Finance Minister Edward Scicluna said today that the pensions in Malta are not reliant on the influx of workers, “but it helps.”

He was responding to questions by this newsroom following a recent statement that Prime Minister Joseph Muscat had reportedly made regarding pensions and foreign workers, however the Finance Minister claims that the meaning behind what was said was twisted.

He was asked by The Malta Independent about criticism regarding Malta’s economic growth being  based on the importation of workers, and statements regarding pensions and wages.

 “Growth is caused by investment. Then it demands labour, and if this doesn’t exist in Malta it is imported from abroad. No economic textbook will say that people on their own, does not create economic growth.”

“As for whether this inflow is helping or hindering pensions. It was twisted and tweaked to such an extent where it read that without the inflow of labour we wouldn’t have pensions.”

He spoke of a model used to check whether pensions are sustainable, which looks at birth rate, deficit, growth, productivity etc.

“We have improved this by increasing contributions, by introducing the third pillar pensions, by incentivising occupational pensions and strengthening the first pillar. When one asks themselves whether a higher population growth from a labour inflow helps or hinders pensions, it helps. What do we mean to say. We are not relying on it, but it is helping. If this did not occur, you would need to ensure the sustainability of pensions with whatever parameters you use.

Asked about the sustainability of wages and the lack of wage rises, he said: “overall wage inflation is subdued. When you don’t hit a ceiling, and there is a high supply elasticity of labour coming from Europe, it will subdue wage inflation. But don’t tell me that wages are themselves capped when we have the minimum wage increases and the COLA. This is also supplemented by free childcare, in-work benefits and others.  So it is supplemented and that is the living wage. Whoever says that the living wage must be the minimum wage is wrong. The minimum wage is a market wage while the living wage is a social wage which the government must ensure that each family, depending on their individual circumstances, have supplemented through benefits. I think we have a whole spectrum of benefits which supplement the minimum up to a living wage,” Scicluna said.

Parliamentary Secretary for Financial Services Silvio Schembri said that Malta is in a situation of near full employment and high economic growth and foreign direct investment. “The economy is growing due to the investment not due to workers being brought in. If they cannot find employees locally then obviously they will need to bring workers from abroad,” he said.

Recently, HSBC chief executive officer Andrew Beane said 2018 was a difficult one for the Maltese financial services sector, saying it had suffered further reputational damage. Asked about this comment, Scicluna said that what the CEO said concerns many families and that people know where the damage came from, “and we are now tasting the sour fruit that resulted in the damage that occurred. It started in Malta, went to the EU Parliament and then in the media and was planned in a way to damage the country. Why, few know, as it is hard to imagine how why someone from the Opposition would damage the country so that, through it, the government might suffer.”

Asked by this newsroom to respond to the statement, with regards to the damage to Malta’s reputation abroad: “If there was nothing to cause damage, then no damage could have been made,” he said: “It’s how you handle it. I still remember when the EU parliament was seriously concerned with certain tax regimes, tax competition.  That is how this all started. There were no incidents at that time. It was way back in 2013 and they set up this tax committee.” He said that this committee was for the whole EU and “they weren’t concerned with a particular country or particular case, nothing of this sort but then as we know, try and try again certain MEPs managed to bring that committee to Malta to interview the Prime Minister and certain people. It wasn’t their remit. The EU Parliament’s remit is, when certain things are of concern to the whole EU such as when they question the democratic principles of a European country and that is why they might be concerned with Poland or Hungary. But to get to a particular case, that is normally of a national concern. It was twisted out of proportion and they bullied a small country.”

“Even last week the EU Commissioner, the same one who came to Malta and spoke about the FIAU and Pilatus, was blocked from listing a number of countries for money laundering purposes. One should question why this proposal was blocked and by whom, whether it was a tiny country or two big countries who lobbied politically so that their territories would not be listed. So you can see the politics even at that level.”

During the press conference, the Finance Minister, together with Parliamentary Secretary for Financial Services Silvio Schembri, defended recent reports by the IMF and a country report by the European Commission. While highlighting that criticism was made over the recommendations made, regarding issues which need to be improved upon, they both highlighted the reports as being positive.

They highlighted that great strides have been made in the anti-money laundering field and in terms of supervision. They highlighted that an IMF report in 2013 mentioned better measures to address money-laundering 17 times, yet the recent report only mentioned it 6 times, highlighting the work done.

Reading the opening statement from an IMF report, Scicluna quoted: “The Executive Board of the IMF’s opinion on the report for Malta commended the authorities for sound policies which have supported strong economic performance and job creation while improving public finances. it also highlights the need to address challenges, which are the same challenges in the previous budget that government admitted to, in terms of capacity constraints on infrastructural gaps, rising house costs and shortages of labour.”