Bailouts: Malta opposes proposed bank tax
Malta has received €1.3m in interest on Greek loans so far --- Opposition calls for cap as loans and guarantees by Malta total €850m
Malta has so far transferred €39.8 million in loans to Greece under the EU/IMF aid package, Finance Minister Tonio Fenech told parliament this evening. Malta will be giving Greece a total of €74.5m over three years.
The financing costs for Malta were €542,000 per year, the minister said, but Greece had already paid Malta €1.3 million in interest.
Speaking in a debate requested by the Opposition on the situation in the eurozone, Mr Fenech underlined the importance of the eurozone supporting Greece but he stressed that the aid that Malta was giving was conditional.
He said that a second bailout to Greece had not been agreed yet. The way how countries would participate in a new bailout was still under discussion and it was hoped the private sector would participate in it.
Greece would also be required to take new actions to restore its financial situation, including privatisation.
The EU, he said, had also set up a mechanism to be used in new crises, so that, rather than bilateral loans, this new body would raise loans to give to the countries in need, with the eurozone countries guaranteeing the borrowing. The mechanism now had €750 billion, which was being used to support Ireland and Portugal.
Mr Fenech referred to the urgent Eurogroup meeting on Thursday and said several proposals were on the table to pacify the money markets.
On the economic level, the eurozone debt at 85% of GDP was relatively low compared to, say, the US which was at 92% or 225% in Japan. However the markets in Europe were taking a more serious view of the eurozone debt.
One of the reported proposals was for a financial tax (on the banks) to raise funds for the emergency mechanism. The Maltese government had objected to this proposal and viewed it as detrimental to the eurozone. It was not fair that banks who had nothing to do with the crisis were made to shoulder the cost like this.
What was important, however, was that the eurozone acted as one.
VELLA: EUROPE NEEDS TO TACKLE ECONOMIC CAUSES OF FINANCIAL PROBLEMS
Karmenu Vella, Opposition finance spokesman, said the Opposition agreed on the need for stability in the eurozone. It was also important that the euro recovered.
He expressed concern that the crisis in Greece had spread to Ireland and Portugal, but it was much more worrying, he said, that Spain and Italy were now also showing signs of trouble. Crises there would be even more serious.
Mr Vella said he feared that the european authorities were trying to solve the immediate financial crisis, without resolving the underlying economic problems.
In so doing, they were only postponing the problems, instead of solving them.
He called on the government to explain Malta's position on various issues, including the possible default, the proposal for a 40-year restructuring of the Greek debt, the position of rating agencies, and the proposed euro bond.
As a partner, Malta had a duty to work for eurozone stability, he said, but there was a difference between what Malta wished to do and what it could do.
Its finances were limited and one had to discuss how far Malta could go in debt sharing. So far, bailouts and guarantees by Malta totalled €850m which was 15% of GDP. One had to see how these commitments would impact on Malta.
MALTA ADOPTED THE EURO TOO EARLY - SANT
Alfred Sant (PL) said Malta had adopted the euro with undue haste. Never had the prime minister's judgement been so wrong as when he promised that the euro would be a rock (anchor) for Malta.
Unfortunately, developments in the eurozone were being dictated by Germany and France with small countries like Malta having no real voice.
The eurozone had strict laws which no countries had followed, he said.
The government, he said, was failing to give accurate and full information on the guarantees Malta was liable for. It was no surprise that a German economist had said that Malta was at risk of the current financial crisis.
Malta adopted the euro too early, before sufficiently preparing itself. But it should not allow itself to be carried by the current in a one-size fits all mechanism.
It should not agree, without reserve, on programmes which created more problems to the Greeks and did not consider social matters.Ultimately such programmes created more problems, rather than solving them.
And Malta's assistance could not be unlimited, especially when they impacted Malta's own economy.
It was worrying that Greece may default, and that would mean goodbye to the loans Malta has been giving that country.
What would happen is Plan B - never officially recognised - came about, with the eurozone divided between countries with strong economies and others suffering problems. Where would Malta end up?
Charles Mangion, PL economic affairs spokesman, said that if matters deteriorated, the loans and guarantees which Malta had given would cost the island some €40m a year. Parliament, he said, needed to be fully informed of what liabilities Malta had and how they could impact on its economy.
Winding up, Mr Fenech said that Malta's real exposure was €54 million and not the notional figures mentioned by the Opposition.
He said the lending to Greece was being made in tranches and Malta had to be satisfied by the progress made by that country before it made its next advance.
Malta, he said, had so far only guaranteed €6.5m to Ireland and €11.8 million to Portugal.
The figures given by the Opposition was the maximum that Malta might by liable for
The funds that would be given to the new European stability fund (EFSF)were still under discussion and Malta did not want to give blank cheques to stabilise the markets.
He said the biggest question mark in the Eurozone was about private sector involvement, a situation which was causing market uncertainty.
Malta, he said, agreed with the eurobond proposal, but this was more applicable to the triple A rated countries. Proposals for a fiscal union were being banded around, but this were not seen appropriate for Malta, being a small country.
Mr Fenech denied that Malta had adopted the euro too early and said the European currency had been a major boost for the economy. It had also helped Malta weather the global financial crisis far better than having a local currency whose value was based on a formula based on the value of a basket of currencies.