Thus spoke the Governor of the Central Bank

The latest report from the Governor of the Central Bank contains the usual admonitions plus the currying of favour with private profiteering enterprise and a few unexpected contradictions.

To start with, it certainly does not make sense to "reduce the deficit" by "cutting current expenditure", let alone "achieving the required fiscal consolidation (no less) at a time of slow growth" while ignoring the adverse effects of the recession.

Does the governor really believe that "releasing sufficient resources (however much) to finance the investments necessary for the modernisation (sic) of the economy" would lead to Malta's "income convergence with the euro area"?

Would the "animal spirits", however strong, push the private sector to invest if the prospects for profit are not seemingly bright?

How come the governor is now calling our neo-liberal, or better, laissez-faire economy "a social market economy" - a contradiction in terms?

For, insofar as a market economy relies on social measures it must be opposed to the principles of a market economy.

However, it appears that the gradual erosion in motion, or better dismantling, of social services is intended to comply with those principles.

Thus, he states "it (social market economy) must be focused less on subsidies, benefits and other transfer payments..." Does not "other transfer payments" appear to signify pensions? Subsidies are not usually permitted by the European Union. But are not unemployment benefits increasing because of the still increasing unemployment?

Then the governor continues by saying "...and more who is paying for them", meaning unmistakably the taxpayer as if the beneficiaries of subsidies, those receiving benefits, particularly for unemployment and those receiving "other transfer payments" (pensioners) do not pay indirect taxes with the latter even paying income tax to boot.

When referring to the "distribution of wealth and more on creating value (wealth)", the governor conveniently forgets that finance, irrespective of the greater preference it is being given, does not and cannot create "real" wealth which he calls "value".

According to the governor, labour is the "predominant wage component of production costs". He goes on to state that "nominal wages are being frozen or cut in a number of competitive countries". He seems to suggest that this should be emulated here so as to make local exports price-competitive while ignoring that while wages are frozen or cut, prices are not.

Needless to say, the government could not resist the temptation to refer to the "replacement of the national wage indexation" (Cola) with a "productivity-linked wage adjustment system at the enterprise level" (originally a suggestion or recommendation by the International Monetary Fund). Finally, recall that the governor had recommended "cutting current expenditure" and less focussing on "subsidies, benefits and other transfer payments" because they are made good by the taxpayer.

And, incidentally, on p.A39 of the 2009 Annual Report of the Central Bank one reads "Compensation to the members of the Board of Directors (chaired by the governor) for the financial year under review amounted €208,311 (2008: €204,271).

Instead of increasing, should not this compensation be likewise reduced to save the taxpayer some money?