Muscat recalls 2015 do-or-die moment for eurozone during Greek bailout crisis

Joseph Muscat is, in his own words, not “the biggest fan” of the European Central Bank.

But Malta’s Prime Minister had words of praise on Friday morning for ECB governor Mario Draghi and his "whatever-it-takes attitude".

Muscat was speaking at a half-day seminar organised by the Malta Institute of Management to mark 10 years of the euro in Malta.

“Mario Draghi did a wonderful job. With his attitude of ‘whatever it takes’, he managed to turn the tide around and this approach led to the results we are seeing today,” Muscat said of the ECB’s actions in the wake of the 2008 financial crisis.

With no prepared speech, Muscat recalled the fateful evening in 2015 when a decision needed to be taken on whether to bail out Greece or not. “The sense that prevailed was that we had to take a political decision on whether we wanted the eurozone to stay alive or whether we wanted to kill it,” Muscat reminisced.

Greece was tottering on insolvency in the face of a growing social crisis, fuelled by massive debt that shut the eurozone country out of international funding markets.

Muscat gave a behind-the-scenes glimpse of what passed through the minds of European leaders as they were faced with the momentous decision of what to do with Greece.

He said there was an “unflinching political belief” in the eurozone, which underpinned the bailout strategy.

“I do believe that concrete signal kickstarted the marginal growth that we’re seeing now within the eurozone. It also helped calm the markets at the time because we are at the mercy of the markets whether we like it or not,” Muscat said.

Focussing on the current situation, Muscat said regulations being discussed now were a “knee-jerk reaction” as a result of the 2008 crisis.

“It’s about preventing systemic crises, protecting consumer interests, protecting small investors, but then again there is this common Brussels mistake of going large on regulation and trying to draft rules that have to fit everyone,” Muscat said, delineating his aversion to the one-size-fits-all mentality prevalent in Brussels.

The Prime Minister said Malta should take the lead in embracing regulation but qualified this with his trademark comment: “as long as all rules introduced are sensible.”

Muscat also dispelled what he described as the myth that Malta was failing to enforce EU rules. “Malta is in fact among the top three enforcers of EU rules. The fact is that we underestimate ourselves sometimes and although it is true that there might be more we could do, I think we have a very solid system.”

The creation of a European Monetary Fund (EMF), Muscat said, would be one of the big debates in the coming months.

“Some people believe that it is a misnomer to call it a monetary fund because monetary policy falls under the ECB, so it shows a clear lack of understanding by politicians when they use this term. But the EMF mechanism is needed because if something like Greece were to happen again, it would be very humiliating for Europe to have to rely on a troika made up of three institutions – two of which are not European,” Muscat said.

Preceding Muscat was Economy Minister Chris Cardona, who said that the euro helped trade ties between European countries grow.

“It’s not over yet. 10 years after Malta joined the eurozone, the economy has been drastically transformed, in part because of the euro itself,” Cardona said.

He noted that Malta had been spared much of the economic turmoil that ensued as a result of the financial crisis, adding that the country was defying trends in the rest of the eurozone with growth being financed by more stable foreign direct investment rather than short-term borrowing.

“It is very clear that the global environment in which we operate is continuously changing. So, despite all the achievements, this is not the time for complacency,” Cardona said.

Other speakers at the conference included Opposition leader Adrian Delia and PL MEP Alfred Sant.