Creating a dangerous precedent in markets by bailing-out toxic garbage

The Labour Party is extensively changing Malta’s social contract, skewing it in favour of the richest and the strongest at the expense of the weakest and the smallest, and the latest tweak that the Labour government is introducing is its new dangerous precedent of bailing out bondholders and shareholders of bad investments gone wrong.

The only excuse that Minister Owen Bonnici could conjure up to justify the Labour government’s massive bailout to MIDI was that, if the government did not bail out MIDI, bondholders would have remained unpaid.

We are now entering insane territory where the government is literally bailing out investors who invested in toxic garbage that went wrong. This means that the government is now guaranteeing the bondholders and shareholders of public Maltese companies, and no one is going to be allowed to fail — because failing would “hurt the families who invested in these assets.”

This dangerous precedent will warp and obfuscate markets in Malta by incentivising further toxic garbage and encouraging more bad investments due to the fact that the government will always backstop failure. This is also a very hardcore measure against social mobility and the middle class because it guarantees the survival and continued growth of big players in the market at the expense of their smaller competitors, even if the big players make horrible mistakes.

Failure in markets is functional: it weeds out the toxic garbage. Markets are healthy and thriving when bad companies and assets die and are replaced with more efficient alternatives. The Labour government is removing one of the most important functions of the market and replacing it with a guaranteed backstop for failure.

Note also the discourse by shareholders playing the victims: “the poor families” who would have lost their savings and investments. Jaħasra.

This is all dangerous and also very backward because people are being given the message that their stupid decisions will eventually be rewarded.

By the way, the MIDI project was always known to be a project by rich investors who were exploiting public land that was given to them for free. Those who invested in this asset, knew very well that they were investing in something that was fundamentally wrong and negative for our country. Somehow, now they want our sympathy and even want our public money.

Mark Camilleri

Website Editor
Historian and Publisher