A few days ago I had occasion to mention in Parliament how wrong and over-simplistic the Prime Minister is being when as a result of his cheer-leaders and electoral frenzy linked to the forthcoming local elections he is claiming that the soaring bank profits reflect a healthy economy and an improved well-being of Maltese and Gozitan citizens.

As a former banker, without denigrating the banks involved, I listed the main factors that are contributing for their over-performance in relation to past endeavours.

Modesty apart, my intervention seems to have set off a spark since the moment I spoke in Parliament on the issue I received a number of phone calls and e-mails telling me how right I was to point out that bank profits do not in any way reflect a sound economy.

On 19 February, 2006 the London Sunday Times proved how wrong Lawrence Gonzi is when he repeatedly makes such a naive claim.

An article entitled Banks make record 33 billion sterling profits despite downturn shows that Gonzi is completely misguided.

In his article, Robert Winnett recorded that Britain’s high-street banks are to unveil record-breaking profits for 2005, expected to total more than 33 billion sterling over the next few weeks.

What is interesting is that Winnett remarked that: “The record profits come despite a slowdown in the housing market and growing trepidation among consumers. House prices rose by just 5.1 per cent last year, compared with more than 13 per cent in 2004. Meanwhile last week, official unemployment rose by 8.7 per cent, the biggest jump for 13 years, while bankruptcies hit a new high.”

In his article, Winnett explained how consumer experts claim that the banks have managed to avoid the consumer downturn while going on to rake in extra profits.

In fact, the profits are expected to spark renewed calls from some British Labour backbenchers to impose a windfall tax on the banks. This last happened in 1980 under Geoffrey Howe, the then Tory chancellor. Jim Cousins, a Labour MP and member of the Treasury select committee, described the bank profits as “grotesque”.

Mick McAteer, principal policy adviser at Which?, the consumer organisation, said that the banks with the lowest customer satisfaction have the highest market shares – that cannot be right. If you had real competition, they would not have anything like this level of profits.

A report from the Centre for Economics and Business Research makes interesting reading since it addresses the concern that has been growing over some tactics used by banks (in the UK) to boost profits.

The banks have also been accused in the UK of behaving unethically towards savers and borrowers.

The only silver lining to all this is that there are signs that consumer disquiet may be leading to change.

But although this may be the case in the UK, I do not know how much it applies locally.

The reasons why

It is shameful how the so-called independent press chose to ignore the findings of the PN commissioned report in the wake of its Euro Parliamentary election defeat of 2004 which has been scooped by l-orizzont.

No wonder the report itself claims that the so-called independent press in Malta together with PBS have traditionally been always supportive of the Nationalist government.

The most interesting part of the report is that which outlines

the main reasons why the Nationalists came a cropper in the Euro elections.

Among these one finds:

• the false and empty promises made by the PN;

• the socio-economic problems that the country was facing;

• the apathy and arrogance that was prevailing in government and Nationalist Party circles;

• the questionable choice of Eddie Fenech Adami as President of the Republic;

• the increasing number of redundancies;

• the lack of job opportunities;

• the sharp rice in food prices, medicinal goods as well as other basic items;

• the wrong strategy adopted by the PN in addressing the challenge of the campaign itself;

• The fact that people were realising in the wake of the 2003 general elections that Labour was saying the truth while Nationalists felt conned by empty promises;

• The rising support which AD was gaining from disillusioned Nationalists;

• The Nationalist Party’s lack of credibility.

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Leo Brincat is the Shadow Minister for Foreign Affairs and IT.