Malta's elections - A new confidence in governance.

Continued economic growth, effective social policies, and targeted support for vulnerable population will be crucial in improving the economic well-being of households


Following last week’s elections for the European Parliament and local councils, the results show a new trend of voters’ aspirations for smarter state governance and an assertive relation with European institutions. 

As our economy is intertwined with that of the European community, one needs to follow closely social and economic trends in the EU. Surely one of the main concerns of local voters was the level of inflation, interest rates and how these impinge on the cost of living. The good news is that inflation is showing signs of being tamed under the ECB policy. 

Last week, the Governing Council of the European Central Bank decided to decrease by 25 basis points the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility to 4.25%, 4.50% and 3.75%, respectively, with effect from this month. For instance, inflation in Germany rose slightly more than forecast to 2.8 per cent in May from 2.4 per cent in the previous month. The increase in German headline inflation is a stark reminder of the difficulty faced by the ECB of the last mile of bringing inflation sustainably back to its two per cent target. 

Turning back the clock to times when we benefited from low inflation within the 2% rate and the scaling down of core inflation is a harbinger for a quick recovery. Economists assure us that the dynamics of underlying inflation and the strength of monetary policy transmission, is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady. 

Since a Governing Council meeting in September 2023, inflation has fallen by more than 2.5 percentage points and the inflation outlook has improved markedly. Council stands ready to adjust its instruments to ensure that inflation returns to its 2% golden target over the medium term and to preserve the smooth functioning of monetary policy transmission. What about the jobless rate in Europe. This has shown a moderate recovery and one rejoices seeing the seasonally adjusted jobless rate in Germany held at 5.9 per cent. This is in line with expectations. 

On the other hand, the number of people out of work in Germany rose to 2.762 million, a rise of 25,000 and much more than the 10,000 predicted. The latest number of jobless in Malta according to the Labour Force survey is a modest 8,000 range. Moving on let us discuss wellbeing in Malta. By definition, a barometer for wellbeing is the percentage of families that are at imminent risk of poverty. 

Here the story is not too rosy. In the EU, 10 per cent of children live in families below the poverty threshold. Another worrying statistic is the percentage of early school-leaving students who drop out of school with no digital fluency that may reduce their ability to progress in the labour market. Lack of minimum qualifications does limit job applicants to enlist in less rewarding jobs. Out of a job means living on state handouts and risking being drawn in the circle of poverty. 

Back in Malta, one is surprised to read the latest report from the National Statistics Office, stating that last year one out of every six people in Maltese households was at risk of poverty. More disturbing stats show that 88,462 people were under the poverty line in 2023 - meaning that 16.6% of the local population was at risk of poverty. This is according to a survey released by the European Statistics on Income and Living Conditions. 

Is there a quick fix? Try reviewing and adjusting the minimum wage to reflect the cost of living can help ensure that all workers earn a living wage. Addressing poverty and improving the economic well-being of households in Malta is a multifaceted challenge that involves various policy measures and socio-economic factors. These poverty indicators include whether a person affords to replace worn-out clothes with new ones; have two pairs of properly fitting shoes; spends a small amount of money each week on him/herself; has regular leisure activities; gets together with friends/family for a drink/meal at least once a month and have an internet connection. 

While it is difficult to predict exact prospects for the next five years, several initiatives and social trends could influence the situation positively. One is hopeful that Castille will roll up their sleeves and start a remedial programme focused on efforts to diversify the economy beyond traditional sectors like Igaming, tourism, manufacturing and financial services.

A novel idea is higher collaboration with the private sector and non-governmental organizations to address poverty through innovative solutions and community initiatives. A radical shake up in Malta Enterprise will rekindle the old adage that the early bird catches the worm. Malta’s practitioners will again venture forth and armed with government initiatives be the first to attract foreign investment and support local businesses. The latter can lead to job creation, which is crucial for reducing poverty. 

Next, one augurs that the ministry concedes to demands by educators in a long-drawn out saga to reach a wages collective agreement. Once agreement is reached, a stellar effort is expected from educators particularly in higher vocational and digital training programs. These can equip the workforce with the skills needed for high-demand industries, improving employability and income levels. 

Ensuring access to quality education for all children, regardless of their socio-economic background, can break the cycle of poverty and improve long-term prospects. Malta can also benefit once a high-quality educational reform is implemented for all children, regardless of their socio-economic background. This can break the cycle of poverty and improve long-term prospects. 

Continued economic growth, effective social policies, and targeted support for vulnerable population will be crucial in improving the economic well-being of households. 

Additionally, ongoing monitoring and evaluation of poverty reduction initiatives will be essential to ensure that they are effective and responsive to changing needs. While challenges remain, a concerted effort by the government, private sector, church authorities and civil society can create a more inclusive and prosperous future for all Maltese households. 

Hope springs eternal.

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