13 August 2003

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Toon this week: The times they are a-changin’

Everything to gain and everything to lose

Malta as a country stands teetering on the edge of a brave new world where the only future certainty that remains is uncertainty itself. On the one side of the edge stands Malta’s former protectionist past - now well put behind us - while on the other lie in wait the new realities of EU membership, the prospect of increasing taxation, the pensions time bomb and scores of old and new sets of fiscal problems to torment the country’s delicate economy.
Malta’s closest European neighbour, and one of the country’s single largest trading partners - Italy - dipped into a technical recession on Friday when it was announced it had registered negative GDP growth for the second quarter running this year. Other EU members are also facing the threat of recession, with Italy's figures making it more likely that whole eurozone’s second-quarter GDP will contract for the first time since the last quarter of 2001, when the 11 September attacks had depressed economies around the world.
But while Malta’s GDP growth at present remains in the black, the state of public finances is beginning to lose some of its pre-electoral whitewash as the grim undercoating is revealed. This problem alone stands to create a ripple effect that could, in time, send Malta too plunging into a recession.
Public expenditure is also facing new demons in the form of forking out for accommodating the growing masses of illegal immigrants, for which the country should be expected to pay a sum proportionate to its EU neighbours who are also burdened by the phenomenon.
Also threatening to wreak havoc on Malta’s finances is the country’s long-ignored environmental degradation, which will have to be addressed significantly by public funding lest Malta’s tourism product, and indeed the health and quality of life of future generations, is sacrificed on the alter of neglect.
The message is clear: the good times are over and EU accession will not be the bed of roses that many had dreamt of unless our public and private sector leaders do some serious soul searching.
Malta’s pensions times bomb, ticking away furiously under the carpet it seems to have been swept under, ticks more ominously by the day and taxes will inevitably need to be raised, directly or indirectly, to offset future pay outs.
Malta’s and the world’s equity markets no longer present many investment opportunities and as Malta’s investors turn back to solid brick and mortar investments, property investment potential appears to be running through investors fingers like so much dry mortar.
Undeniable is the fact that Malta’s property market has been artificially inflated by the prospect of EU membership and when these investors find that hoards upon hoards of Europeans will not, in reality, be so keen to scoop up whatever the market has to offer, they will suffer losses that cannot be reinvested.
But all is not doom and gloom and to buffer against these threats Malta must seize the opportunities being served up on the metaphorical silver platter with all due haste and attention.
If this is done in a proactive fashion, Malta has everything to gain, but if our actions remain response-driven, Malta has everything to lose.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
Tel: (356) 21382741-3, 21382745-6 | Fax: (356) 21385075 | E-mail