Just as Malta registered the second highest GDP growth rate for 2012, news came that another small country – Slovenia – is on the brink of a bailout as its government verges on collapse.
Slovenia, which Malta used as an example of good practice in adopting the euro, is teetering on the edge after another junior partner quit the center-right coalition just days before a confidence vote in the parliament.
The People's Party and its two ministers left the government yesterday, becoming the third party to do so since an anti-graft watchdog in January accused Prime Minister Janez Jansa of corruption, which he has denied.
The confidence vote on Jansa's government is set for tomorrow.
If the government collapses, an opposition leader would become prime minister-designate, in a political reshuffle that would lead to the formation of a new Cabinet without immediate early elections.
An early vote would prolong finding a solution for Slovenia's economic downturn, and would likely lead the small EU state to seek international bailout.
Slovenia is a small player in the European economy, but the need for a bailout would, no doubt, set the market players’ nerves jangling once more. Italy is, again, on the brink, as it seems unlikely that a majority will be formed out of this general election.
It seems that the larger players, Spain, Ireland and even – to an extent Greece and Portugal – are finally getting their finances in order and back on track. But in the meantime, we have seen a fair few of the smaller nations, including Cyprus, some of the Baltic states – and now, Slovenia, fall further behind.
And it is in this, that we must consider Malta’s current situation. The economy is growing and both the incumbent government and the opposition believe that the deficit can be brought down to 3% soon, eventually aiming for a balanced budget. Once that is achieved, then Malta can aim at a surplus and eventually, bring down the national debt to accepted levels.
To do that, we must continue to rely on our tourism product, value-added manufacturing, I-gaming and financial services. The first has been addressed fantastically. We keep registering record numbers and accessibility continues to improve. But the others do have risks. We already had alarm bells ring when a high-end manufacturing company was considering the viability of its Malta plant at the height of the crisis. Thankfully, after careful government brokering, it stayed.
Equally, I-gaming is volatile, as some companies relocate or slim down their workforce which was bloated in the pre-crisis glut years.
Financial services offer great return to the economy and do provide jobs, but we must be careful to never allow the bubble to over-inflate and burst – as it has done elsewhere. We need to invest in all the above mentioned sectors of the economy, and we must continue to find new niches and avenues that offer good and sound financial return.
While the current government can be blamed for other failings, it cannot be faulted for its efforts in job creation and fiscal governance. Of course, we may yet hear differently, after all, Greece cooked the books and lied about its finances for years… but it does not seem to be the case with Malta. Bonds are snapped up and the return is always acceptable. One just hopes that once we get a new government, the budget will be passed through and implemented without delay and that whoever is in control, opts for sound and prudent economic growth in proven areas.