It’s time to re-cork the bottle of champagne. Just as the European Central Bank announced its bond buying programme, and the markets showed some restored confidence in Europe’s beleaguered economy, we get more bad news.
On a local level, we just heard that we are out of recession, but on the broader front, it looks worse than ever. One recalls that in the last general election campaign, many thought that PM Lawrence Gonzi was just performing for the stage when he said “It doesn’t look all that sunny out there, storms are looming”.
At the time, the crisis had not even exploded yet, and we wager that the PM had no idea just how bad it was going to be. Even the experts said that the system could recover. It could not, and that much is clear, given the way that the free market and capitalist system is morphing and evolving.
Now experts and leaders in Europe have said: “the world economy faces a "perfect storm" of risks that include prolonged crisis in a structurally flawed Europe, political paralysis pushing America off a "fiscal cliff," a slowdown in the emerging economies drying up the last of global growth, and the spectacularly destabilising prospect of war over Iran's nuclear program.”
At the annual Ambrosetti Forum at Lake Como on Friday, participants fretted about mounting US debt and Europe's inability to balance electorates' apparent insistence on national sovereignty with the need for regional coherence to salvage the teetering euro. Economist Nouriel Roubini predicted years of gloom almost regardless of what is decided.
His analysis is rooted in the specific nature of this crisis, a downward spiral in which a financial meltdown largely caused by excess credit was defused by a blast of public spending; that 2009 stimulus, widely credited with avoiding a global depression, pushed some governments too far into the red for the markets' liking — a "sovereign debt crisis"; and this in turn was attacked through severe austerity measures that suppressed spending to the point that countries cannot grow their way back to prosperity.
The grim prognosis was consistent with new figures released a day earlier by the OECD, a club of the world's richest nations. Its report found that the global economy is slowing and that the G7 economies would grow at an annual rate of just 0.3% in the third quarter of 2012. The government recently acknowledged that GDP growth for this year should meet the target of 2.3% but said that there could be small variations to that rate, perhaps 2.1 or 2.2%. Quite how Malta has managed in light of what we have written and quoted above, we do not know. The government will take the credit, as it deserves. But there is more to it than that – perhaps it is the Maltese people’s constant competition in a very small market that has made us resilient and adaptable. Perhaps we are all quite miserly. Perhaps we just got a bit lucky too. One thing is certain, the storm is not over yet.