Propeller malfunction

Prime Minister Lawrence Gonzi and his ministerial colleagues remain in a state of denial. Apparently they have decided that their best bet to shift public attention away from the worsening economic situation is by mounting further campaigns to rubbish me personally and the Labour opposition. We have been here before but where will the Prime Minister's approach get this country to?

The economic data is there for all those interested to read and interpret. Obviously if one happens to be, for instance, the government-appointed chairman of Air Malta and a PN strategist to boot, one's analysis of the data will be as slanted as mine is claimed to be. However, on the whole, when minimum levels of analytical professionalism are not being breached, the conclusion emerges that things are not being done right.

It is foolish to argue, as Dr Gonzi and his backers do, that the economy is picking up. I understand the political need for them to say so and the very high stakes they are playing for but, by and large, they have taken this argument far too far. Nobody can believe them. The acid test remains the question addressed to one and all: Are you better off now than a year, two years ago... three years ago even? If the government is on track, the reply to the question should be a straight yes. To the contrary, it is a general no.

Central to the Prime Minister's position during last week's budget debate was his dogmatic assumption that data released by the National Statistics Office showed a pick-up in the economy. Yet, the data was extremely provisional, seeing that the budget for 2006 has been presented almost a month earlier than usual.

The slight growth in the economy recorded by this provisional data has been blown by Dr Gonzi into a deep belief that things are improving. He made no effort to explain why the puny growth registered is actually bolstered, for about 80 per cent of it, by a build-up in stocks, that is, items produced by business organisations but still waiting to be sold. The rest is accounted for by government expenditures and by some construction investment.

You do not need to be a top economic expert to understand that this is a very poor performance indeed. Moreover, provisional data by the NSO has been subject in the recent past to drastic revision. For the growth registered during 2004, some three revisions were carried out which reduced the growth estimate by much more than a half. It is likely that the same will happen this year. So why chant the Gloria?

The problem is that the Gonzi administration has no real plan for economic recovery. It only believes that if Malta adopts the euro as its currency, rapid economic growth will follow. Which is a chimera.

Malta is now obligated by its EU membership treaty to join the euro. About that there is no argument. Yet, the timing for euro accession remains in our hands. There can be no ifs and buts about it. Malta should join the euro when its economy is well and truly on the mend, with new investment generating the kind of growth and jobs we enjoyed 20 to 15 years ago. To join the euro when the economy is still spluttering or worse is a recipe for further trouble. It would be like putting the cart before the horse.

Yet, Dr Gonzi is determined that such is his only way forward. And in so doing he is putting his trust in data that needs hard-nosed assessment, definitely not his brand of feel-good pumping. For apart from the provisional nature of the economic data published with the 2006 budget, there is too the whole question of government accounting. This is still done on a cash basis.

First promised with the 2000 budget, an accrual system for government accounting now is to enter its "preliminary" phase... according to the 2006 budget. The cash in, cash out system still being used by the government provides an unreliable measure of what is really taking place in government finance. Labour knows this through bitter experience and we therefore take all Dr Gonzi's big claims about how the public deficit is being contained with more than a trowel of salt.

Meanwhile, there is no coordinated plan by which to make growth happen on the economic front. In tourism, the Prime Minister simply admits he has failed to increase tourist numbers by the paltry 50,000 prospected this year.

For the rest, the impression one gets is that it will be business as usual. In manufacturing, the government appears resigned that the sector will crumble further because of "China". Even the setting up of an investment fund, announced last year after it had been unveiled in a previous budget three years before, still needs to implemented.

All this amounts to a recipe for further stagnation. No amount of massaging the public mood with the perspective of euro accession will be relevant to the problems at hand.

Despite the relentless effort by Dr Gonzi to hype feel good and the aggressive denigration of all that I and the Labour opposition stand for or do, many have realised that the administration is in a state of drift. It is like a ship that cannot correct a persisting malfunction in its propelling system, while the captain and crew continue to pretend all's well.