A rainy day

In one of his parables, Jesus tells us about the prodigal son who, after having spent his share of his father's fortune, comes back home hoping his father will bail him out of his self-inflicted misfortunes. He was a really lucky guy for his father did not hesitate to accept him back into his home.

Malta, and especially our government, reminds me of the prodigal son. Always hoping that some "father" bails us out of our financial predicament. We have now been an independent state for over 40 years and yet we still have not managed to shed our sense of dependence on foreign financial assistance. We got our share from Britain and decided to fend for ourselves. To be fair, we did not blow all the money away. Still, by the late 1960s, it was becoming obvious that the level of government spending was not sustainable. The people decided for a change in government.

Then we got the Mintoff administration with its crude but effective tactics in getting additional financial assistance. From Britain, Italy and Libya among others. It was at that time, in the 1970s, that Lee Kwan Yew, the then Prime Minister of Singapore, visited Malta and noted that we were perpetuating a "dependent" society.

Indeed, it is obvious that we have still not broken away from our colonial frame of mind and many have been hoping that this time round it will be the EU to make good for our financial mess. There is little probability of this happening. The EU has its own problems and its priorities lie elsewhere.

Even if we do not take into consideration the ever spiralling cost of crude oil, the government would still have a deficit of some Lm80 million a year. Government debt accumulation has trebled in the last decade or so and has bloated our debt servicing burden. We also have a problem with our balance of payments since we continue to import (and travel overseas) much more than we can afford.

Over the last few decades there has been a dramatic change in our social and economic behaviour. Traditionally, the Maltese had a very high propensity to save. Today we parade our mobile phones and boast about our internet connections and DVDs. And, in the meantime, our savings level continues to fall.

A foreign friend of mine once told me that we Maltese get married to our houses. Young couples borrow heavily to buy and furnish their homes. Then they have to struggle throughout their working life, toiling constantly just to make ends meet. In such circumstances, losing one's job spells disaster. No wonder that financial difficulties are the primary reason for marriage breakdowns. Many of us are putting aside too little money to pay for our retirement, relying on an almost bankrupt public pension scheme and rosy assumptions about capital gains from the value of our houses.

We have been carried away by our past success. And the government's "money no problem" mentality has served as a bad example. From a national, macroeconomic perspective, the saving rate has two components: public and private. It does not really matter which of the two does the saving as long as a society we put enough money aside to finance the necessary investment that is to drive our economic growth. We need productive investments and not euphemisms for politically sensitive expenditure as is the case with the shipyards and much of our education.

Our fathers and mothers were thrifty, always keeping what they could put aside for that rainy day. Inevitably, the rain has arrived and our coffers are empty. What is surprising is that the government continues to stage-manage the whole situation, refusing to come across clean with Joe Citizen. In act one, we got the charade about the oil prices. Yesterday, we got act two. And tomorrow we will get another act. In each act the government will continue to try to sweeten the pill, hoping against hope that the electorate will continue to mellow in its regard.

For the government it is increasingly becoming a Hobson's choice. On one hand, it has to honour its convergence commitment with the EU, otherwise Malta will not be able to join the euro countries. On the other hand, it can try to buy its way forward by seeking, as much as possible, not to hurt the electorate's interests. The government has been making too many wrong decisions and it continued to postpone remedial action for too long.

Just as with Enemalta. The building of a new power station which, according to the corporation's chairman, is not even as efficient as the old one which we had all believed to be obsolete. Continued gross inefficiencies in the distribution system, not issuing bills whenever there is an election around, failure to take action against those who do not effect payments and so on.

For years this government refused to make any hard decisions out of fear that the people would turn against EU membership. Now this same membership has become a millstone around its neck.

fms18@maltanet.net