Steady as it goes

Budget day has come and gone. Many have made their calculations and concluded whether as a result of the announced measures, they will be better off or otherwise. The big picture is different: few bother to look beyond their personal interests and assess whether among the budget measures one can find any interesting moves that show a sense of direction in the way the government is running the economy.

Currently Malta has got one of the fastest growing economies in the EU. By hook or by crook, our unemployment statistics show that we have practically full employment, to the extent that foreigners are coming in droves to work in Malta. Our deficit is diminishing at a steady rate. Economically Malta is the EU’s current success story.

This success is due to many factors, including – most importantly – Labour’s decision not to upset the applecart and keep building – and improving – on what the previous PN administrations had achieved. The EU’s coming out of a recession also helped in no small manner. One can therefore ascribe this success both to the foresight of the Minister for Finance as well as to Labour’s luck in the timing of the 2013 elections. But then everything in life is a mixture of luck and skill and one cannot begrudge the present administration’s success in the economic field.

Obviously, it is not possible to keep up this incredible rate of development for ever. As always, the future is not clear cut. The Finance Minister, Edward Scicluna, has already warned that some areas of the economy – particularly the construction sector – are overheating. What the government should not do, at this point in time, is to press the economy to go faster. The situation calls for prudence rather than for the government to keep pushing the economy to dizzier heights. This would mean higher housing prices, higher rents, and an increase in the importation of foreign labour. 

While foreign workers are contributing to the success story of Malta’s economy, it is time to pause and think, rather than to keep pushing for more. This is where last Monday’s budget is on the right track. Some details might affect some sectors negatively but the big picture is what matters and to me the big picture seems to be right. 

Incredibly, the country that was touted as going bust after Independence and after the winding up of the British military base is doing much better than anyone expected. The country is awash with money and the great majority are doing very well. In fact one of the problems we have is that people do not have many opportunities to invest their money in a fruitful manner and many resort to the property sector, thus contributing more heat to an already hot situation. The government’s decision to incentivise shareholders of companies listed in the stock market and to encourage private pension schemes should be viewed in this background rather than depicted as just some transparent hand-out for vote catching purposes.

There is no doubt, however, that in this generally positive scenario, there are also some who are not able to keep up with the fast rate of economic success. There are those who do not partake in the much touted trickle down effect: pensioners are the most obvious candidates. The budget announced on Monday attempts to rectify this situation by helping this sector of the population in a practical and effective way in the form of more rent support and tax free pensions. 

Incidentally, the government is also trying to control the so-called rent sharks – one of the more well-known areas of tax evasion. I suspect that this budget lays the foundations of a long term strategy in this regard.

The government has cleverly realised that the situation calls for tactical support to deserving segments but not for a wholesale expansionary approach, which is what most of the rest of Europe still needs. 

Riding on the waves of a thriving economy and introducing popular measures that would be unsustainable in the long term – in a future when our economy could be less lively – was not on the cards. Economically this was clever. Politically, it also signifies that all talk of an early election is just baloney. The real election budget is still to come.

Many might conclude that the budget is no great shakes. But this is what the government must have intended it to be. Having weathered so much troubled waters, the economy is now going steady in calmer oceans. Trying to push for more speed would have been counter-productive. 

It is a credit to Minister Scicluna that he has come up with a sober budget, with a long term view, and did not fall for short term political gain.

This is not to say that next year’s budget will follow the same trend. The temptation to be more populist and satisfy the insatiable demands of those who always want more, will probably be too much on the eve of an election.

Does Brussels rule ok?

The Canada-EU trade agreement (CETA) due to be adopted by EU trade ministers is in danger of falling through because Belgium and Romania are holding off. 

In Belgium, Walloon MPs say CETA favours Canadian firms and they want more safeguards for Belgian farmers and the Walloon regional parliament has rejected the accord. The Belgian federal government cannot give its consent without Wallonia’s authorisation. 

Romania is still in talks with Canada over visa-free travel, as visa requirements for Romanian citizens travelling to Canada have made Bucharest reluctant to sign the deal. 

In practice, the deal requires approval by all six regional and community parliaments in Belgium, as well as the EU’s national parliaments, and the European Parliament, to take full effect. This is interesting because it belies the oft repeated mantra of Brexiters and right wing European politicians who keep claiming that in the EU, decisions are made by unelected officials in Brussels over the heads of the democratically elected governments of the member states.

Many cannot fathom the intricacies of the bureaucracy in Brussels and this makes such allegations easier to be believed outright.

Brussels should stop ignoring these ‘anti-EU’ whiners and take steps to unravel its bureaucracy while sending the message that we are all in one boat and not being pulled and pushed by some Brussels supra-national tugboat.