Such progressive fiscal policy should be supported in a global context.

More EU integration would also bring about more discipline in Government budgeting. This would help avoid situations where individual Governments act irresponsibly in their financial and economic policies.

Above all, more EU integration would help member states move closer towards more equal rights and duties amongst citizens, workers, businesses and consumers within the EU.

Some argue that more EU integration is detrimental to small member states like Malta, as this would not permit us to have policies such as low tax rates for sectors such as financial investment and gaming. Yet one should keep in mind that such investment is volatile and can pack up and leave as soon as other countries decide to follow suit and lower their tax rates, too.

Whilst one should not shoot oneself in the foot and discourage investment, it would be better focus on more sustainable forms of investment, such as that which has high value-added and is more labour-intensive, as is the case with investment in green jobs, for example in alternative energy, waste management, IT and sustainable agriculture.

Last but not least, I augur that the Maltese Government supports the proposal of the European Commission for tax on financial transactions. Such a tax, which is supported by various parties on an EU level – including the Greens – would help generate revenue that can be used to help recover the European economy. It is estimated that such a tax can generate up to €55 billion a year.

Time has come for banks and financial institutions to carry part of the burden of the economic crisis, especially when they received help from public funds when they needed it. If workers and employers are financing socio-economic stability through their taxes, it is only fair that banks and financial institutions do the same.

Michael Briguglio is Chairperson and Spokesperson for Economy and Finance, Alternattiva Demokratika – The Green Party

Michael Briguglio is a sociologist and senior lecturer at the University of Malta

More from Michael Briguglio Michael on Twitter

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@Kiev (I suppose I shouldn't bother with the @bit ... we are the only two here. Interesting subject, no?) Kiev, I will add your definition of Economics to the long list found in introductory textbooks on the subject. Comparing it to maths would tickle my old professor, he of the opinion that time will prove every known economic theory wrong. (I won't name him out of respect to his memory; besides, Smith is one heck of a common name, and he was anything but common.) Your concern about poverty is a step in the right direction. How to eliminate it, is the big question. One thing is sure: none of the economic systems has managed to successfully tackle this problem; in fact, one would be forgiven for deducing that all economic systems are quite callous when it comes to dealing with this anomaly. What is the solution?

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However 'noble' and legitimate the reason for Malta's share in Greece's bailout is, the fact remains that we, Maltese tax payers, are pumping our hard earned cash to pacify other nations irresponsible money squandering. Whether these moneys will be paid back to us or not is still anybody's guess. From the looks of things, the skeptics will surely be taking pole position.

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CJohn - "Old hat"? You are an exceptionally funny man. Economics is based on market behaviourisms, which, like maths, it is predictable, time-honoured and universal. Keynesian economics is where one dabbles with the market and currency issuance, replacing sound money with fiat currencies so the global bankers get richer and the rest are condemned to perpetual poverty. The long-predicted collapse is here - this has nothing to do with what you're talking about.

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@Kiev Bonici Kiev, you, or I, or any other citizen, cannot go to the Central Bank for a loan. We go to the "bankier tar-rahal" as you put it -- derogatory, but somewhat apt. Obviously, you are well-versed in Economics and Finance, so, I will not enter into a dispute with you, seeing that I am in no way near your level of competence. Terms such as you have mentioned, "quantitaive easing, bond-buying and bailouts" are newcomers and alien to Canada (where I live), and I have no knowledge of what is involved, other than the result of such practices in our neighbouring giant, the USA -- Lehman Brothers, and all that. I must also admit that none of these terms is to be found in any of my textbooks (which predate the Internet by a couple of decades). Of course, there are advances in every facet of life, so, it will not surprise me if the Central Banks (Canada's excluded) are resorting to this kind of activity. The question then becomes, have these advances benefitted humanity? My short answer is, "NO". And I bet that you will agree ... poverty is rampant; unemployment is universal; under-employment is the norm; the working-poor are legion ... all, in the midst of plenty. Why? I suggest to you that name-dropping and reference to theories which have been written and re-written a zillion-and-one times by countless thousands of economists from each generation, will not solve the problem. The problem is getting worse with every passing year, in spite of all that has been written. A new approach is needed. (I did follow the link ... it's old hat. Worthless.)

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I'm talking about Central Banks as banks of last resort - that's the top level of money creation and if you don't know this it explains why you did not delve into quantative easing, bond-buying and 'bailouts'. Then at the second level you get fractional reserve banking which is multiplied down the banking line. What you're talking about is a bankier tar-rahal's view: giet koppja ghal loan... mela ha naraw japplikawx... Why not start with a classic of classics? Murray N Rothbard's "What Has Government Done to Our Money" - here: http://mises.org/books/whathasgovernmentdone.pdf

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@Kiev Bonici "the fact that central banks, controlled by global bankers, create money out of thin air to lend to the taxpayers' treasuries, at interest, ..." Mr. Bonici, while I agree that Dr. Briguglio needs to do some serious head-scratching thinking, I suggest to you that you, too, could use some pinching. Banks do not create money out of thin air. But just like you Kiev, everybody believes they do. (The Central Bank is the Bankers' bank. It is the Banks in the system that do the heavy work.) Well, if money is not created by Banks, then, how is it created? Money is created through the Banks (not by the Banks). Here's how: On demand by credit-worthy entitities. Suppose you need a mortgage to buy a house. To be credit-worth, you will need: 1) Adequate down payment; 2) Sufficient collateral; 3) Ability to re-pay the loan. 4) Good credit-rating In the old days, 25% down payment was required. The value of the house had to be equal to, or greater than the purchase price. Your job had to be steady to ensure that your earnings are not temporary, and that your monthly financial obligations will not eat up more than 30% of your monthly income. So, from the above (true for all major loans -- the source of all new money and earnings for the Bank), the Bank is acting as an intermediary between its shareholders' strength, and its client's economic prowess, to satisfy a need, with little-to-no risk. If politicians were to understand that simple mechanism of meeting society's needs, there would be no taxes and no borrowing to carry on government's business. Perhaps Michael might want to give it a thought. As they say, you can't make an ostrich fly. Our economic system is just that; with its head stuck firmly in the sand.

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This is all foggy politics and you're not even scratching the surface. You'd first need a crash course in the difference between sound money and fiat currencies. You'd also need to know what the role of the central banks is and who controls them. And you'd need to sweep aside all that Keynesian BS economics from your brainwashed mind, where money is debt and where savings are eaten away by the inflation of the currency supply. You'd also need to know the difference between free market economics and corporatism, which brings us close to Mussolini's brand of socialism, which in turn is only a step away from National Socialism - in turn not much different from international socialism, Marxism and communism, as Goebbels himself had remarked before the last world war... not to mention Marxist Green ideology, with all its myths and deception. So you think more EU integration will solve the problem, eh? Now there's a believer of big government! And you haven't the gall to even suspect that this was all pre-determined - ma tarax, history is not made of conspiracies but the decisions of elected gentlemen representing the people... Did you try and crunch the numbers to see what it takes for all debt to be redeemed, with debt-ridden Paul borrowing more from our money masters to loan to Peter, who's insolvent and can take no more loans? Can't your Keynesian brain sense that this permanent bailout mechanism has only one direction: the enslavement of nations and the fiscal takeover by totalitarian apparatchiks obeying the dictat of global bankers? Have you put any effort into researching what actually happens in bailouts, QEs or central bank bond-buying? Where does the money come from? Who benefits? Who pays? Have you fathomed, in your nauseatingly naive argument, the fact that central banks, controlled by global bankers, create money out of thin air to lend to the taxpayers' treasuries, at interest, for the money to be deposited in their own commercial banks for them to again profit through fractional reserve banking? Have you even given a thought to debt enslavement and the 'inflation tax'? Do you know anything about usury? How exactly will an EU treasury department solve this economic crisis? Would it be through the GosBank plan? It worked for the rouble - for over 70 years... It's time for you to cleanse your brain of the rubbish you've been fed and restart your quest for truth. If that's what you're after, that is. If not, carry on wanking greenly and non-alternatively. You have become a joke to the knowing, Briguglio, and you should be ashamed of your self-inflicted ignorance. If you want the truth, check the free press. If not, keep up with the corporate media spectacle, but expect no respect from anoraks.