(The Malta Business Weekly)

We apparently live in an Age of Entitlement. I understand that this means that people feel that they are owed things by others not because they have earned them in some way but because they need them or because others have them. For example, students get stipends. We pay our students to study. It is common knowledge that a substantial enough part of this money is spent on entertainment. Students think that if we are willing to pay them to entertain themselves, just imagine how much we would be ready to pay them to actually work. Ergo, as students have a need to entertain themselves they feel they are entitled to stipends and very high wages.

Employees today feel they are entitled to Work:Life Balance. The EU subsidises a PR campaign across all states promoting this concept. Let us leave aside the detail that the EU is largely financed by countries in an acute economic crisis and should not be lecturing anybody on any sort of balance. Let us also dismiss the reality that had employers to adopt this attitude, employees would not have jobs. It is a fact that only hard work creates wealth, jobs and growth in any business or country. At Portman International we are fortunate to have a hard working and loyal team – it did however take us 15 years to reach this point and it has been a very expensive and time consuming exercise. There is no such thing as a free meal and if somebody is having an easy ride or a benefit one can rest assured that somebody else is working hard to pay for it. Now that people have learnt about this Work:Life Balance idea, they feel the need to have it especially, as everybody else in the EU has it, they think. Ergo, employees feel they are entitled to Work:Life Balance.

The inhabitants of our islands have lived under the yoke of powerful rulers since 1530. First came the Order of the Knights and then the British. The inhabitants felt that it was morally acceptable to cheat and steal from their rulers and at that time it probably was. Then came 1964 and Malta had its first democratically elected sovereign government. Over this 500-year period everything has changed and remained the same. People still feel that they should not contribute to the common good. Why should they, if they can get away with not contributing? Ergo, people feel that government owes them a living and therefore they are entitled not to contribute to the national coffers and still benefit.

It seems that this idea of entitlement is not really what, as a country, we should be encouraging. It is one thing helping people to whom life has dealt a bad hand and quite another to encourage the abuse of the welfare state. It torpedoes hard work, provides undeserved reward and is a dead weight on the economy.

The total government revenue for 2011 was €2,572.7m. Total expenditure was €2746.5. The deficit was €173.8m. The way an economist would calculate this in percentage terms would be as a percentage of GDP, that is, 2.7% for 2011. As economists have been largely discredited by failing to successfully advise EU governments out of the economic crisis, I would propose that this number, because of its low value, gives us a false comfort level (my apologies to the economists who know better and are living in the shadows or ignored by governments). I will adopt an accountant’s approach. In our profession we do not express losses or profits of a business as a percentage of the business’ clients’ turnover. We express losses as a percentage of the own turnover of a business. The reason for this is that this gives us a better indicator of the extent of the problem. Using this approach we can see that Malta had a deficit (loss) of 9.4% and 6.8% calculated on total revenue for 2010 and 2011 respectively.

Interestingly we also see that the cost covering compensation of employees was €840.4m in 2010 and €870.1m in 2011 and that this constituted 31.7% of total revenue. The number of public sector employees was 41,123 in Q4 2011 and the average cost to government per employee was therefore €21,158 annually. Public sector employees make up 27.5% of the total of gainfully employed persons (149,764) in Malta. The ratio of private sector gainfully employed persons to public sector employees is 2.6:1, roughly one public sector employee for every two and a half private sector gainfully employed persons. The government has recently agreed to grant an increase to public sector employees that would increase its compensation of employees cost by €60m over a span of five years. Our country has a surface area of 316 sq. km. In 2011, compensation of employees cost taxpayers €2,753,481 per square km of Malta. This is what the country’s employee costs are to manage each sq. km.

There is a draft EU agenda on the table that would have eurozone countries sign binding contracts with Brussels that would commit them to a detailed fiscal reform programme. This reform programme, if implemented, would radically increase Brussel’s control over Malta’s economy. I sincerely hope that such a transfer of sovereign power away from our elected representatives would at least be put to a referendum in Malta and not be passed through our Parliament as if it were a normal administrative matter. Here we are faced with an insidious threat that Parliament may approve financial manoeuvres that could have as a consequence a transfer of power away from our representatives and the latter implication may not be so apparent.

I have heard so many times, too many times, the comment that it is better for Malta to be managed by Brussels as at least some things get done and, as a country, we perform to a higher standard. This demonstrates the dramatic lack of confidence that the electorate has in its representatives in spite of 97% turnouts at elections. It also demonstrates the dearth of information that exists on the consequences of a loss by our country of its sovereignty.

Our financial services sector has done well also because the country has managed to portray an image of economic and political stability. Prospective and present foreign investors have their eye on our economy and are making enquiries about its resilience. There is concern as to whether the debt and banking crisis has hit our shores and to what extent. The first concern of any foreign investor is currency and country risk, the latter very closely linked at this time to the economy. Nothing unsettles investors more than uncertainty. It is in the greatest interest of our economy and industry that the election be called earlier rather than later.

David Marinelli is CEO of Portman International – A Financial Services Group