[ANALYSIS] Gonzi | The cost of irrelevance

In his last address to parliament in this legislature, Lawrence Gonzi presented a focused speech with a coherent narrative highlighting Malta's relative economic success and warning on the risks of throwing everything down the drain by changing the country's direction. 

But he chose to ignore his failures in political management, which culminated in yesterday's vote by Franco Debono, who was dismissed as "irrelevant" by the Prime Minister a few minutes after he voted him out of office.

Throughout his speech in parliament, the PM deliberately chose to ignore the elephant in the room: the maverick Franco Debono, who ultimately determined the fate of the budget and the government probably because Debono's 'no' vote was not only expected but also actively encouraged by the government. 

It was only after the decisive vote during a press conference that the PM described Debono as "irrelevant", despite admitting that the "result of the vote was no surprise" and presenting the unapproved budget as the PN's electoral manifesto by adding that: "If the Maltese people gives us its renewed trust, it will be this budget that we will implement as our programme for the first year of government."

Dismissing Debono as "irrelevant" when it was game over flies in the face of Debono's relevance throughout a politically turbulent year.

Neither was Debono irrelevant for the PN's electoral strategy, which now hinges on the electorate ratifying what was rejected by Franco Debono and the opposition.

In Gonzi's worldview, Debono's emphasis on micro-management issues pales in comparison with the risks posed by the global economic crisis.  But this exposes a weakness in the Prime Minister, not just in keeping his team united but also in addressing some of the issues of good governance raised by Debono, which constantly plague this administration. 

In his speech, the PM did make a reference to the internal troubles that plagued his party throughout the last years, but declared that the PN's turmoil was secondary to the country's challenges and the financial storm it had to weather.

"In hindsight, I believe I made the right decisions," Gonzi said.

Gonzi's swan song, accompanied by his 'no regrets remark', exhumes much-needed confidence among the pale blue electorate, but also risks being perceived as pig-headed arrogance by the disgruntled segment of voters the PN needs to win back.

It's the economy, stupid...

Moreover, although Gonzi's fiscal prudence in the first four years is partly responsible for Malta's relative success, other factors like the lack of exposure of local banks to the collapse of the global financial system cannot be attributed to government of the day.

Moreover Malta's institutional and democratic deficits and shortcomings, largely left unaddressed by Gonzi, also pose economic risks as the Greek experience clearly shows. 

By ignoring legitimate criticism by Debono on his failure to introduce a whistleblower act and to react to a scathing report on government spending by the Auditor General, Gonzi shows that the lessons he learned from the Greek collapse are very partial.

Moreover, Gonzi's use of the unapproved budget as an electoral ace raises the question on whether it is the global crisis or little island politics that dominate Gonzi's list of priorities.  Once again, it is probable that in Gonzi's mindset, the national interest is best served with his party winning the next election.

The populist temptation

Yet despite these shortcomings, Gonzi's speech was coherent in defending the government's handling of the economy and in depicting a change in "direction" as a potential risk to the country. Gonzi was also outstanding in berating the opposition leader's populism and error of judgement.

Replying to Muscat's speech on the budget in parliament on Wednesday, Gonzi used much of his two-hour address to highlight the dangers that, he said, would jeopardise whatever had been achieved if the PL won the next general election. The people would be asked to make a crucial choice, which could make a major difference to their lives.

Gonzi described populism is an "immensely dangerous instrument," in his dissection of Joseph Muscat. "The lesson we have learnt in these last years is that political leaders should not be scared of taking the right decisions for the reforms that a country needs. If our country needs reform, we have not been scared of carrying out such reforms... reforms that have also saved this country. Not taking such bold steps could mean leading our country to the financial ruination that afflicted other European states."

Still, this in itself raises the question whether he is also toying with populism by proposing tax cuts while projecting an increase in tax revenue, something which hinges on higher rates of economic growth which contrast with the present reality in the eurozone.

The problem for Gonzi is that his constant reference to Malta's relatively positive performance when compared to other southern European countries is not something tangible felt in everyday life.  While people can directly feel the pinch of utility bills, they cannot directly feel the pain of the jobless in other countries... especially as Gonzi takes pride in being one of the few prime ministers able to present a budget, which cuts taxes. Ironically, this message strengthens Malta's insulation from events in the rest of Europe. 

Moreover, although official statistics show the country's finances as being manageable when compared to other countries, Gonzi has not really addressed the time bomb posed by the debt of public corporations like Enemalta.

Gonzi's statements referred to events taking place only eight years ago, as well as statements he made just two years ago in which Joseph  Muscat referred to Cyprus - a country now facing a bail out - as a role model.

"Beware of what you promise... I've seen prime ministers in Europe humiliated because of what they had promised. They chose populism instead of courageous reforms. These countries now have to borrow as much as €17 billion... Cyprus, much lauded by the Opposition leader, is now raising income taxes and taxes on private pensions."

Gonzi's MPs also acclaimed the prime minister's attacks on Labour's historic "mistake" to oppose EU membership, laying into former premier Alfred Sant and Joseph Muscat over claims that Malta would not reap more than one million euros in EU funds, or that numerous factories and businesses would close down under pressure from EU countries' competition.

"Now we're about to see Alfred Sant as Labour's new star candidate to the European Parliament," Gonzi said.

His snide remark on Sant standing as Labour's star candidate in the next MEP, underscores the intellectual prowess of the former PM, but must have resonated with pale blue voters and brought back memories of doomsday scenarios which never materialised. 

It also raises questions of the late conversion of Joseph Muscat from Sant's eurosceptic acolyte to politicians who speaks of making Malta the best in the EU.

In many ways, Gonzi had a field day attacking Labour simply because he was given a walkover by the opposition, which has raised very few questions on the sustainability of the present budget simply because electoral considerations dictated that it should accept the tax cuts even before these were even presented.

The spectre of socialism

One interesting feature in Gonzi's speech was his constant reference to the opposition's "socialism" which contrasts with the Labour Party's downplaying of its socialist roots and its constant pandering to business, developers and the "middle class".

Gonzi conjured up Labour's "socialism" as "a typical ideology of being generous with other taxpayers' money".

But while Gonzi blasts socialism, Gonzi prides himself on Malta's universal health care system, increasing children allowances and sustaining the stipend system which only exist because the government puts tax payers money to this use.  Gonzi's justification for this is that such investment in education and health is "productive" and not a sheer handout.

The risk is that tax cuts on higher income earners as proposed in the unapproved budget, could undermine the sort of social solidarity which characterises Scandinavian countries where poor and rich alike take civic pride in contributing towards their country's public services.

Still Gonzi's emphasis on empowering people by providing them with a rod to fish for themselves does strike a chord with those resenting the dependency culture while still retaining the basic framework of a social market economy.

"We believe that we can help minimum wage earners better by encouraging them to work harder and earn more, and to that end we introduced a budgetary measure to give training to minimum wage earners, over a period of six months, for which they will be paid €25 every week." 

But it remains to be seen how many people would take up such a scheme. When a similar scheme was launched two years ago only eight people applied. Ultimately, Gonzi's trump card in the next election is the slogan "you know where you stand with us," which highlights the possible risks of a change in the country's direction. 

Yet this underscores both the dissatisfaction with a direction which left a segment of the population poorer and the government's failure to address the country's institutional deficits.