Mood swings are not restricted to individuals. They are a psychological phenomenon which can take over whole groups, even countries. They also apply to economics. When we talk about confidence, we essentially refer to a mood-swing trigger. What is not so common is that there is a mood swing in some room at the top from which economic and financial events are followed, while viewing the same set of figures, the same situation.

Brussels did not quite accept our government’s Budget for 2012- Lino Spiteri

That is what seems to be happening with our policymakers, as reflected in the recent statements of the current Prime Minister. For months this column as well writings by other economists have warned that the external situation is very inimical to Malta’s economic prospects. In the eurozone, for instance, we are in the same boat. That this been a recurring theme in this column, set off by the manner whereby government spokespersons persisted in describing Malta’s economic and financial performance.

They spoke as if Malta was immune to what was happening in our foreign markets. In part this was due to misleading statistics, such as those which showed exports increasing by a massive factor. That turned out to have nothing to do with domestic output. It simply reflected the way oil trading from a Malta base is recorded.

It was not that the National Office of Statistics was massaging the figures. I have full faith in the way that the NSO operates, on the basis of the parameters established by Eurostat, the statistics arm of the European Commission. But statistics cannot be accepted blindly. They have to be analysed.

Very evidently, that was not done in the case of export figures swelled by exports of oil which did not even touch Malta, though trading profit arising out the trades should have been reported and taxed. Gradual shrinkages in the activities of main export players were ignored. The government lays great stock on the aid it provided during 2009 to a number of export-oriented companies which found themselves in difficulties.

That was timely positive intervention. Still, it was not the end of the story. It would be useful to know, for instance, what business plan is being followed by ST Microelectronics, one of the beneficiaries of the government’s assistance. To what extent is it still working on four-shift basis? How many employees has it retained? Has their remuneration packet increased, declined or remained stable? The answers should help to understand the industrial situation somewhat better.

Another area where the government has been bullish beyond comprehension is the estimates of recurrent revenue during 2012. Admitted, estimates should be challenging enough to keep the main revenue generators focused and nimble. Nevertheless, there is only so much income tax, VAT and social security contributions that can be collected in arrears and through amnesties. Also, capital payments for a renewal or fresh allocation of a licence to operate gaming for the Maltese cannot be a recurrent feature.

This column asked, more than once, for an estimate of how much of the 2012 estimated recurrent revenue was not really sustainable. No official answer has been given. If one only takes the capital payment for the domestic gaming licence forecast under miscellaneous revenue – over €20million – one can understand why.

I was gradually gaining the impression that the minister who would be presenting a report on this year’s performance in terms of public revenue and expenditure would have some explaining to do about the real size of the structural deficit, adjusted for sustainability. Nevertheless, the official drumming of the positive drum went on.

Until, that is, the last fortnight. It has come to pass that the Prime Minister has taken over from the Finance and Economy Minister the role of speaking about the economic situation. The Prime Minister, all of a sudden, is spouting more doom and gloom about the external situation than is being reported in the international media. He went as far as indulging in an exercise in political economy, effecting Cabinet changes which he attributed to the coming economic situation.

There is no doubt that the eurozone remains in turmoil, and that the economic forecast is weak. But it was that when the government was speaking in loud bullish voice. The mood swing, in short, was not exogenous – triggered from abroad – but endogenous, arising from within the government.

One reason for that may be the fact that Brussels, which now has oversight of the budgets of member countries, did not quite accept our government’s Budget for 2012. It demanded, and got, a reduction in public expenditure amounting to 0.59 per cent of the Gross Domestic Product. That means the government will have to lop off spending plans which it passed through the House of Representatives a little over a month ago by some €36million. That is the first doze of official austerity imposed on Malta. The reductions seem to have been worked out carefully. Yet they will still be affecting forecast public employee incomes and so marginal tax revenue and effective demand.

Better a mood swing towards a more realistic assessment of the situation than continued alienating beating of the positive drum. More important, the mood should never again be allowed to swing away from serious appraisals and forecasts.