Over the past few years, both the Fenech Adami and Gonzi administrations concentrated on trying to boost economic growth. Past attempts to solve this problem made little headway, with factories closing their doors and more employees made redundant.
Malta didn’t manage to attract enough foreign investment, even though one has to applaud the Lufthansa Technik investment for being a milestone compared to previous years. There is also the Smart City project, which seems a really good investment but there is still nothing factual going on at Fort Ricasoli.
Throughout the past years we couldn’t manage to compete with our neighbours especially when it comes to tourism as Tunisia, Ibiza, Cyprus and Eastern European countries among others have become really good alternatives. All this seemed to have affected Gonzi’s government income, thus more pressure on the people was his last undesirable solution.
Not far away from our shores, the French economy seems to be in the same situation. After 12 years of stagnation with ex-President Jacques Chirac in office refraining from making bold reforms, newly elected French President Nicolas Sarkozy is delivering a “kick in the butt” to Europe’s third largest economy, which may allow it to grow faster than the government’s predictions. In France, like in Malta, there is too much rigidity, red tape and too many stumbling blocks that prevent citizens from accomplishing their full potential. This type of debate has also been taking place on the Maltese political scene for the last four years as Labour Leader Alfred Sant has been saying that because of this rigidity we can’t compete with our European partners when it comes to economic growth.
In fact, a new Labour government pledges to reduce the electricity surcharge by half, thus giving the Maltese economy time to grow as a result of an increase in consumer expenditure. Labour is also promising that for the first two years, first-time entrepreneurs will be exempt from paying the national contributory tax to help the business build a solid platform in its initial years. Labour is also pledging that the taxation system for those buying their first residence will be revised. On the other hand, funnily enough, Gonzi’s government is on the one hand trying to make fun of these pledges by saying that they are not viable and next to impossible, and on the other, copying them literally in the pre-budget document.
A couple of weeks ago, French Finance Minister Christine Lagarde confirmed a EUR13.8 billion package of tax cuts. Undoubtedly, a push to make people “work more to earn more” will be a shock to the confidence of the French economy now lagging behind its neighbours and with the highest unemployment rate in the 13-nation euro area.
A few weeks ago, the French Parliament voted to scrap taxes on overtime, introduce a reduction on mortgage-interest payments, lower the cap on household income taxes, create tax breaks for households investing in small companies, increase deductions for primary homes and eliminate most inheritance levies.
Sarkozy won the election three months ago pledging to revitalise the French economy and this may already be happening with the result that expansion may be stronger than the 2.25 per cent the government predicts for this year. Positive reforms like those mentioned above affect the people who literally start thinking to themselves, start believing “we can do it”, and are not discouraged prior to seeking employment.
The aim of similar policies is to have our country actually taking full benefit of its assets, energy and human resource potential. It seems it has to be a new Labour government that can kick the Maltese economy in the butt, for the benefit of the many, not the chosen few.