Had Malta’s situation been similar to that of the United States, Britain and many other countries, then Minister Tonio Fenech would very well be wise to pick up some pointers which Agnes Debono from Kercem raised in her letter (TMID, 24 November).

If Ms Debono had followed the present crisis from the beginning, she would have known that the billions in different currencies which are being thrown at it, was the result of major banks collapsing as a result of inadequate regulations and abused lending practices.

A secondary issue, no less critical, was for major industries such as the auto makers not striving for innovative green technologies and competitiveness compared to Japanese and emerging manufacturers in Korea and China.

Fortunately, in Malta such serious deficiencies are not present, both in the financial industry and the manufacturing sector which seems to be operating in a lean and efficient manner.

While the growth in the GNP is predicted to fall, it is currently still on the positive side and local spending should be encouraged so that it will partly make up for reduced exports due to soft demand from overseas. Economies in other countries have been in recession for the last two quarters while Malta’s is still on the positive side.

The government’s job is to take care of the short term while not losing sight of the longer term.

It has reduced, albeit not drastically, the income tax for the third year in a row and increased incentives for the use of alternate sources of energy such as water heaters and photo voltaic cells.

Although a budget is struck for one year at a time, there is nothing to prevent the government from altering the course during the budget year should the circumstances dictate, but it is good to start with little or no intention of increasing deficits unless later on it finds it necessary to deviate slightly from its own policies of restraint.

One is apt to protest every time it is perceived that the cost of living is rising but this is not a local phenomenon.

Prices of food are escalating and one major reason is that it costs much more for transportation due to large increases in the price of fuel.

Layoffs and plant closures seem to highlight the news daily in North America with some auto plants closing forever and others opting for two weeks on two weeks off due to high inventory.

If one had ready cash, one would find that this is a buyers’ market because of much lower prices and huge incentives trying to lure customers into buying new cars.

The outcry regarding the new tariffs for water and electricity, or their timing, is clear proof that the government did not take time to explain nor did the public stop to realise that what it had been paying before was an artificial price and the difference was made up from its own taxes, anyway. Delaying, diluting and subsidising will only be an exercise aimed at making the public feel a bit better but in the end, it may make things worse. Subsidies paid in the meantime or delay in charging the real price of energy will only dig into the cash available to finance capital projects.

The next six to 12 months are going to be rough while the economies bottom out, sort their difficulties and hopefully, by the end of 2009 start to climb on the way back to normalcy.

Malta will find that it too has to suffer the agony of going through worse before things get any better, but in the end if the storm is weathered well, without adding any unwarranted burden on the treasury, when the country comes out of the recession, it will come out stronger.

No government intentionally makes things worse for its citizens who should at least stop and reason things out and not be influenced unduly by opposing views whose intentions are to make the government spend and create huge deficits, and later on, these same critics will harshly chastise it for creating more national debt.

Each country has its own economists and if one takes stock of numerous panels assembled to evaluate and make recommendations on how to tackle this huge problem, one finds that even among these experts, there are different opinions. Some recommend that governments throw maximum cash to spend their way out of the recession while others go for a cautious approach and prefer to let lame industries die because no amount of cash will ever make up for their inefficiencies, high wages and old plant equipment.

Any finance minister walks a tight rope every time he or she is entrusted with composing a budget but in times like these the balancing act gets that much tougher.

J. Martinelli

London, Ontario

Canada