With a relatively more prudent financial sector and economic policies focused more on making structural reforms prior to the sub-prime financial crisis in 2007/2008, it is believed that the Maltese economy is facing external difficulties relatively successfully, especially when compared to countries like Ireland and Greece – two countries that had to pay the price for their risky bets on speculative practices before the crisis.

Without underestimating the relative success in mitigating such negative externalities, the structural economic challenges remain high on the national agenda, and there is no place for complacency, especially when faced with huge challenges that the EU will be experiencing in the coming year due to the issue of public and banking debt.

International financial markets are betting positively on 2011’s economic performance of the European economy, mainly because of the successful auctioning of Spanish and Portuguese bonds in the first month of this year.

However, financial observers maintain that what the European Central Bank is doing through its purchasing of member state bonds through secondary markets, is just an act of prolonging time before major political decisions have to be taken at EU level, particularly with reference to the institutional reforms that link the budgetary, economic and monetary pillars that would allow for the better management of financial shocks.

Here, I do not have the luxury to explain in more detail these institutional changes at EU level. But something that we Maltese should keep in mind is that we are not living in an economic and political vacuum, and our life quality depends on our ability to outcompete other economies around the world through more flexibility in our work and daily practices, research-oriented education and IT-driven infrastructure. As a result, all these would allow us to build a more balanced economy based on industries that are less shock-sensitive, while attracting high-value-added businesses to our economy like semi-conductor, bio-technology, pharmaceutical, financial industries, and other knowledge-based services that are suitable to our smallness as a country.

The vision of Malta becoming a richer member state might be popular and fashionable. However, in a global economic situation where the victory of an economy is becoming more the loss of another, Malta cannot achieve such vision without taking major political decisions, especially at the public bureaucratic level. By pricing the burden of costly, obsolete and reactive bureaucratic practices on the private sector, we are simply subsidising ourselves at the expense of our competitiveness due to under-productivity.

There is no point in having semi-public entities like Malta Enterprise and Finance Malta successfully promoting business formation in Malta, but then the private individual and enterprise has to pay a portion of taxation for structural wasteful practices and unaccountable mistakes at public level.

Related to the above point about private contributions to the Maltese state, I would like to mention the very recent issue of pension contributory increases in order to enhance the chance of guaranteeing pensions for the future generations through government savings.

I fear that leaving such huge savings in the hands of a large bureaucratic entity that has no private motives is not the best option. I am not saying that pensions should become all privately managed, but I am of the opinion that if we want to promote more flexibility among future generations, we should also promote it with regards to our personal financial investments in a context of a closely regulated financial sector that is accountable to the final shareholder, i.e. the person who is investing for his future pension.

Our struggle in this challenging economic context continues. Real change is not about changing the utility bills by a small percentage. Real change is about making sure that structural reforms take place both at public and private levels, in order to promote more politically-sound and reasoned transparency and to reduce the rigidity of our Maltese economy.

The latter can be achieved only through better exploitation of public finances for productive industries, while making sure that people at the bottom of the social ladder that are dependent on the government’s social security, would be able to improve themselves through more effective educational and health systems that promote equality and not differences between the have and the have-nots. However, there is no long-term gain without short-term pain.