In Malta we have a special way of doing politics. Indeed, we have a special way of governing. For instance, we have this knack in regard to how to go contrary to prevailing economic thought on how to manage and finance the economy in times of adversity. You see, we like doing things the Maltese way, which means, in essence, that we will do anything in our power to avoid doing what other economies abroad are trying to do for their own benefit.

There is consensus that 2009 will be a difficult year for world economies. Even the most powerful and wealthy economies, like the US, have been humbled, previously by rising oil and food prices, and then by the international banking crises. Although not fatally wounded yet, capitalism was dealt a serious blow and is currently being bailed out by socialistic politics that were supposed to have been crushed and buried with the fall of the Berlin wall.

The way forward for most economies is to stimulate demand and consumption. This is exactly what most European countries are trying to do right now. It’s not really the proper time to try to balance budgets even in those countries running rampant deficits as the UK. That can wait for a while until the world staggers through the international recession. What matters most right now, and in the short term, is to ensure that families, consumers and businesses weather the storm with the least possible damage to employment and growth.

“Put money in people’s pockets” is what leading economists, business organisations and trade unions in Malta have been asking the government to do in view of the looming economic slowdown. It doesn’t seem that Malta will go through a recession and hopefully we will avoid the worst of what Britain, France and Germany are facing at the moment. But we are already experiencing an economic slowdown due in part to the international crises, which doubtlessly will hit us more severely in the months to come, and in part due to our own structural problems which, for political convenience, have not been addressed by the government for too long.

Our exports are plunging, internal consumption is weakening, wages in the private sector are not rising and our GDP has been progressively shrinking since before we heard about the credit crunch for the first time. While Europe and the world are already suffering from a severe bout of bronchitis, Malta is already feeling the chill of an influenza.

Unless the government administers the right medicine, we run the risk of creating a self-induced crisis.

The European Union has just launched an economic stimulus package proposing, among other things, a reduction in VAT across the EU in the short term in order to regenerate recession-hit economies.

The European Union said that during the current recession within the eurozone and across Europe, billions of euros are needed to be pumped into the economies to get them moving again.

Contrasting with these EU statements, the Gonzi administration is pushing for an increase in taxes with huge increases in the water and electricity bills for families and worse still for business concerns. Other increases, which Maltese families will be facing, are the new car licence schemes by virtue of which motorists are facing hefty increases in their licences. Moreover, the Gonzi administration plans to collect e59 million from income tax and e22 million from VAT next year... at the time when the international crisis will be making landfall!

Britain is one country that didn’t wait for these proposals, unveiling a VAT cut of 2.5 per cent from 17.5 per cent, getting into line with the least possible VAT rate allowed by the European Union of 15 per cent.

Indeed China too is not resting on its laurels. Although China is buoyed by the strong economic growth it experienced in the last 20 years, and with much stronger finances than most European states can boast of, it’s not taking the international recession for granted. It has just launched a stimulus package pumping billions of dollars into its economy to boost demand and consumption.

But here in Malta the Gonzi-Gatt-Fenech trio is defying all economic logic and persist in punishing families with higher taxes which will eventually lead to less demand, less consumption, less growth and more unemployment.

Yes they’re going to take us up the wall, doing it the Maltese way.

Dr Gavin Gulia is the Opposition’s Main Spokesman on the Economy and the Self-Employed.