Keep calm and carry on
I would have liked to focus on the Malta Report of the International Monetary Fund this week, but I’d rather discuss the outcome of the G8 summit in the United States last weekend.
I think the outcome is fairly simple – no one really has a clue as to what is going on or what is going to happen. Some may claim that it is all due to the fact that the Greek elections did not produce a clear winner and so it is still uncertain as to whether Greece will stay in the eurozone or not.
However, the problem actually runs much deeper than that. Greece may have a lot of faults, but the uncertainty is not solely due to the Hellenic Republic.
At the G8 summit there were deep divisions on how to solve the eurozone crisis and how to address the issue of rising unemployment.
I believe that for the first time in many years, Germany, with its policies of fiscal rigour (even at the expense of economic growth and social cohesion), has found itself alone on the world stage.
Chancellor Angela Merkel no longer has the support of France, Italy has a leading technocrat as a Prime Minister who understands well the need for investments to stimulate economic growth, while both the US and the UK believe that there needs to be a balance between economic growth, inflation and fiscal consolidation.
In such a situation, what comes to mind is a statement that is often used in complex and confusing situations – keep calm and carry on.
In fact, it is expected that a decision on Greece and its membership of the eurozone will not be taken before summer.
France will be having parliamentary elections in a month’s time and the outcome of these elections would indicate the direction French economic policy will take. The US will soon become embroiled in a presidential campaign, with the outcome still anything but clear.
So we have to keep calm and carry on, maybe people will stop panicking while the governments of the leading economies sort out what is happening.
As regards Greece, we don’t know whether or not Greece will leave the eurozone and if it would be a bad thing if it actually does.
If it were to leave and default on its debt, no one really knows how much German, French and other banks would be exposed to this debt. So do we really have a choice except to keep calm and carry on?
Germany would seem to hold the fate of the euro in its hands, even if it may not like it. However, it must come to terms with some facts of life.
The country’s current prosperity is thanks to the euro as it has continued to increase its exports within the eurozone.
So it has to accept the fact that the price of having captive markets in southern Europe, to its west and to its east, would be the need to subsidise them, possibly permanently, if they cannot afford to pay up when the time comes.
And if there is a break-up of the eurozone, it will have to accept the fact that its economy will shrink significantly.
Malta continues to watch this story unfolding and it certainly cannot take any risks.
The prudent fiscal policies have to remain in place, while we have to continue promoting investment that generates jobs and increases wealth.
Our economic performance certainly does not put us in the group of countries that includes Spain, Ireland, Portugal and Italy.
If anything we should be grouped with the better-performing Nordic countries. However, we should not ever take anything for granted.
Membership of the European Union and the eurozone has brought us many positive results because we have been able to capitalise on the opportunities.
As a country we need to keep calm and carry on, not because we have no clue as to where we are going but rather to ensure that we continue to exploit the opportunities that are bound to arise as the international economic situation evolves.