On 8 July the Council of the European Union ruled that "an excessive deficit exists in Malta due to non-compliance with the deficit criterion". On 24 August the Malta Fiscal Advisory Council (MFAC) warned Prime Minister Robert Abela "to avoid inflating spending so as to ensure adherence with its deficit targets". The very next day Abela defied both the European Union and the MFAC. He announced "the biggest tax cut in history".
Robert Abela bragged that "we're envisaging the biggest tax cut that was ever granted in the history of our country that will be announced at the next budget". Abela didn't explain how he plans to fund those massive tax cuts. He gave no indication how the country can afford his tax cuts while under pressure to bring down its massive deficit.
"This measure will especially benefit the middle class through better tax rates," he said. He wanted to target the middle class to support it and encourage it since it is working so hard and is motivated to improve, he insisted. As an afterthought he commented: "But the lower class will not be sidelined".
The ailing leader is making the most cynical calculation. He's not interested in the "lower" class. They're dyed in the wool Labour in the vast majority. He doesn't need to bother with them, even though they're the ones needing most support. Abela knows they'll vote Labour even if he robbed their mothers.
He's after the middle-class that has abandoned him and his party in droves. He's trying to bribe them back into Labour's fold. That middle class has seen through him. They know the man is recklessly incompetent and ruthlessly self-centred. They can see what he's up to. He's no socialist. He's just an opportunist, a chancer squandering more of the very money that middle class creates to preserve his own position.
Robert Abela has established a personalist regime, built around his patronage and absolute authority. He has forced out contenders he detested from contesting party leadership posts - Jason Micallef, Ishmael Psaila - and sacrificed others like Josianne Cutajar and Nigel Vella at the altar of political expediency.
Now he's abandoning the "working class", the very core of the Labour party. He's planning to burden the country with an unnecessary tax cut for those who are substantially better off than Labour's own grassroots.
Abela hasn't told us how he's going to fund those "massive tax cuts" for the better off. He could raise taxes from somewhere else. He could cut the energy subsidies - but he's already declared he's not going to do that. He might slash capital investment. That's exactly what the MFAC told him not to do. They recommended that "productive capital expenditure that promotes growth should not be curtailed". Or maybe he could end the hundreds if not thousands of fake jobs, the lucrative CEO posts for party loyalists, the unnecessary direct orders to Labour's donors. That's not going to happen either. He'll have a revolution on his hands if he dared.
He might be hoping that the economy will grow so fast next year that the increased revenue will fund those tax cuts. But that's even more unlikely. In 2022 GDP grew by 8.1%. In 2023 it grew by only 5.6%. The prediction is that GDP growth will decrease this year and decrease further in 2025. Now in another of his populist U-turns Abela clamped down on work permits for third country nationals. Less TCNs means less taxes, less NI, and slower economic growth. Malta's GDP isn't expected to suddenly and dramatically increase.
The only way Abela is going to fund those tax cuts is to borrow even more money. Abela has single handedly increased national debt by €3.5 billion to almost €10 billion. Abela is responsible for more than one third of Malta's national debt. Last year he ran up a deficit of 756.8 million euro. We're now paying over €4 million per week just in interest on our national debt - thanks to Robert Abela.
But Abela couldn't care less. He's utterly reckless. He knows Malta's debt-to-GDP ratio is still well below the EU benchmark of 60%. He has enough fuel in the tank to borrow himself through another election victory - maybe even two more. After that it won't be his problem anymore. Somebody else will have to deal with the staggering debt he inflicted to keep himself afloat. That somebody else is the middle class now cheering at Abela's tax cut pledges - and their children, our children.
Robert Abela's premiership is already dead in the water. That's why he needs to bribe the electorate to keep him in power.
The last Prime-minister to announce massive tax cuts for the middle class was the calamitous Liz Truss. Her chancellor, Kwasi Kwarteng announced 45 billion pounds in unfunded tax cuts in a 25-minute speech. Like Abela, Truss gave no indication how she would pay for those tax cuts. Her cavalier approach to national finances led to a disaster. Her so called "growth plan" sent the pound plummeting to its lowest ever value against the dollar. Billions of pounds were wiped out. Borrowing costs rocketed. The IMF slammed her plan.
The Bank of England had to intervene to steady the chaos in the market. But the damage was done. Truss was constrained to sack Kwarteng. Within days she was forced to resign too after just 49 days in office. Her party never recovered from that fatal blow that shattered the public's confidence.
Having won a landslide victory in the previous election, Britain's conservative party was annihilated. The Conservative's 365 seats in parliament were decimated to a mere 121. Keir Starmer's Labour won an unprecedented victory giving him 411 MPs and a massive 172 seat majority.
Robert Abela should take heed. He knows huge tax cuts never pay for themselves. Reckless decisions motivated by partisan political interests deter the very investors Malta needs to attract. Our GDP may look like it's growing but it's boosted by irresponsible government spending, funded by increasing debt. Incompetent leaders don't bring sustained real economic growth. They cause catastrophes.