Europe’s financial crisis seems set to continue troubling the euro zone finance ministers, as the latest news from Portugal indicates that the country’s economy is heading towards a double-dip recession. A record number of unemployed people and the excessively high borrowing costs of this debt-laden country are among the main factors which are touted to be edging Portugal’s economy towards another recession.

Moreover, it is thought that Portugal might soon be faced with the prospect of requiring financial support from other euro zone member states to help it overcome the financial crisis. If that were to be the case, Portugal would be joining Greece and Ireland, which both required financial assistance after excessive government debts became unsustainable and had to request a financial rescue from other European countries.

The fact that, within the space of a year, three European countries required financial assistance to survive displays a worrying trend, especially so soon after the global financial crisis. Obviously, these events are bound to have an impact on Europe, and Malta, being an open economy, will eventually feel the impact. Various factors could be of concern for the local economy, but resolving the restructuring process of Air Malta remains one of the crucial factors for this year.

So far, the focus in the restructuring process has been the number of employees that will be made redundant. While this is a crucial factor for the employees and their future, the effect that mass layoffs could possibly have on the economy cannot be underestimated. It has been made amply clear that the airline will have to cut around half of the current employees. The media has also reported that the government is seeking to create vacancies within the civil service to absorb as much as possible of the employees that will be made redundant. In terms of social sensitivity, redeploying them within the civil service is a noble gesture, but the consequences that this might have on the country’s finances have to be weighed in economic terms.

As things stand, there are very few options in the process of restructuring the airline, and reducing labour costs is a top priority. Nevertheless, the burden on the local economy will more or less be the same when the situation is analysed in depth. For a start, the airline has been incurring significant losses and these had to be absorbed by the government in order for the airline to continue flying. Should the employees being made redundant be absorbed by the civil service, which is known to be overstaffed and a reform of the public service has been on the cards for quite some time, the inflated public service wage bill is bound to increase the deficit and reduce the country’s competitiveness. Alternatively, the jobless employees have to be sustained through social welfare, as is rightly so.

Thus, from whichever way the situation is seen, the local economy will have to make good for the excessive employment, and this is a serious consideration both on a social and economic level. A fine balance has to be somehow found to guarantee a future for the national airline, respect the welfare of employees and safeguard the local economy amidst a bleak European scenario.