The Malta Independent 15 June 2021, Tuesday

Valletta and Brussels – a tale of two cities?

Ray Bugeja Sunday, 20 April 2014, 09:27 Last update: about 7 years ago

In 2003, the Maltese voted for EU membership and elected a PN government. In 2008, the PN was returned to government and Malta joined the eurozone. Last year, the Maltese ushered in a Labour government.

The EU is the world’s largest economy and exporter. It has a population of 505 million, producing a GDP of €13 trillion. Seven out of the top 10 foreign direct investment destinations are in the EU, as are 148 of the top 500 companies. There are 24 million businesses, employing an average of seven people each. A quarter of EU citizens have started a business and almost half of the young people aspire to do so. One in six of EU citizens have attained third-level education. The top 10 luxury brands are in the EU, which also has the largest shipping fleet in the world.

Malta is a micro economy with a population of 0.42 million, producing a GDP of €7 billion. Malta fares reasonably well with a PPS per-capita GDP of €22,000, compared with the EU’s €25,500 (interestingly, Luxembourg, with a population of 0.54 million, close to Malta’s, has a PPS per-capita GDP of €67,100, three times Malta’s). As with the EU, Malta has a predominant presence of SMEs. Sixty per cent of 18-year olds are in education, compared with the EU’s 80%. Malta has the largest shipping register in Europe.

How has Malta fared economically since the present government took office?

Inbound tourism was up 6.3% in Feb-14 on Feb-13 but expenditure was up only 4.6%. Employment was up 2.8% in Q4-13 on Q4-12 whereas unemployment was up by 1.3%. Of the 4,785 additional employed, 1609 (34%) were in the ‘public administration’ category. The industrial producer price index was down 2.1% in Feb-14 on Feb-13. The current account balance worsened by €72 million in Q4-13, from a surplus of €29 million to a deficit of €43 million (EU -€267 million, extra-EU +€224 million). Annual RPI inflation was 1.08% in Feb-14, compared with 0.65% a month earlier and 1.84% a year earlier. Feb-14 annual HICP inflation was 1.6%, compared with 0.9% a month earlier and 1.8% a year earlier. GDP went up 2.4% in real terms in 2013 over 2012.

Without delving further, and looking at what visibly needs improving, tourist average spend is falling, unemployment is rising, industrial prices are falling, the current account balance has worsened (notably with the EU), and inflation is still below the two per cent target. These are signs of an economy which needs qualitative and quantitative stimulus.

Jean-Claude Juncker, ex-prime minister of Luxembourg and ex-president of the Eurogroup, is the candidate for President of the European Commission put forward by the EPP (European People’s Party), currently the largest political group in the European Parliament, and which the PN is affiliated with. Dr Juncker has stated that his primary objectives would be economic growth, job creation, and to be a bridge builder in reuniting Europe. And there, he has identified the key issues for the EU.

We have seen that 34% of the employment increase in Malta in the year to Q4-13 came from government. That is a Keynesian-style approach which increases public expenditure with ensuing risks of higher taxes and/or increased public debt.

Job creation should come from the private sector. Malta’s SMEs need to be incentivised to start up or grow as the case may be. They are the engine of economic growth. They are where the almost 6,000 young unemployed can find employment or entrepreneurial opportunity.

The EU is going through a period of a minority but growing wave of scepticism. MEP candidates from certain parties in certain EU member states appear to be intent on contention. The same appears to be the case with some, if not all, of the PL candidates. Nothing will be achieved, especially by a small country like Malta, with six of 751 seats in the European Parliament, by being belligerent. The EU is about contributing to policies in the respective committees (where the Maltese MEP presence is 1 on 50) and bringing back the largest possible share of the good which is created. This is what the PN candidates are intent on doing. In an era of globalisation, Malta’s place is as part of a global economic player – and the natural place for Malta is the EU.

Valletta should be working proactively for an ever stronger symbiotic relationship with Europe, economically and otherwise. This is a primary objective of Brussels as promised by Jean-Claude Juncker. The two cities should move forward with a shared vision, rather than as in Charles Dickens’ London-versus-Paris novel.

 

Ray Bugeja is a PN candidate in the forthcoming European parliamentary elections

 
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