The stunning shock waves radiating from the last Gonzi budget will inevitably take their time before they are fully absorbed by Malta’s incredulous tax-paying electorate. In saying so, I am thinking of workers and self-employed persons, pensioners and all kinds of businessmen, as well as consumers.

The more thoughtful of these cannot reconcile themselves to the topsy-turvy logic of a Finance Minister who, in one fell swoop, introduces a raft of massive tax measures that will stifle enterprise and initiative when the supreme need of the hour is to ignite the economic engine.

One cannot increase costs, take more resources from a debilitated private sector and, at one and the same time, promote competitivness.

Seen from this angle, the budget bears the trademark of crass incompetence rather than economic misjudgement.

Sinister aspect

The sinister aspect is that a deliberate driving force drives this incompetence.

The sustained money no problem deficits, which accelerated from a trot to a gallop from l987 to date, flew in the face of public warnings that Malta was living beyond its means. When the consequences came to light and the PN administration faced reality, it coined the phrase “Il-hofra hija hrafa” and proceeded to assure the electorate that the nation’s finances were on a sound footing.

Now that the economy has stagnated and come to grief, the PN government has been constrained to pull the brakes after dissipating a good part of Malta’s disposable resources. It cobbled a Convergence Programme at the bidding of the European Union, with a view to backtracking to the Maastricht grooves. This called for a stern austerity regime.

The Gonzi government has decided, after due deliberation, that the burden called for by this adjustment will be largely carried by people with lower or middle incomes rather than the better off.

This is why people took to the streets. The social conscience of the average citizen has been outraged.

Angry mood

This newspaper was right when it declared in its editorial of 9 January that:

“there can be no doubt that people, of whatever political beliefs, are now angry, and cannot take any more. They have seen their take-home pay depreciate in so many different ways over the past years and there seems to be no end of the pain in sight, except a very long way off when the deficit is hopefully brought down in a more substantial way”.

The budget introduced immediate massive hikes in the water and electricity tariffs, the price of motor fuel and paraffin, public transport fares and an array of eco-taxes. And it is on the cards that more – much, much more – is to come

For Prime Minister Gonzi, however, Malta is not facing a crisis. In his view, Malta is merely “undergoing some changes which are necessary for renewal”. The ongoing process, according to Dr Gonzi, amounts to “pruning a grapevine, where certain old and dry branches have to be removed”. Some changes indeed!

The evidence

Ever since l987, Malta has been living in debt. The national debt rose from Lm86 million to Lml.36 billion last November. In other words, Malta’s national debt escalated from 21 per cent of GDP in l987 to 93 per cent in 2004.

The annual servicing cost of our national debt has now risen to equal the whole national debt bill outstanding in l987.

There was a steep rise in taxation during the Fenech Adami years’ draining away consumer spending power.

During the past five years, the economy has been either mired in stagnant waters or it was shrinking in real terms

The State Leviathan accelerated its spending to pamper its bureaucracy, set up a proliferation of quangos and embarked on one wild goose chase after another, for example the purchase of Avro jet aircraft and the setting up of AzzurrAir, the Chambray deal, the Brindisi Terminal adventure, the purchase of prime property in Brussels and the Mater Dei white elephant, to name a few.

These are symptoms of a malady that is in need of urgent attention. The treatment calls for sustenance rather than more exertion, more than anything, the patient needs fresh air.

Gonzi opted for a policy that seeks to beat a dead horse and, all the while, he persists in selling the illusion that the economy is performing like a racehorse!

Facing reality

Maltese public opinion is, however, coming round and facing reality. The man in the street has seen with his own eyes how the Maltese economy was turned from a fortress to a market economy since Independence; he now understands that the people of these islands have to depend on their ability to sell their own goods and services for their living.

Malta was able to survive and to make headway after launching an industrialisation drive in l964 and through the development of its services sector (tourism, financial services, trans-shipment and so on).

That process has faltered. The focus has been on joining Europe rather than on the steady development of an entrepreneurial economy. The bureaucracy has clogged the works. The environment has been poisoned by clientelism, partisan politics and at times, the odour of corruption. Persistent investment fatigue manifested itself and the economy came to a point when it began to shrink.

The only way to survive is to change course – to be proactive, to think in outward-oriented directions, to bring in new blood and new ideas.

We need, most of all, and very urgently, politicians with a business mind and managerial know-how to take over from the lawyers.