When the war in Iran broke out, Finance Minister Clyde Caruana went to Parliament and said that the government has a cushion which will enable the country avoid the negative affects of the war. The Finance Minister said that the government can spend up to €250 million more in subsidies to ward off energy inflation without exceeding the 3% deficit rule, bringing the total amount of subsidies spent this year for up to half a billion Euros.
Once the Finance Minister made this announcement, the Prime Minister began bragging about this policy every single day, stressing how heroic it was that the government is going to issue more subsidies to keep energy prices low.
Behind this celebration about increased subsidies expenditure, there lies a very dark reality of gross and incredible incompetence that is being presented as “socialism”.
When the Minister of Finances went to Parliament and boasted about the prospect of spending more to avert an energy crisis he was revealing a very dark truth about the government and also Enemalta. The truth is that the government was not hedged, it had no insurance, no contingency plans, no reserves, no alternatives and no plan.
Despite going through a major energy and inflationary crisis in 2022 due to the Russian invasion of Ukraine, the Maltese government has done nothing to prepare and mitigate the effects of a potential new energy crisis. Today we are here, with the only solution being presented is spending more money.
The Labour government and Enemalta are running their energy policies haphazardly with no hedges, no plan, no system. They are buying energy and producing profits to private traders and Elecrogas while the population is subsidising this mess The government has literally no plans and no insurance contingencies to protect itself and the taxpayer from a crisis.
This is a very outrageous and scandalous situation but the problem is that the Opposition has literally no one who is financially literate enough to make this argument. Surprisingly, Adrian Delia is starting to get it, and he is the only MP so far that has been articulating the nuance about subsidies that these can’t go on forever. Adrian Delia is the only MP who has the courage to speak the truth about this matter but he has much more things to say if he gets it fully right.
The government once made a gas-purchase agreement and pinned the gas-purchases with the price of oil. They told us that this was a hedge. This is not a hedge – this is just a directional bet in which you forecast that oil prices will rise lower than gas prices – this bet has been a total disaster for the government.
What is a hedge? In the world of finance, a hedge is considered as insurance and traditionally, you should b buy your insurance cheap. A hedging system works by producing a long-term loss on the trades but makes a massive net profit when a crisis hits and the insurance takes its direction.
The government has no hedges. No plans. No system. Ultimately, the government has no insurance and the only policy it has is to keep forking out subsidies because spending money is the only thing this government is capable of doing.
We are basically paying for their incompetence and corruption.
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Historian and Publisher
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