Malta monitors worrying situation of volatile world economy – PM

The government was closely monitoring the “worrying situ-ation” of financial markets and developments in neighbouring countries, especially those forming part of the eurozone, Prime Minister Lawrence Gonzi said.

He said the authorities were following the developments because of the country’s open economy but were encouraged by the “positive indicators” emerging in recent hours.

“The situation is very worrying. It fluctuates and is very volatile. In the past four days we saw the stock markets take a plunge and the downgrading of the US credit rating having an impact on the whole world and not just the US. However, there have also been some positive indications, such as that the euro as a currency continues to remain strong throughout this turmoil,” he said.

Dr Gonzi commented on the global economy after touring a €1.6 million investment in an extension of the Junior College, Msida, where 3,000 students are continuing their post-secondary studies.

“Investment in education is key. Malta has to continue investing to strengthen its competitiveness. We have 20,000 students receiving €24 million a year in stipends. This is not a luxury but an incentive to study.”

Dr Gonzi added the government was keeping an eye on what was happening in Italy and France. Decisions taken by French President Nicolas Sarkozy over the previous 24 hours had stabilised the markets, he said, adding that a meeting between Mr Sarkozy and German Chancellor Angela Merkel in the coming days would continue to improve the situation.

“We continue to follow what Italy is doing. They are in a difficult situation. The government there is not sitting pretty but is taking initiatives. It is planning to advance its targets from 2014 to 2013 to reach fiscal consolid-ation, which I think should be good news for the markets,” he said.

“Our economy is open and depends highly on what happens around us. We have to be very careful because in 2008 we had an international crisis, a collapse in the financial services and several economies.

“We suffered even though we were the last to enter the recession and the first to emerge.

“We had factories on the verge of closing, reducing their staff or going on a four-day week. This is why we cannot be complacent,” he said.

Asked what the government was doing to continue strengthening its position in view of what was happening in other countries, Dr Gonzi said: “We are taking measures to achieve fiscal consolidation, removing unrequired subsidies , removing subsidies that yield no results and turning them into subsidies that serve as incentives, investing in education and taking measures to attract investment to Malta.”

He insisted the country had achieved excellent results in the first quarter of this year with record exports and a positive performance in all the sectors of the economy excluding construction, “which seems to be going through a lull.

“This is because we took the difficult decisions that were highly unpopular at the right time. Other countries are having to take such decisions now, all at one go,” Dr Gonzi said.