An economy built on debt does not reflect good governance. Prosperity brought about by splashing borrowed money around is a sham. It places a mortgage on the country's economy and the future of its people. We are a people professing to care about our children and grandchildren and yet we think nothing of placing a huge burden on the country's future.

The EU is not what we would all wish it to be and nor is our country. I am a great believer in the EU as a group of nations with common ideals; nations that are respectful of each other's sovereign rights; nations that have pledged not to wage war on each other and to trade freely. These ideals should benefit the peoples of Europe. These ideals should encourage diversity. These ideals should encourage order and not at the expense of freedom. The EU is there for the people and not the other way around. Brussels should be a servant and not a ruler.

I am also a great believer in Malta as an independent nation. Malta has much to contribute to help transform the EU and to stop this self-destructive drive towards an authoritarian federation of states with Germany at the centre.  We have forgotten our roots, being too consumed as we are by our day to day struggles and by having lives cushioned by relative comfort. We forget the hundreds of years that our ancestors have spent in servitude under the Knights and the British. We forget the mass emigration of jobless Maltese in the post war 1950s and 1960s. We no longer appreciate how our forefathers, whose genes we carry in our blood, put their own lives at stake in the Great Siege and the Second World War facing sickness, starvation and death in defence of their freedom. It took boldness and courage. Such was their determination not to be enslaved.

We do not recognise the threats our country is facing today because these are shrouded in the fog of finance and economics. Do not however be misled. A failed economy leads to civil unrest and violence. We are seeing this in Greece, Spain and Italy.

There was no growth in the EU (0.0%) or the Eurozone (-0.3) in 2012. Unemployment is at 10% and 11%. The debt to GDP ratio is expected to rise to 87.2% in the EU and 92.6% in the Eurozone in 2013. Budget deficit reductions were at only 3.6% in the EU and 3.2% in the Eurozone for 2012. This is a dire state of affairs. Economies are contracting and austerity is not leading to any material reduction in debt or deficits. Countries are stuck in the “No Options, No Way Out” trap as they do not have the money to fund growth. 2013 projections are mildly optimistic and this optimism is sadly based on a hope that there will be GDP growth and this in spite of the fact that the opposite has happened repeatedly in past years.

Governments declare to have control of debt or to have improved the debt situation by quoting improvements to the Debt to GDP ratio. This ratio is not an indicator of good public financial governance in situations of excessively high debt levels. Debt rises weekly and the numbers are factual. GDP, on the other hand, is calculated quarterly on statistics only partly based on actual national performance. This is then annualised and projected to estimate the GDP for the year. We, therefore, get four GDP estimates a year. The resulting debt to GDP ratio is therefore a hybrid of fact and fiction.

The GDP is a macro-economic analytical tool and should not be used in a debt reduction effort. Debt reduction is a micro process. In practice this ratio is used to do the exact opposite and to justify increases in debt. The recent budget projects an increase in Malta’s debt of €600m over the next three years as well as a Debt to GDP ratio decrease of 5% from 72% to 67%. I rest my case. In the meantime, week after week, month after month and year after year the country’s debt and interest burden continue to grow and grow...

The UK government is now publicly conceding that it has no money to invest in growth and No Money translates into No Options. It will be two years before sufficient cash flow can be generated or disengaged from other commitments, and invested into stimulating growth and job creation. In the meantime austerity and hardship will prevail in the UK. Although Malta needs desperately to avoid getting into the No Options corner, we are relentlessly moving in that direction. Government is in denial. This is more than proven by the fact that it advertises its success in the financial management of the country although the opposite is so blatantly obvious to any educated observer. Unfortunately, a government in denial cannot be expected to seriously address the issue and in fact government has just planned to borrow another €600m.

International businesses looking for a home in the prevailing economic situation first look at the sustainability of the host country's economy. The latter is therefore of extreme importance to our financial services and manufacturing industries.

One ray of hope of finding a kindred spirit among politicians is the election of the new PL deputy leader. This new deputy leader should be better placed, because of his qualifications, training and background, to understand what moves the economy and what proper financial governance is about. We also desperately need a champion of the private sector in government.

The PL leader’s energy proposal is certainly an interesting proposition, a new solution to an old problem. The risk is relative as this concept is not new. Build–Operate–Transfer (BOT) is a form of project financing wherein a private entity receives a concession from the public sector to finance, design, construct, and operate a facility. This enables the private entity to recover its investment, operating and maintenance expenses in the project. Due to the long-term nature of the arrangement and as it relates to a public service, the tariffs charged during the concession period are agreed with government and also allow the private entity to reach a satisfactory internal rate of return for its investment. The country’s energy plan is one of the pillars that sustain the economy. There is no valid reason why the PL's proposal should not work if the project is undertaken professionally, with determination and with the will to make it succeed.

There still seems to be a lack of any business sense in political and government quarters. The strategy seems to be to promise everything to everybody.

The latest billboards are full of happy faces. The young and the elderly, the straight and the gay, the white and the blue collar workers and let us not forget women, always portrayed as if they were some minority disenfranchised group we need to be charitable with. All are smiling because one party or another will give them all they wish for. Promises cost money. Handouts do not create wealth or jobs and make no economic sense. They are in fact a disincentive to work and work is what creates wealth and jobs. More importantly by handing out benefits for votes we drain the government’s coffers and money is diverted away from investments to stimulate the economy and away from investments aimed at the creation of tomorrow's wealth and jobs. No Money, No Options, No Way Out.   

David Marinelli is CEO of Portman International - the Financial Services Group The Malta Business Weekly