23 - 30 May, 2001
In our view, the two Union leaders Gejtu Vella and Tony Zarb would do well to study the Moodys report
It should, if anything, serve to enlighten them on the danger their proposals for inflated salary increases pose for the future of our fragile economy.
The Moody report was the talk of the town last week, after the finance minister John Dalli announced the ratings of this credible Investors Service to the press.
Apart from the well publicised political instability linked to whether Malta becomes an EU member or not, The Business Times would like to focus on some sombre statements by Moodys. They concern the bloated public sector which Moodys singles out as the main reason for the worsening situation when it comes to debt.
This comment continues to strengthen the arm of those who argue that the government must continue to encourage tight control on the public sector; a line of thought that is upheld by most government ministers.
Moodys has been very clear that economic adjustments are needed. It states in no uncertain terms that the MLP-spearheaded anti-EU views have led the public to believe that the rough economic adjustments are needed only to meet EU membership specifications, and therefore scepticism about joining has increased.
The Moodys report says that the budget deficit remains far too large. And interestingly, the fiscal gap, it comments, has relied too heavily on raising revenue rather than on cutting expenditure.
But then Moodys remarks positively on the measures that have been taken to restrain overtime, recruitment of personnel and other costs as well as mean testing of public benefits.
The privatisation programme also comes under some attack, and clearly Moodys believes that divesting the government from such public entities will reduce the government bill dramatically.
But on the plus side Moodys concludes: "We certainly recognise that the coherence of macroeconomic policy mix has improved considerably in the past two years as fiscal policy has tightened and financial markets were deregulated. These successes also have helped to support the A3 country ratings, in spite of our concerns about the countrys structural problems. "
Pension reform, when?
Yet one of the more important themes that has been relegated to third division is the issue related to the pension reform. A third division by the pensions commission which has failed to realise the importance of its findings.
Moodys has not shunned away from pointing out that such reforms are vehemently opposed by Labour party and the unions.
It remains strange that the Labour party is opposed to such reforms, but with the hostile and regressive mentality pervasive within the Labour leadership such things can be readily understood.
And once again, one cannot identify any particular urgency from government to tackle such an important matter.
The public in general should start waking up to the fact that in the next 15 years, the welfare gap will widen by 21% of the GDP a figure that is unsustainable.