Medium term effect of crisis might be harder on Malta - economist

Andian Joseph

Jul 9th 2009, 20:07

That's not very encouraging for us business men Mr. Cordina, haven't you got better and more of a positive news for us in the long term, does our economy has to sink further before we surface.

R.Gauci

Jul 9th 2009, 18:47

MR. Cordina might be right (something I believe) or he might be proved wrong just time will tell us!! Just one thing is clear that this recession ( I call it its time to pay the bills we kept in the drawer and come back to Earth from the clouds) is effecting all the major economies and was instigated by the non sense explotion in property prices all over the world and then by the fall of major banks.
It is clear that in Malta we always feel the effects of something happening around the globe after this had effected other countries so its clear that the hard effects of this recession have still to hit us hard!!
In my opinion in Malta everyone needs to unite and be ready for sacrifises that is the working class should accept wage freeze, business men especially property developers reduce prices and profits drastically,Banks should reduce rates to the ones suggested by the ECB and the Goverment control the rate of inflation and the cost of living which exploded up, a trend which is totally not happing in other countries especially in the Euro Zone where instead prices are going down!

Gianni Xuereb

Jul 9th 2009, 14:18

@Joe Balzan: Int bis-serjerta ?

Emanuel Cilia Debono

Jul 9th 2009, 14:03

Please refer to my earlier comment.
'I do not agree that one should not focus' should read 'I do not agree that one should focus'. Typing error is regretted.

My message is that immediate short term problems , particularly those relating to social hardship should NOT be ignored.

I am also of the opinion that investment for long term real growth is on the whole being actively promoted by policy makers in Malta.. I can see that the pursuit of such objective may sometimes entail for business entrepreneurs a trade off between the cost of maintaining current employment levels and the cost of restructuring for future growth. This is always an economic problem which has to be faced courageously.
Professor Robbins once defined economics as an exercise in allocating scarce means to competing ends, which have alternative uses. The human aspect cannot however be overlooked. The recent world economic experience shows the havoc and tragedy that may be unleashed when economics ceases to serve Man as its primary objective .

albert leone ganado

Jul 9th 2009, 13:08

Our immediate concern should be to survive and prevent a negative feeling of doom and gloom and worse still social unrest .
That is why I am fully in favour of preserving jobs at all costs once workers understand that they too have to make sacrifices.
Given the current extraordinary turmoil in the world's global economic and financial systems the medium and long term prospects are outside the control of a small nation like ours. The normal economic and financial theories simply do not provide a solution in times of such cataclysms and political skills in preserving the spirit of all the citizens is more important than theory or quantitative measures.
What is most important is conveying a message to all workers and students that not only can we survive but more importantly imbibing them with a spirit that this earthquake which hit the normal world business and economic order offers new opportunities for success.
Let us therefore invest more in our education and in those industries which hopefully will be the first to rebound. However like in wartime what is essential is political partnership and consensus in taking decisions in the national interest .

Randolph Peresso

Jul 9th 2009, 13:04

@ r ferriggi

Very good comments indeed. Mr. Cordina's philosphy is shifted towards statistics and figures. He is an economist with a Capitalistic mentality. Most probably he is right, as he was proven right after the introduction of the Euro. But the PM and Finance Minister have a social responsibilty, which they must address daily. Their decisions are proving they prefer cushioning the impact of the recession on the workers, than getting out of the recession quickly, at the expense of the workers. I would have done the same.

D.MANGION

Jul 9th 2009, 12:59

Economist Gordon Cordina is talking about Malta as if it was an economy the size of France, Italy, Belgium, or Britain.

Malta is small....just the size of a medium sized foreign city.
So what theoretically can be applied to these big countries does not necessarily apply to small economies like Malta.

If overseas economies recover in the medium term, they can be ecouraged to invest in Malta and they can do that starting from step 1. Thus Malta will be able to recover almost contemporaneously with the rest of Europe. Malta has rarely been used as an investment for R& D but more as an investment for the versatility and flexibility of its work force.

Remember Mintoff and Eddie...They both believed that Malta's greatest asset is its workers.

I have not voted for GonziPN but I have to point out that his way of tackling the crisis is commendable from various aspects ( I still do not agree with the high W & E tariffs) but his big effort to safeguard jobs is the best way to avoid a catastrphic collapse of the Maltese economy.

You do not have to be a genius to arrive to this.

J Martinelli

Jul 9th 2009, 12:59

Part 1

How come, every time I read an economist's opinion, forecast and other speculative calculation, I always get the feeling like I had just finished seeing a fortune teller who looked at the palm of my hand and told me that I shall live a long life? Very comforting - if only she knew that I have a pacemaker in my chest just to keep the old ticker, well, ticking!

Like any other economist, Mr. Cordina may be right or he may be wrong. Are we any farther ahead knowing his opinion?

America, the originator of this mess, right in the middle of a presidential election, chose to spend the recession away dumping some trillion dollars at failing industry and busted banks. But will it work? If it does, for how long? Was it wise to dangle dollars in front of ailing industry's noses which, no doubt, will find the least excuse to grab as much as they can? Is it fair to hard working and efficient sectors which will survive without state aid?

Continued

J Martinelli

Jul 9th 2009, 12:58

Part 2

Now that there is a general consensus that this recession (some call depression) is deep and here to stay for a longer while than first anticipated, what is going to happen when the trillions are spent and the recession is still around us? Pump more trillions?

Economists must get together and not just opine about the obvious but rather get to the roots of the problem and ask why? There are some givens, like greed, sloppiness, lack of banking regulations and if there were, never applied. Was it inefficiency at production level? Was it wages out of proportion to what the work was worth?

Why are the three main automotive manufacturers in the United States all renegotiating with UAW and CAW, wage reductions, slashing benefits, fewer holidays and stricter production rules? One can conclude that their workers were a lot of overpaid fat cats and now are made to realize that the good old days are over and will, without choice, have to join the rest of the workers who never enjoyed as much.

Chrysler and General Motors have already received billions just to stay afloat and Ford will soon follow albeit not to the same degree.

Continued

J Martinelli

Jul 9th 2009, 12:58

Part 3

How does this situation apply in Malta's case?

Besides feeling the effect of the world recession which is unavoidable, Malta had a few things going for it. First of all our banking system is built on a more solid foundation by virtue of its somewhat conservative policies which, in the face of crumbling world banking system, it remained practically unscathed. The government did not spend millions to guarantee deposits or keep the banks' doors open. One less big headache. Secondly the government did not panic and spend millions ahead of the industries needing any but rather doled out aid not to help an untenable industry but as a temporary measure to save jobs and employment levels. In other words, it did not issue a carte blanc. Instead, it is embarking on capital projects which will still be there for the public's use and enjoyment after the recession is over.

Malta's recession recovery will run parallel to its trading partners, no doubt, but it will help a lot if our consumers continue to spend and continue to be optimistic that in the next year or so, normality will return. Self fulfilling prophesies of doom will certainly not help.

N.Calleja

Jul 9th 2009, 12:49

Funny Malta. Mr. Cordina's opinion was thrashed by so many so called experts! As usual! 400,000 persons who are experts in any subject under the sun.And we are so sure of ourselves that God forbids if we are contradicted! Funny Malta indeed!

Joe Balzan

Jul 9th 2009, 12:23

These economist don't take into account the level of leaders that we have in Malta and the projects that we are building e.g Smart City and Renzo Piano. Under the leadership of our PM and with the knowledge and help of Austin Gatt and Tonio Fenech, Malta will come out of the recesion before the rest of europe.

Dominic Azzopardi

Jul 9th 2009, 12:09

New industry,technology....use the old shipbilding area to manufacture new wind turbines for malta and others,will help our exports and will be good recycling...reuse

emmanuel zammit

Jul 9th 2009, 12:01

Gordon is saying the total true!!!Some people could not like his points but at the end he will show up that is true!!!

J.Borg

Jul 9th 2009, 11:34

@J.Farrugia: I'm sorry but in my opinion you lack knowledge about basic economic policies.Other alternatives are eliminating stipends and children's allowance amongst other fiscal and monetary policies..but i guess then no one would vote for who vows to introduce these policies..so don't blame economists.And no economists do not think that the economic motor is in the hands of the entrepreneur.The majority of economists all see the free market as the perfect market were demand and supply form the price mechanism in what Adam Smith calls the invisible hand..yet then everyone is allowed to have his/her own opinion whether it is correct or not.

Fleur Vella

Jul 9th 2009, 11:32

What this correspondent or Dr Cordina failed to mention is the negative effect that rising water and electricity and fuel prices are having on our businesses. It seems that in Malta the only businesses which matter are only a selected few for which the Government has tailor made financial packages. The truth is that the financial well being of our families is being seriously eroded and the weak international trade scenario and tourism can only make things worse. The Government should stop crushing people and small businesses with higher water, electricity and fuel prices just as other Governments are doing overseas.This would decrease the costs of businesses and make them more competitive while giving some breathing space to families.

Emanuel Cilia Debono

Jul 9th 2009, 11:29

I do not see what makes economist Gordon Cordina think that Malta is not well prepared for long term real growth? In so far as i am aware there are a number of projects in the pipeline , Smart City is one of them.
I do not agree that one should not focus on long term growth at the expense of ignoring immediate problems, particularly those related to employment. Keynes may be out of fashion these days but in my opinion however he did a great service to the study of economics by highlighting the role of full employment as a means of generating income and expenditure and promoting investment.
The economic situation today is not the same as those faced by the world during the thirties. Welfare services now ensure that people do not fall below the bottom of the poverty line. However this does not do away with need for promoting ( as far as possible) full employment A policy of promoting employment avoids the worst forms of social distress. It also generates confidence and ( within the limitations of the local market) must have a salutary multiplier effect on consumer expenditure and indirectly on private investment.

P Pace Balzan

Jul 9th 2009, 11:28

@J Farrugia. I fully agree , however the countries' infrastructure is the reponsibility of the government. The government has to create the drive for investments to thrive. A clear message at the moment is that of job creation at the expense of less revenue ' corporate tax' for the government , however we need more ideas and initiative.

r ferriggi

Jul 9th 2009, 11:12

i understand mr Cordina's argument.

if i am correct, malta is doing the opposite of the uk. the UK is trying to hit the recession hard, with the consequence that the UK will come out earlier from the recession ( probably even before other EU nations). because it took harsh and sometimes hurtful measures.

but on the other hand, Mr cordina needs to keep in mind ( IMHO) that if and when the common working poeple are hurt, the psychological factor comes into play.

so, what is best,,,, harsh corrective measures, job losses, more streamlining, survival of the fittest policies, quicker exit from the recession OR less extreme measures, less job losses, slower exit from recession???

i.e. extreme capitalism measures or more socially conscious and cautious measures??

the answer is: depends on which side of the fence you are sitting.

the powerful who has the laid out cushion to absorb the shocks or the worker who livess day by day.

J Farrugia

Jul 9th 2009, 10:54

For me these economists are just bad doctors. One economist tells you one thing others tell you something different. The truth is that they do not have the medicine for the economic collapse that is around us. Yes we have to save jobs. we have to re-train the workers. This all comes at a cost. The deficit will continue to rise. But what other alternatives are there? These economists sound as if the earth will stop turning at their whims. The economic motor is in the hands of the entrepreneur and him only can save our bacon. With his capital (which is an ugly word for leftists) and his brains he can move the economy around given the necessary booting from a good governing body. No economist in the whole world has ever moved a finger to save us from the economic crashes that have happened since time immemorial.