Skeleton in the cupboard

Michael Bonello, the longest-serving Governor of the Malta Central Bank, has just walked into the sunset after 12 years of service. His term of office coincided with Malta’s accession to the European Union and the subsequent changeover from the old Maltese lira to the euro. He also had to face the turbulence associated with a powerful recession.

Mr Bonello has earned a well-deserved reputation for his total dedication to his work, which was matched by his professional qualifications. Although his office required him to be in the thick of the action, he shunned the limelight and operated actively from the wings.

His parting shot was uncharacteristic of him. He has now gone on record, with what looks like deliberate intent, to strike a significant discordant note, namely that his expectations over a structured and regular exchange of views with the Ministry of Finance on matters of common and national interest “have not been entirely met”.

He pronounced his lament by exhibiting a skeleton in the cupboard in the course of a long, exclusive interview in The Times Business on June 30.

The Central Bank Governor did not go into detail but he emphasised specifically that, “after all”, in terms of the Central Bank of Malta Act, the Bank is required to be an adviser to the government. And it was at this point that he emphasised that his expectations have not been met, especially over the past three years of financial crisis. It was in this context that Mr Bonello went out of his way to emphasise that, during all his years as Governor, he took a firm stand in defending the Central Bank’s independence “as required by the Treaty and our own Central Bank Act”.

This tension developed at a time when the European Monetary Union was not accompanied by the required degree of economic integration and the fiscal rules were largely disregarded, such that debt levels rose dangerously to the point that we now have an acute sovereign debt crisis.

Mr Bonello also made it a point to remark that, since Malta’s EU accession, incomes in Malta did not grow as fast as in the EU on average and Malta’s economic growth has been accompanied by persistent fiscal imbalances. In this regard, fiscal consolidation is of the essence to enhance competitiveness, especially if the strategy is based, as it should, on expenditure restraint rather than high taxation.

Do these words of wisdom reflect water past the bridge? Are we still in time to improve matters? Is it not high time for this topic to be aired in full daylight in the public forum, and for the culprits (if there are any) to be identified and put out of harm’s way?