It may not seem so, but there IS a public discussion going on right now.

It may not seem so: there are enough diversions as it is – the World Cup, the heat, preparing for the holidays…

There are also sub-plots aplenty – the power station extension issue has not quite died down, the attacks on Maltese tuna fishermen, MCESD issues – the lot.

But deep down, and almost completely unnoticed, there is one issue that goes on and on and that is never fully in public view, maybe because deep down no one seems to want to face it, or maybe because it has been raised by the Opposition so many times that people have just stopped noticing it. Or maybe because the media prefer sexier sound bites and public wrestling (verbal, of course) than sensible discussions about the really important issues.

This article is thus an attempt to put this issue in focus since it keeps popping up here and there and the mainline media, while indeed reporting it, repeatedly keep sidelining it and burying it amid a welter of other issues so that it gets forgotten.

And yet, when all is done, this is the issue that really matters – our economy. This is the issue that determines our future and that of our children. As in all the other countries in the eurozone, and in the developed world, it is the issue that determines whether we will all have to spend the coming years in grinding recession and austerity. When we hear on Tuesday what the British government announces, we should be asking ourselves if, at some point in the future, we will have to suffer this kind of cruel adjustment to the real world, or whether we will continue to live in a dream world until reality hits us.

Or whether, as our government tells us, we are high and dry from all this.

Ten days ago, the NSO announced that GDP growth for the first quarter of the year amounted to 3.4 per cent in real terms.

Now that is an absolute rarity in today’s eurozone, since most eurozone countries would be extremely happy with a growth half that. Prime Minister Gonzi, as reported by TVM, referred to this growth when speaking outside the European Council in Brussels.

But is it all that it seems?

While the Malta Chamber of Commerce, Enterprise and Industry said that it was encouraged by economic growth figures for the first quarter of the year, it noted that it was still unclear whether this trend will be sustained. GRTU, in a hard-hitting statement, said the government did not really have much to shout about regarding GDP growth, since most of the gain stemmed from higher salaries in the public sector –increases that were practically unique in the European Union. The GRTU also noted that, apart from the public sector pay rises, GDP had also gone up because of growth in financial services and e-gaming.

Local productive activities, however, were not doing well. The only sectors that were doing well were those where government support schemes had worked, it said. (See graph taken from GRTU’s newSTRING.)

Then last Wednesday, the day before the European Council meeting, the Brussels-based European Policy Centre (EPC) reported that Malta, Spain, Latvia, Romania, Hungary, Lithuania, Cyprus, Slovenia and Ireland are all classed as being “in danger” of becoming unsustainable, with Spain the worst off.

At the other end of the scale, Sweden has the best-looking economy in the EU, followed by Denmark, Estonia and Finland, the report said.

Another study, also published on Wednesday by the European Commission, painted a slightly different picture, indicating that Greece, Ireland, Spain, Portugal, Romania and Britain were the most economically precarious countries in the EU.

The Public Finances in the Economic and Monetary Union 2010 report also took into consideration private sector imbalances, including in the banking and construction industries, as well as governments’ debt levels.

Italy was seen as weak from a budgetary point of view, but more solid in terms of “macro-financial risk”, an area in which Germany scored the highest marks.

The study also said that Belgium, Ireland, Slovenia, Luxembourg, Malta, Finland and Spain are expected to see their age-related expenditure rise sharply in the next 10 years, meaning that pension reform could become necessary.

Economic development in Italy and Portugal is “unsustainable” and will only be improved by radical reforms, while Spain is “in danger” of joining them, the first study concluded.

Greece sowed panic this spring as its finances imploded under the burden of high debt and leaden growth. The crisis sparked fears that countries such as Spain, Portugal, Italy and Ireland could follow suit.

“Structural reform is necessary in many countries if we wish to avoid future crises. In particular, Greece and Italy, as well as Spain (and) Portugal... must carry out reforms,” the EPC wrote.

Hungary, Latvia and Romania, all of which have had to be bailed out by the EU and International Monetary Fund, must also reform their economies to “improve governance, competitiveness and productivity and deal effectively with long-term challenges.”

The second of these studies was duly reported in The Times, but then, the next day, the government was soon pouring water on the whole thing. Speaking to a different journalist, (Kurt Sansone, not Ivan Camilleri) the Finance Minister was reported to have dismissed the urgency of “painful reforms” requested by Brussels.

“These comments have appeared regularly in every report on Malta. They come as no surprise and it is not a matter of taking corrective measures in the next Budget,” Tonio Fenech said, insisting that the government had undertaken pension reform three years ago by increasing the retirement age to 65.

However, also interviewed by Mr Sansone, economist Joe Vella Bonnici was less dismissive of the EU’s warning in the light of the Greek crisis, which sent shockwaves through the eurozone.

“Up to six months ago, in the pre-Greece period, the Commission’s warnings were just a question of procedure because they believed the government was in control of the fiscal deficit,” he said. This reality changed after the multi-billion euro Greek bailout by other eurozone countries, he insisted.

“In the post-Greece period, the implication of what the Commission said is more serious. Although it acknowledges improvement, there have been regular setbacks in government deficit and debt, which may lead to questions on whether the government does really have control of its finances,” said Mr Vella Bonnici.

This government seems to believe that there is no need for austerity measures, no need to cut expenditure, because the growth figures are moving up and everything looks good. “Austerity is not Malta’s strategy” ran the heading in a Malta Independent daily story on 12 June. Annaliza Borg and Chiara Bonello reported that, while Europe is in the grip of austerity, Finance Minister Tonio Fenech is of the belief that Malta’s economy needs the continued implementation of initiatives to support it, such as safeguarding and attracting new and better jobs, and not drastic spending cuts.

Mr Fenech emphasised the need to support the economy. “This philosophy has carried the government throughout this legislature,” he said, “and can be seen in the fact that, despite the considerable pressures on finances, the government did not resort to new taxation”.

On the other hand, he said, income tax had been reduced in the first budget of this legislature and the last budget saw the introduction of substantial tax credits for businesses.

The eurozone’s crisis can be partly down to the fact that most of the countries involved have failed to honour the very regulations that they themselves created in the 1995 Maastricht Treaty. As a matter of fact, only two of the eurozone countries, Luxembourg and Finland, succeeded in keeping government debt under 60 per cent of GDP at the end of the fiscal year and the annual deficit under three per cent of GDP.

In Malta’s case, the debt stands at 69.1 per cent of GDP, placing Malta just below Germany, which has the fifth highest debt of the eurozone countries. The deficit, on the other hand, was reduced and reached its 3.8 per cent target in 2009, Mr Fenech said. The situation in Greece is the worst, with debt at 115.1 per cent of GDP and the deficit at 13.6 per cent of GDP.

When will Malta decide to hear the warnings? asked a Times editorial on Friday. “How many times does the European Commission have to warn Malta about the long-term unsustainability of its public finances before the island gets to grips with the required reforms? One report after another has sharply focused on the need for Malta to reduce spending on healthcare and social services but, to all intents and purposes, it would seem that such warnings are bypassing the economic planners altogether, or, if they are not, the issues involved are not being aired well enough for the country to realise the dangers involved if no action is taken at the right time.

“The Commission has always been very clear in its warnings to Malta but the government is not acting quick enough to see to the carrying out of the necessary reforms to ensure, in the long term, the sustainability of public finances. What is Malta waiting for before it launches the required reforms? What, exactly, is the size of the problem the island is facing today? To what extent is the situation being discussed by the Malta Council for Economic and Social Development and, even more so, by Parliament’s Social Policy Committee? What plans does the government have to tackle the situation? And if plans do exist, when does it intend implementing them? What, exactly, are the opposition’s views on the sustainability of the island’s social services network as it stands today? More importantly, is it prepared to play ball in efforts to work out reforms meant to correct the situation?”

The issue, of course, is wider than that, far wider. There is a huge debate inside the eurozone between the pro-austerity and the pro-growth opinions. Too much austerity can bring stagnation and kill off any green shoots. On the other hand, the governments that have handed out public money as if it is confetti, such as Barack Obama’s, are now trying to see how can they retrieve their outlays.

Mr Fenech is in excellent, if rare, company. Writing last Monday in the Financial Times, Wolfgang Munchau claimed that the EU is in the hands of small-country leaders who think small and who are behind this spreading austerity fraternity, which has now spread from Greece and Spain to Italy and Germany. The only big member state to think macro-economically is France and even there it might be pulled into the austerity club. But sustainable debt reduction is extremely difficult in the absence of growth.

This, of course, is a worldwide issue, on which the future of the eurozone and much more depends. The leaders’ meeting in the Brussels council on Thursday barely scratched the surface of the issue: is the 10-year-old euro as badly structured as some critics are making it out to be? Is there any hope for it? How can the euro be saved?

On the other hand, can tiny Malta be the only country out of synch with all the other governments of Europe and blithely continue singing No austerity, No austerity?

And given that our growth is not growth in the proper sense of the word, that is, it is not underpinned by broad growth (unless in the tourism sector, which is seeing a welcome resurgence) but is brought about by particular causes such as job increases in the public sector, can we really believe we don’t have to do anything except foster growth?

I get scared every time some minister or body comes up with another multi-million euro project for which nobody seems to know how it will be paid (unless by the next government).

Or is it because the government has been banging the growth drum for so long that it has ended up believing it, and now it cannot see how on earth it can ever begin to think about austerity without the whole pack of cards collapsing?

On the other hand, seeing that this government has freed the country from its enthrallment to the dockyard points to a debt-reduction worthy of note. If only it could be spread around to the many other cases of public over-expenditure.

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