Editorial

It would seem that the feel-good factor so much in evidence today has more than the 2007 budget as prime motivator, at least insofar as business is concerned. A business perceptions survey, carried out by the Central Bank in the third quarter, that is when the budget had not yet been presented to Parliament, showed improved optimism, with the majority of respondents indicating a pick-up in order books and activity levels. Expectations about the general economic situation also improved.

An improved economic environment percolates from business down to other sectors, generating greater confidence in work aimed at bringing about a higher living standard. The Central Bank's survey is confirmed by another, that by Euro-chambers, the umbrella organisation representing European business organisations, which has also found that business sentiment in Malta has taken a turn for the positive.

In a political environment where the opposition often - if not invariably - doubts the progress being made in the economy, with doubts cast on the reliability of statistics thrown in for good measure, general agreement in the outcome of different surveys may be convincing evidence that the situation is not as black as they make it out to be after all. There is, of course, more than one hot spot to be taken care of, but at least the work put into the restructuring programmes is now showing positive results.

Beyond the general positive picture, there still remain a number of challenges that have to be met. As regards joining the eurozone, the latest convergence report on the state of preparedness makes it clear that "Malta is well on the road though risks still exist".

One risk is inflation. The average inflation rate over the 12 months to October was 3.1 per cent, above the reference value of 2.8 per cent, but according to the convergence report, it is likely to return to a position close to the reference value in the months ahead.

As to other areas requiring attention, a few were well commented upon and analysed by the Central Bank governor, Michael Bonello, only recently. Mr Bonello put his finger on what will some day definitely become the island's major challenge, the sustainability of the welfare schemes and free public services, particularly public health.

The time element, "some day", must be highlighted because it would appear that politicians are not yet prepared to face facts. When Labour put up so much opposition to the pension reform, it is not difficult to imagine the kind of reaction they would give to proposals for the re-examination of the issues bought up by the bank governor. Yet, whether the politicians like it or not, the day will come when the country would surely have to seriously grapple with the mounting costs of all the free-entitlement systems now in operation.

When he was specifically speaking about the sustainability of the public health system, for instance, Mr Bonello warned that sooner or later the ability to provide free services to those who truly deserved them would come under threat. When the new hospital opens, costs for the government will continue to soar, putting added pressures on state finances.

When will the political environment be ready for all the players involved to work out, dispassionately, the best way forward for Malta? Safeguarding the provision of services to those who truly need them is well worth any cross-party effort aimed at seeking the right solutions. The right time for such an exercise is immediately after an election. The more the exercise is delayed, the greater will be the cost to all.