Two weeks ago my contribution dealt with the various conflicts that were developing and with the need for peace to enable the world economy to grow further.

At that time, the troubles in North Africa had not yet engulfed Libya and so seemed to be distant from us Maltese.

Now, they all seem to be too close for comfort. With the level of instability that still exists in Egypt and Tunisia, with the open conflicts in Libya, Bahrain, Morocco, Algeria, Yemen, Iraq and Palestine, with the rumblings in Jordan, and with the uncertainty that exists in Lebanon, Iran and Syria, there should be no doubt that the whole of North Africa and the Middle East is one big melting pot.

We need to appreciate that this situation represents a big threat to our economy. Malta has never sought (albeit with one exception) to play a centre stage role in world politics. We try not to bother anybody and we hope nobody bothers us.

And even if we do try to step on someone’s toes, we are not taken seriously anyway. And that is the way it should be for a small, open, island economy such as ours.

We seek to grow our economy not by imposing our will on other countries, but by adapting ourselves continually to evolving international developments. Today, we do this, having a firm strong anchor that provides our economy with great stability, through our membership of the EU.

However, in spite of this anchor, the current situation may still have a strong negative impact on our economy for a number of reasons. To start off with the geographical proximity to North Africa may serve as a deterrent to international investors to look positively at Malta.

What may seem to be long distances to us, would appear to be very short distances to investors from other countries.

We, therefore, need to ensure that we send a clear message out there that although the whole of the Southern Mediterranean and the Middle East are in unstable position, we still provide certainty to investors.

The second reason is the situation in Libya. I doubt as to whether we really know the extent of economic linkages between Malta and Libya.

There are a couple of household names that epitomise these linkages; however, that is just the tip of the iceberg. There is indeed a significant number of persons who earn their livelihood directly and indirectly from Libya, both through employment and through trading.

No matter how the situation will eventually resolve itself in that country, there will remain a great deal of instability. This instability will hurt our economy in no small measure.

Then, there is the price of oil. When it had risen to well over the $100 mark three years ago, it had wreaked havoc in the international economy. The price of oil is rising again given the instability in North Africa and the Middle East. As if this were not enough, even the prices of other commodities, including foodstuffs, is rising again.

This is bound to create inflation in our economy with a consequential drop in the purchasing power. Moreover, our costs of production will rise. If we were to couple this with a dampening of global demand, our economy could be facing further uncertainty.

The next element to consider is tourism. The political instability in some countries in the Mediterranean Sea coupled with the economic instability in others (such as Greece, Spain and Portugal), could render this area very unpopular with tourists from Northern Europe. In such a circumstance, Malta will not be immune from a drop in tourism arrivals in the countries surrounding the Mediterranean Sea. This will hinder the progress made in recent years.

The unstable situation that has been created around us is unlikely to melt away. The impact on our economy can be very serious. It is a storm that we can see coming. We therefore need to start taking initiatives now such that instability will hurt our economy the least possible.