When hyperbole boomerangs

Hyperbole, the habit of exaggeration, is an integral part of Maltese politics. It is evident both when one refers to the benefits of one’s policies, and also when one denigrates the policies of the other side. It is par for the course, passable in an art which includes fudge and hassle among its weaponry. Even so, taken too far it ceases to be funny or acceptable. It is a step too far when applied to financial and economic discussion.

That should be based on objective reality, even if at the end of the day the participants reach different conclusions. Should be, but all too often it isn’t. Hyperbole in projecting merits or firing away criticism is unduly often practised in that type of discussion as well.

A clear example was given at the start of the week in regard to pensions in Malta. As in so many other parts of the world, pensions are very much an issue, of concern to the whole of society since problems are inherent in their provision. Demographic projection based on current and projected population and demographic trends indicate the dependency ratio will deteriorate heavily by the middle of the century.

From approximately four to one at present, it is projected to rise to two to one. Thus, instead of four people working to support one person, there will be two in employment for each one out of the employable range. The problem was raised in public discussions many years ago. Six years back the government took the bull by the horns, or rather partly so.

After setting up a study group, receiving its report and carrying out public consultation, the government introduced legislation to alter the pension provisions in the Social Security Act. The retirement age for contributory national pension eligibility was to be raised gradually from 61 to 65. The qualifying period of contributions towards a full pension set at two-thirds of a given ceiling was to be upped from 30 to 40 years.

The third major change was that the pension ceiling, kept stagnant for decades, was to be gradually increased. It was also resolved that the Pensions Reform Working Group would review the situation every five years. There is much to review, as pointed out by pensioners’ representatives contributing to the letters’ column of this newspaper some weeks ago.

The detailed letters elicited no reaction, presumably because the observations made cannot be refuted and need addressing. One hopes they will be addressed in the first review, which is taking place.

For the first time the opposition Labour Party is taking part in the review. This was revealed by Charles Mangion, the opposition spokes­man on pensions. He did so in the context of allegations that the government intends to raise the retirement age beyond 65. He did that by latching on to Malta’s agreement to an EU proposal to link the retirement age with life expectancy. The government denied any intention of increasing the retirement age.

That is where it resorted to hyperbole. It recalled that the 2005 pensions reform had been criticised by the opposition. Then it declared as follows: “Countries which did not take action regarding their pension systems had to raise the retirement age at one go, increase taxes and reduce social benefits. Had the government done what the opposition wanted, Malta would have ended up in a situation similar to Greece, Spain and Portugal.”

That is not only hyperbole, but also undiluted rubbish. Whoever drafted that statement ought to be ashamed of himself. Pensions are part of the problems of the countries mentioned, and of many others too. However they did not give rise to the causes of the EU peripheral countries’ economic and financial predicament.

That was due to economic mismanagement, such as the property bubble in Ireland and Spain, and to other bad economic management, such as in Portugal, and corruption too, such as in Greece, as adumbrated by Tony Curmi in this newspaper a few days ago.

Raising pensionable age and taxes, even cutting pensions and public sector salaries were part of the conditions for Greece and others to receive loans from the European Central Bank (including a Maltese contribution) and the International Monetary Fund. To peg the sovereign debt problem on pensions displays economic and financial illiteracy.

Even worse, the EU peripheral countries in distress have massive structural deficits and public debts. Malta knows what that is all about. Our deficit and debt to GDP ratios are not at the same critical level. Yet they are not to be brushed aside easily. The deficit might come close to the three per cent Maastricht norm, but the public debt is ballooning annually. Servicing it places a severe strain on the primary deficit (that is before interest is taken into account). For that to end many years of high budgetary surpluses are required.

They are nowhere in sight. So why the misleading hyperbole? Back to pensions – the reform group had recommended the introduction of a second (mandatory) and third (optional) pensions pillar. Neither has been introduced. The second one is not popular with employees and employers alike. Still it is essential to try to ensure that future pensioners have adequate provision to live on in their lengthening twilight years.

Yet the government has not acted, and the Finance Minister said the government has no intention of introducing the mandatory second pillar, but will seek consensus. Why has it not acted? Probably because the words used to describe the strength of the economy contain too much hyperbole for government comfort.