Wednesday, 19th November 2008
Ask your MEP
Coming in from the cold
Until recently, Iceland was a rich country that could afford to stay out of the EU and the eurozone.
That was before the financial crisis swept this country off its feet and left it out in the cold. Iceland is now facing total economic collapse.
Its financial markets are said to have lost 90 per cent of their value, whereas its currency - the money in people's pockets - fell by some 80 per cent. Interest rates shot up, inflation soared and unemployment is set to rise significantly.
People's bank deposits are frozen, pensions lost their value and even foreign depositors have been affected.
It is a scary predicament and I hope that this country, with a population less than ours, can find all the support it needs. Indeed, it has already turned to the International Monetary Fund (IMF) for a $2 billion loan, becoming the first Western country to do so since the UK in the mid 1970s.
It has also turned to the EU, which is gearing itself up to provide some support. Little wonder then that opinion polls now show that some 70 per cent want Iceland to join the EU and even more want Iceland to adopt the euro.
Iceland has been the worst hit and it is paying the price of staying out on its own. But it is not alone.
Denmark is a member of the EU but following a referendum in 2000 it chose to stay out of the eurozone and stick to its krona. Yet, as the financial tsunami hit home, the krona stumbled and the Danish authorities were forced to spend a lot of their foreign reserves to prop it up.
And as the European Central Bank cut interest rates in the eurozone to 3.25 per cent, the Danes were increasing theirs to 5.5 per cent to defend their currency.
In other words, they were forced to increase interest rates at a time when all the rest of us were decreasing them, as we should, to help stimulate the economy.
Now that's a huge price to pay to keep their own currency. The Danes are finding this out at their own expense. Small wonder then that their Prime Minister wants another euro referendum before his mandate runs out in 2011. Support for adoption of the euro has surged in recent weeks in both Denmark and Sweden.
Now look at Hungary, which joined the EU with us in 2004. But unlike us, it did not put switching to the euro among its top priorities and therefore failed to fulfil the criteria for adopting the euro. Meeting the euro criteria is no mean feat. We know because we have been there. It takes serious reform and tough decisions, not least on taxes, which do not win you votes.
But reality hit home and even short-term political gain comes at a price. Hungary's currency fell under pressure from the financial crisis and it found itself turning to the EU for help.
This is the first time that the EU will use this kind of financial instrument, which will enable it to provide a €6.5 billion loan to one of its own, Hungary.
Now look back at Malta. We have a small but open economy which is highly susceptible to the ups and downs of the world out there. Yet, the financial crisis has found us in the shelter of the euro currency and of the EU bloc and we have emerged largely unscathed.
True, the recession around us will still hit us, as can be seen from the lay-offs and reduced working weeks in some of our manufacturing plants. And, yes, adjusting to the real price of energy will not be easy as the trade unions told us in their unprecedented show of unity last Friday. After all, we are not an exception to the world.
But this is a far, far, cry from what is happening out there in countries that have made different political choices. We are not in their mess.
Far from it. And there is little doubt that our political choices have helped us through.
Thankfully, we are not paying the price of staying out of Europe or out of the euro. Because we are in.
So while we strive, as we should, to fight on for our competitiveness and our livelihood, difficult as that may be, a look out there around us would not be amiss. If only for a proper sense of perspective.
It's cold out there. And we could have been there.
That we are not is no mere coincidence.
Readers who would like to ask questions to be answered in this column can send an e-mail, identifying themselves, to contact@simonbusuttil.eu or through www.simonbusuttil.eu
Dr Busuttil is a Nationalist member of the European Parliament.
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Comments
Government is seeing the national interest whilst unions (rightly so) are looking at sectorial interests. This dynamic is a healthy thing in democracies. The confrontation of different proposals means that a balanced solution will be found in the near future.
P.N. has had a long-term vision and was courageous to take decisions which were not liked by all but where of national interest. The government will surely take care that no one will lag behind.
Let us not forget that it was the P.N. that championed for a social market, for EU and for the Euro. PN has faced opposition to these stands yet P.N. continued to work in benefit of the Nation and the message was understood. In the mentioned issues P.N. has been proved right. M.L.P. has know officially accepted these positions. This will surely stabilise our democracy further.
Today we are facing a similar position. Government is taking the less liked decisions yet the most responsible. Government has little control over external blows thus has to make internal measures to ensure that our market has a stable morrow.
We are not arguing against the E.U.! We are arguing against your fallacy that any country which is not in the Euro zone, is suffering more financial problems, whilst those that are in the zone are not suffering! Germany is a Euro zone member and it had to bail out banks as well, and we still are awaiting the unknown, not because Germany is in the EU, but because the NEW problems facing the world have not been seen for years and years. Dr Busuttil, is suggesting the same reasons and logic as you, and many people beg to differ! Thats all.
'Calling the euro a haven from the storm is not just economic nonsense. It is political bad sense, since nobody is going to be sheltered from this deluge'.
Dr Busuttil may wish to read the full article at
http://www.economist.com/world/europe/displaystory.cfm?story_id=12592230
What is VERY evident is that people who continually wear dark blue glasses ... cannot even see that far! ;-)
I do have faith in this country. My investments include shares in a LOCAL bank which has never looked back since its inception in the early seventies - no thanks to the present administration, the EU or the EuroZone. I have enough faith in Malta that I chose to remain here, as have both my offspring, despite having foreign qualifications - again, no thanks to the EU or the present admin.
With respect, you appear to have mistaken my support for the Euro as a criticism. Even though the relative strength of the Euro is hurting me at the moment, I nevertheless remain a whole-hearted supporter of Malta's membership of the EU and its adoption of the Euro.
Any criticism I implied was directed at the UK government for its stubborn refusal to follow suit.
I apologise for any confusion I my earlier contribution to this debate may have caused.
Whether it was revalued or devalued, the Maltese Government would have been in a position to adjust the value to take into consideration our particular circumstances. Now we cannot because what is dictated by the ECB applies to every member country, whether it benefits or is pushed to disaster. Ireland comes to mind.
Mr Martinelli
The Maltese Lira showed that we were a sovereign nation, something which we now cannot say. Whether the euro is affecting us badly or not we have to dance to the music being dished out by the ECB.
The trouble Iceland is in is because their banks invested in the American banks and has nothing to do with their currency or the euro. The non-euro situation also applies to the rest. Insecure banking business has nothing to do with the adoption of the euro or not.
"It was spent on roads you walk on, water which comes from your taps..."
Roads? Like the moon surface and only good for safari on 4-wheel drives?
Water? Haven't you heard about the terrible water situation that we are in?
"This debt continues to be serviced" By US.
"oversubscribed" By whom?
not true that Malta's financial position has not been affect ed by our entry into the Eu and Euro zone why is Iceland, Hungary, Denmark and to a certain extent Sweden begging to join the EU or the Euro zone or both?
Why is Iceland NOW saying that they WANT TO JOIN THE EU? Because what happened to them was due to the fact that they had stayed out in the first place. That's why. If you cannot accept this fact then you are doomed again and again and....
I wasn't about to comment on the above because it is correct and factual and those who find fault with Simon Busuttil's article all display the 'sour grapes' syndrome.
But, Mr. Wenzu Vella chose to mention my name and honour me by putting me in the elite company of Simon, David and of course, GonziPN. Thank you Wenz, this is the type of company I wouldn't mind being associated with.
However even if you all, cannot stand the wisdom of Simon and David, why argue with the plain truth? Have our banks asked for any government funds in order to stay liquid? Has your euro today devalued as compared to a month ago? Has your bank refused to hand over your own money when you went to withdraw it?
If any of your comments were fair, then it would be a different game altogether but you insist on seeing things negatively all the time.
I Galea still wishes we had the Maltese Lira! Now that takes the cake and I don't blame him because, after all it was his party's message all along.
Continued
Now if the government took the MLP's advice, Mr. Galea would have at least 10% less in his savings account. How about that for a fair deal?
Phil Humphries complains about having to change the sterling to euros! Would not the same have applied if he had to change the sterling to Maltese Lira? Why complain here? He should be complaining to the British Government's obsession of staying with the sterling within the EU. But then has Britain not found it necessary to prop up its banks by several billions?
Iceland took the advice of Joseph and I believe there are no framed pictures of Joseph surrounded by Christmas lights to honour the author of this kind of advice which landed them in deep trouble.
So, is it a mere coincidence that Iceland, Britain, Hungary, Denmark and even Sweden have encountered difficulties in their financial sector? No coincidence because there is a common denominator, that being that none is a member of the eurozone!
And, going back to Wenzu, the 3.5 billion you talk about was not spent to shore up banks. It was spent on roads you walk on, water which comes from your taps...
Continued.
when you want electricity which is by far more reliable than we have had before and getting even more secure in a year or two, a state of the art telephone system, a state of the art hospital, a far more efficient and modern airport and the list goes on.
And some of you have the cheek to even bring up the subject of national debt up! This debt continues to be serviced, is at attractive interest rates and enabled the Nationalist Governments to bring Malta to the 21st century. All this without having to go begging at the IMF, ECB, N.Korea, China, Russia or Libya.
When the government needs money it goes to its people and each time a bond offering opens, it is oversubscribed in two or three hours. How about that for confidence by both businesses and individual investors? I am almost certain that all the negative contributors on this page and elsewhere never bothered to invest in their own country, but they are the first to criticize.
When we had the Maltese Lira the Government could only change its value one way -DOWN.
There was no other choice unless you wnated to wipe Malta's exports of the map and put a sign up "Tourist you are not welcome" because your currency is worthless vis-a-vis to our Lira as a result of superficios reasaons.
It is coming more evident that the vision of the MLP and that of the little elves goes only as far as the ttip of thier noses.
Being a member of the EU have absolutely nothing to do with the predicament Iceland is in now.
Iceland is in this situtaion because they trusted the Americans and invested with their banks that now are in the dustbin of this financial meltdown.
Not long ago your friend David Casa wrote about this same thing, and of-course you are being copied by your other friend J.Martinelli of London Onario Canada. Would this be a co-incidence because perhaps you all happen to belong to the same party and ringing the same bell.
Perhaps in your next article you will tell us how the Gonzi governmen is planning to pay the 4 billion Euro of debt your party got Malta into.
Since we were FORCED to adopt the euro by the eu petty dictators we have lost this ability and have to accept the decisions taken by the ECB whether those decisions are to our benefit or they are going to cause us untold harm.
This is the illogical one-size-fits-all eu policy
I remember emailing Mr. Busuttil about 5 years ago about Peak Oil, he was clueless.
Dear Dr.S.Busutill,
After reading this I am sure you have been making Alot of sacrifices ,
can you name a few which really have hit and will effect you in the
future please ? In your opinion are you doing enough to be of service to
the citizenship ?
Thanks and regards for your service to the people of Malta.