Contrasts by design not coincidence

Two photos that spoke 2,000 words. The Times could not have better singled out the dramatic contrast between events in Malta and those in most of the rest of Europe in its front page last Thursday.

A photo of Malta University graduating students outside the Auberge de Castile, in Valletta greeting Prime Minister Lawrence Gonzi and carrying him shoulder-high sat next to a photo from London of British University students burning posters during a protest against the increased fees they will have to pay there. In Malta, we pay students to go to the University; in Britain, they now have to pay three times what they used to.

Contrasts never seem to cease in the wave of austerity bedevelling Europe. Take Europe’s northernmost island. Two years ago, Iceland’s $5 billion bailout by the International Monetary Fund saved its government from default but the country remains mired in recession. As it discusses EU membership, its weak currency is making its imports dearer for a population suffering economic hardship and the fallout from the bankruptcy of its banks.

A similar story is unfolding in Ireland. The Irish government has had to deal with its own big deficit complicated to an extreme by its banks’ profligate ways. The Irish banks’ huge lending caused a bubble in house prices that can in no way be justified as land is plentiful in Ireland. In substantial areas of Ireland, more than half the houses are empty. The Irish government is picking up the bill of bailing out its banks and Ireland now faces an unprecedented austerity budget, even cutting the minimum wage.

Ireland was saying “after you” to Greece that first walked the EU bailout road. The Irish can now see the shape of things to come by taking a look at Athens where IMF officials have lately been assessing Greece’s austerity measures and whether they are anywhere near reducing a 14 per cent deficit. Not enough, they decided. The Greeks are already readying themselves for yet another general strike on December 15, similar to what the Portuguese, on the other side of the Mediterranean, were doing last week.

Portugal seems to be next on the watchlist of the international markets and the EU. Despite an increase in VAT and savage public spending cuts, the Portuguese government still faces very high interest rates for its borrowing and may soon need to the bailed out. Spain looks on in apprehension as it fights its own big deficit and an unemployment rate topping 20 per cent.

Going back east, Cyprus has been downgraded by Standard and Poor’s that warned about its ability to plug its deficit. The rating agency gave Cyprus a negative outlook. Hungary is in the throes of an ongoing austerity programme after its own bailout two years ago when the country was saved from default by the World Bank, the IMF and the EU with a $25 billion bailout.

Back to Britain, the new coalition government is dealing with a 10 per cent deficit and targeting public sector jobs and pay, social and health services and universities in its austerity drive. Students protest for a second time.

All in contrast with Malta. Are we in splendid isolation here? We cannot be isolated from events in Europe as we are a very open economy affected by what happens in our trading partners and our tourist markets. But we have reasons to be satisfied that economic reforms waged over the past few years have borne fruit. They were neither easy nor popular. But economic responsibility and financial prudence required taking them. And Prime Minister Lawrence Gonzi has shown he’s no man to shift or procrastinate necessary economic reforms.

The contrasts between us and many of our European partners are not a coincidence. They are contrasts by design.

Europe is not out of the woods yet. There are still risks, especially if Spain needs a bailout, being a much bigger economy than any of those already bailed out. This is why we need more responsible and realistic talk from our politicians; not the shallow and hollow talk continuously coming from some politicians. This is why our media need to discuss, not hide, what’s happening in countries where our tourists come from and where our exports go. Not to gloat in any way in their distress but to remain steadfast in financial prudence and effective economic reforms.