While it is generally agreed that our financial system will weather the financial crisis well, it is inevitable that the real economy is going to suffer. Malta’s economy is an open one that is heavily dependent on our ability to export goods and services. If our clients are squeezed because of recessionary forces, we are bound to suffer.

Tourism will probably be the first to feel the pain of this financial crisis. Our traditionally strong British market is going to being hit by both a strong fall in the value of sterling, and an economic recession that is hitting people in their pockets. It does not take much forecasting ability to assume that next season we will see fewer tourists from the UK visiting Malta. Let us hope that this will be compensated by other markets, especially the German one.

Manufacturing is equally vulnerable. We are already suffering from weak competitiveness in this sector. The silver lining may be the weakening euro, which will make our exports to markets that use the dollar more attractive. However, even here I fear that investment in technology has been insufficient to improve our productivity.

Our e-gaming industry may also suffer. If clients of this industry have less money in their pockets because of slowing economies in their countries, they are bound to use the service of the companies based here and elsewhere less intensively.

The financial services industry will have to go through a massive restructuring with more stringent regulation almost inevitable. Our financial services regulators will no doubt continue to inspire confidence in Malta as a prime financial centre and this will hopefully attract more business to our island. But the massive growth that has been experienced in this industry in the past decade will almost certainly not be repeated. If anything, one might see a period of consolidation where mergers and takeovers will witness the number of players in this industry declining.

So what can we do to weather this storm successfully? We must certainly not be masochists by suffocating our already stressed economy. The recently announced increases in water and electricity bills have the potential of causing more harm to our economy than the financial crisis we are going through. Our industries and households simply cannot deal with this massive onslaught on their costs at a time when the economy is slowing down.

The government is duty bound to take a pragmatic approach. Now is not the time for political-economic ideology. It is not the time to be more conservative in fiscal rectitude than most other EU countries. It is not the time to put more straw on the camel’s back.

It is time to give temporary respite to industry and households until the economic situation begins to improve. It is time to create incentives for people to work more in the belief that their extra efforts will not be penalised by more taxes. It is the time to ensure that the statutory organisations set up to protect consumers will check that inflation is kept under control as much as possible.

One positive thing about the present world economic crisis is that the price of oil seems to be falling at a much faster rate than was anticipated even up to a few months ago. Let us exploit this situation and not just pass on the full costs to consumers, at least until an improving economic situation justifies otherwise.

The Labour Party will support all measures aimed at reducing the pain of the present world economic crisis. We do fear that beyond the undoubted strength of our financial system, there are other economic dark clouds that threaten to disrupt our prosperity. The government is still in time to see sense and withdraw the shameful proposals to add more costs on our struggling businesses. It’s becoming obvious that the government is strapped due to the fact that the deficit and public debt in the first eight months have outrun all estimates. The overruns in expenditure confirmed in the latest publication of the financial situation confirm that in spite of an increase in revenue of 80 million euro this year, the government will find it difficult to remain within the parameters of the stability and growth pact. All forms of creative accounting that may eventually dress up the budget estimates will not hide this tough reality. So let common sense and pragmatism prevail.