The authorities have to decide once and for all how to receive critical comments of the overall and sectoral situation in Malta in order to be credible. Instead, they express huge appreciation regarding any data or item of news which compares Malta favourably with the rest of the eurozone and the wider EU, while waving away any comment or comparison which suggests there is need for more care.

It is fair to say and it must be stressed that banks which operate within the economy are very responsibly managed- Lino Spiteri

Last week’s examples of these contrasting attitudes concerned the banking sector and the rate of registered unemployment.

In its regular economic assessment of the situation in member countries the European Commission did not have harsh words to say about Malta, which so far has weathered the storm and thunder in various areas of the Union reasonably well. That positive factor is taken on board with great satisfaction by the authorities.

And why not – provided that they do not for a moment lose sight of the fact that we are practically totally exposed to what goes on in the European Union – our major trading partner in goods and services. If the Union contracts, our manufactured exports and tourism will suffer. The decline of our trading partners inevitably translates into a slowdown for us.

So far, it has not happened. Harsh austerity measures are causing or threatening contraction in a number of EU countries. On balance they have not been unduly felt in Malta. The components of merchandise exports and tourism are in the main expanding or stable. Our private sector shows very welcome vitality, together with a positive attitude to the challenging changes taking abroad.

The new sectors of the economy, outward looking financial services and the export-based gaming industry remain operationally healthy with new enquires flowing from parties interested to set up shop here. In this regard the package of financial legislation which attracted bipartisan political support in 1994 is standing the island in good stead, superimposed on accession to the EU in 2004, which saw the financial services industry really take off. The fact that since then the political mainstream speaks with one voice about the EU, following the Labour Party’s conversion to membership, is a further positive location factor.

The practitioners who promote Malta as a competitive and attractive location have a good package to sell. To top it all we have very good regulation, as a result of the financial legislation in place, updated through further bipartisan cooperation since 1994. The legal infrastructure is managed in all its aspects by the Malta Financial Services Centre which, under the long stewardship of Joe Bannister has acquired a reputation for rapid and considered response second to none.

The gaming sector, too, is covered by bipartisan recognition and good legislation. Threats, if any, come from the outside and so far have been kept at bay. There is much, therefore, to commend. That does not mean everything is perfect. The European Commission, for instance, expressed some concern in its economic assessment of Malta about the banks’ exposure to the property sector.

The Finance Minister talked this concern away, attributing it to the goings on in Greece, Spain, Ireland and Portugal.

I doubt that is the right attitude. It is fair to say and it must be stressed that banks which operate within the economy are very responsibly managed. They make general and specific provision in respect of their main borrowers, monitoring old and new loans very closely to gauge the extent to which they are performing.

It is a fact, however, that Malta too has a very substantial overhang of unsold properties, many of them financed to a considerable extent by the banks. It is another fact, noted also by the International Monetary Fund, that there are now many other banks besides the traditional ones. They too are busy collecting deposits, not infrequently deploying them abroad, or using them to gear investments in foreign securities.

This calls for at least two observations. Deposits are nominally covered by a Depositor Compensation Scheme up to the first €100,000. Yet it is not certain whether the size of the scheme to date is adequate relative to the volume of outstanding deposits. Also it is not unlikely, in fact it has been confirmed by published financial statements, that the financial institutions’ investments in securities include exposure to Greece, where a severe “haircut” has already been imposed under the Greek Private Sector Initiative, and where further write-downs could be required depending on how the situation unfolds after the general election to be held in 10 days’ time.

Investments in sovereign and possibly private bonds in other peripheral countries, Italy among others, will also have suffered considerable impairment.

This is not to say that a crisis is inevitable or imminent. Nevertheless it is important not to be too airy in response to concerns reaching us from abroad, probably confirming reality awareness in Malta.

As for employment, it is true that Malta compares well with the rest of the EU. But the composition of the 6,000 plus registered unemployed, as argued in this column last week, allows no room for complacency.