Facing the challenges ahead

The economic news coming form various countries are as chilling as the winter weather prevailing in our country. From an economic perspective few people believe that 2009 will be any better than the year that has just been buried.

The most recent sobering predictions have been made by the IMF that has added its voice to those of countless other economic experts to appeal to governments to ease the pressures on consumers so that they can help the world economy to recover more quickly. The IMF made a very interesting comment when it said that small changes in VAT, as has been done in Britain, are unlikely to have any significant effect in boosting demand.

If demand continues to be sluggish, it is unlikely that we will see the end of the prevailing recessionary period in most EU economies coming to an end. Judicious spending by governments on infrastructure projects could do the trick because such projects are likely to keep the labour market buoyant by enabling various companies to win contracts relating to such projects.

The IMF has also advised governments that when proposing tax cuts they should ensure that the benefits go to those people who are most likely to spend the extra cash rather than stack it away in savings.

This may seem like strange advice coming from the respected IMF but the reality is that those on low incomes are more likely to spend whatever tax cuts they are granted than those who can cope despite the rising cost of living.

The Gonzi Administration should follow the IMF advice and ease the pressures on Maltese families that are struggling to cope with the ever-increasing cost of living. As important political appointments approach in the next few months, foremost being the European Parliament elections, it is not inconceivable that the government will once again try to win over political support by appearing to be generous with the electorate. At last, we may see some significant reductions in the water and electricity tariffs.

While the method chosen by the government to win political support may be shameful, the end result will be most welcome. If what I am predicting happens, the Labour Party (PL) and the great majority of trade unions will be vindicated in trying to make sense of the government's strategy to address the likely effects on Malta as a result of the world economic crisis. Better late than never will be the very pragmatic reaction of many Maltese families who are finding it increasingly difficult to cope with inflationary pressures.

The promised tax reductions to boost demand and support economic growth in the short term are unlikely to be implemented. The Gonzi Administration has once again shown that the loud pre-electoral talk of our economy being "in safe hands under Gonzi" was no more than a hollow and jarring sound bite.

Public accounts for the first 11 months of 2008 show that the control of the budget deficit has once again spun out of control.

The government will, of course, continue to claim that extraordinary events were behind this failure. But the real extraordinary event was not the one-time terminal benefits paid to the shipyard workers who opted to take early retirement but the irresponsible spending resorted to just before the March election.

It is shameful that the Maltese public is expected to underwrite the financial cost of the incompetence and irresponsibility of this Administration. Public sector projects that regularly overshoot budgets, government organisations that continue to provide a shabby public service despite massive amounts of funds given to them from the taxpayers' purse and a culture that accepts that no one needs to pay the price of such abuse of power are just some symptoms of a dysfunctional government.

We are facing serious and tough challenges in the year ahead. The PL will continue to be in the forefront in carrying out its duty as an opposition loyal to the Maltese public. We will hold the government to account when incidents of bad policy and incompetent public administration are noted. We will continue to be the voice of those thousands of Maltese families discovering that under yet another PN Administration the quality of their lives is deteriorating.

Dr Mangion is a Labour member of Parliament.