Minister Clyde Caruana has made some very big statements today which need to be addressed.
The Finance Minister today said that Malta has the best economy in Europe because fuel and electricity subsidies are keeping inflation low, effectively thus cushioning the negative impacts of the external energy shock. He said that these subsidies are helping the vulnerable and keeping businesses afloat while effectively bumping up GDP considerably.
However, these statements do not give the full story.
The government is currently sustaining an economy based on consumption, fuelled mainly by two ever-growing inputs which include government expenditure and private consumption, mainly through tourism and population growth.
Yet, this supposed best economy in Europe has the lowest birth rate in Europe. Clearly the best economy in Europe is not translating its effects into the social contract. There are two main nuances here. Firstly, economic growth is more impactful in high-value economies than low-value production economies and secondly the Labour government, and secondly the social contract is currently compromised by multiple variables including the housing crisis.
A more honest and serious discussion on public finances is needed that goes beyond the propaganda talking points of the Labour government. Essentially, earlier today the Finance Minister gave a press conference to claim that the economy is being saved by the government’s fuel and electricity subsidies.
This may very well be true, as the subsidies are cutting a significant cost for businesses. However, the ever-pressing point remains: the Labour government is filling structural gaps in our economy and infrastructure with immediate subsidies without investing in long-term strategies.
This means that the economy’s momentum needs to be sustained, with any hits to the economy eventually being even much more negatively impactful.
In simpler words, the government is postponing solutions for Malta’s critical infrastructural and energy problems, and the longer these are postponed, the bigger the bill will be tomorrow.
However, Labour doesn’t really see that far out into the future. Already, the policy of subsidies has eaten up to €1.35 billion, and Labour has no plans to rectify this ever-pressing expenditure with infrastructural and energy projects.
As soon as an alternative government tries to fix our problems, Labour will jump and say that the new government is hurting ordinary people. In reality, Labour is only postponing problems and outsourcing them to future leaders because it is ultimately only interested in short-term electoral wins and not the future of the country.
Labour is governing in a reckless manner, irrespective of how much the Finance Minister extols his virtues as a “son of the working class”: that still doesn’t give him the right to be reckless. If we are to be honest about the fiscal situation, we have to admit that the subsidies are not sustainable and Labour refuses to admit this truth. No one has ever proposed cutting subsidies overnight: this is Labour’s libellous fantasy. But a more responsible and honest approach would take into consideration long-term impacts rather than simply being short-sighted enough to aim your fiscal plan just far enough to be able to wake up tomorrow.
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