The issue of bonuses being granted to the bosses of European banks might not have much relevance in Malta, but is central to the European members of the G20’s position in the upcoming gathering in Pittsburgh this week.

The G20 is a gathering of the world’s 20 largest economies and while the issue of the global economic downturn is on the agenda, the leaders of European members of this bloc have already agreed that there must be some form of auditing and controls on banks.

While many Maltese might feel detached from this meeting, we must realise that we are not. There are several European powerhouses who make up the G20 and their economic (and financial) performance will ultimately have an impact on Malta. The European Union, of course, is one of those members.

There are disagreements and at present, France and Germany are looking for an all out cap on what bankers are granted in bonuses. The UK, however, is on the same wavelength as the United States, both of which are resisting the plan, mostly being pushed by French President Nicolas Sarkozy, backed by German Chancellor Angela Merkel.

The UK believes that a deal can be struck on the issue, and it seems that banks in the UK might be subject to audits in the future to ensure that we do not return to the bad practices of before.

On the surface, this might seem obvious. No one wants to witness the meltdown which we all saw towards the end of last year again. Everyone acknowledges that things were not sustainable and that practices must change.

The mess which we are in now (Malta included) was simply brought about by spending beyond one’s means – from Joe Public, the broker, the banker, the investor and governments.

Mortgages or rather, the selling on of toxic mortgages which could never be repaid was the main problem. It’s a nasty cycle. Mortgages are snapped up by a middleman company. They are sold on to the ordinary citizen. The home owner defaults on payments, the middleman can’t pay it back, the bank does not get its money and there were go, meltdown.

There are some ‘schemes’ which are surfacing in the US and Europe which basically involve buying up these toxic assets and reselling them. Woe betide us if these so called ‘schemes’ gain any momentum. It’s simply the old system in new wrapping paper and it will lead to the same result again. Another issue which is high on the agenda and rightly so is economic stimulus spending, which so far has been one of the few glimmers of hope in reviving the world economy. The private sector is still reeling and many companies are only working to order and are tightening the purse strings as much as possible.

In the wake of this fallout, crisis meetings of the G8, the G20 and the European Union have all pushed for a more central government role in providing work and investment to simulate individual economies.

Results have been mixed, and Malta has unveiled its plans for City Gate and Valletta’s regeneration. But it is all taking far too long. The same holds true in Europe. There are hundreds of projects in the pipeline. The crisis broke out late in 2008. It is now late 2009 and nothing is yet in sight. Are we all riding it out? Or are we battening down the hatches and moving towards prevention?