this week: Timebomb ticking...
Waiting for the bomb to explode
Its a problem no matter how hard we try to conceal it. The pensions
time bomb is ticking fast and although there seems to be a general consensus
that something needs to be done urgently, the country is gripped by
Admittedly, pension reform is a political hot potato and it may well
rock the industrial peace groomed by Nationalist governments since 1987.
The commission set up a couple of years ago to study the problem and
propose solutions has not yet woken up from the deep sleep it fell into.
Our front-page story shows that all over Europe governments are doing
their utmost to tackle the issue, some with a higher degree of success
than others. Italy has also declared that, when it takes over the EU
presidency for the second half of this year, the presidencys main
focus will be Europe-wide pension reform.
Europe is ageing and to make matters worse less babies are being born.
Malta is not alone in facing this demographic problem that can unsettle
public finances and rock economies.
Action is required. Consensus must be sought. Bulldozing pension reform
on all and sundry wont get us anywhere. However, the search for
consensus must not lead us into a dead end of continuous chatter.
And within this context the Opposition has an important role to play.
There will always be ideological differences on how to tackle pension
reform, but political consensus on the broader issues is a necessity.
Increasing the retirement age is one of the broader and more controversial
issues that should find political and social consensus. The assurance
of a decent quality of life for pensioners is another broad issue that
should find political consensus.
A new social contract has to be drafted and the earlier the different
stakeholders get together, the better for everyone.
Equity downturns and investor sentiment
Investing in the worlds, or Maltas, equity markets is always
a tricky business and one that calls for nerves of steel and an unemotional
However, we are told by fund managers time and time again that the Maltese
investor is a particularly emotional breed that smiles gleefully when
they see their investments rising, but resorts to panic and knee jerk
reactions when they see prices falling.
The reaction is, of course perfectly understandable many have
sunk hefty portions of their savings into equities that appear to go
nowhere but down.
And equity investors have had a great deal to fret over of late. First
came the bursting of the technology bubble, then the events of 11 September,
followed by the Enron and Worldcom accounting scandals and, most recently,
the war in Iraq.
These happenings on the world stage of course take their toll on international
and, to a lesser extent, Maltese stock exchanges. And the figures clearly
show drops in equity prices as a result of international turmoil.
But looking at the figures from a historical perspective shows the other
side to the coin. Consider if you will for a moment how every major
global event of the last century that brought havoc to the worlds
stock exchanges has been followed by a later show of force from share
prices and, consequently, market capitalisations. The 1929 stock market
crash, Pearl Harbour in 1941, the Suez Canal/Sputnik incidents, the
1973 oil crisis, the 1983 US recession and the 1990 Gulf War had all
seen stock markets plunge. But they have also recuperated many times
The lesson is clear: equity investments are not best geared for the
short term investment and to see real returns on equity investments,
investors must be willing to wait out the tribulations that will inevitably
be thrown their way from time to time.