The 2013 Budget is a bridge that should lead us over the troubled waters that surround us with the hope that we will soon reach the other end and the highway that takes us to the land of economic prosperity.

Measuring value for money is the name of the game- John Cassar White

It is up to us to make it safely to the other side of the bridge. If we do this successfully, we still have to tackle the economic highway. Will we choose the fast lane of economic growth or be stuck in the slow lane like many other laggards in the EU? The Budget speech contained few details on the strategic options available to us in the next decade even if the word ‘strategy’ was used frequently.

On the same day of the Budget, the European Commission issued its second Alert Mechanism Report for 2013 – a meaningful supplement to the Government’s own Budget document. For those who take a long-term view on our economic prospects, it was no surprise that with regards to Malta, the Commission “has found it necessary to analyse in detail the accumulation and unwinding of imbalances and related risks since certain indicators were found to be above their indicative thresholds”.

Put simply, the Commission has some concerns about the long-term prospects of the Maltese economy and wants to be reassured that the Government is addressing these issues with determination. It is particularly concerned about the level of our public debt as well as private debt.

It also believes that our domestic banking system needs “close monitoring” despite passing the stress tests of the European Central Bank and other institutions.

There are other issues that occasionally just make it in the analysis columns of the business media, but rarely excite the imagination of politicians. I am referring, for instance, to the lack of medium to long-term plans and action programmes to address the sustainability of our health, education, pensions and social systems.

Our health and educational systems should remain free for all as this is one of the few factors that promote social fairness in our society where privileges resulting from social and economic status still influence one’s chances of success in life. But I am realistic enough to realise that such systems can only last if they are based on sound financial management.

The debate on our public debt is often characterised by red herrings that are thrown in by some who want to play down the seriousness of this problem. Our public debt currently amounts to about 73 per cent of GDP.

To this one must add another 17 per cent of government-guaranteed debt (according to the latest IMF report), 60 per cent of which relates to Enemalta debt. So with a total actual and contingent debt liability of 90 per cent, we are not quite in the same league of Greece, but we are certainly way above the Stability and Growth Pact benchmark of 60 per cent.

The 2013 Budget contained some interesting proposals for capital expenditure for the coming year. But our physical infrastructure still cries out for major investment. For instance, who can deny that our island is gridlocked with traffic for most hours of the day because of the excessive number of cars, a dysfunctional public transport system and an insufficient traffic management system? When are we going to see some investment in flyovers to ease frustratingly long traffic jams in key hot spots throughout the island?

Our banking system, as remarked by the European Commission, the IMF and also our own Central Bank, needs close monitoring. We must not rely only on standard stress tests that often fail to identify systemic weaknesses in a particular country. Our banks should increase their capital beyond what is required by international regulators like the Bank of International Settlements. The banks’ reliance on property as collateral could be a potential landmine that destroys shareholders and depositors’ value.

The EC has partly justified the inclusion of Malta in the Alert Mechanism Report due to the domestic banking system’s “high exposure to the property market which has seen very dynamic price growth followed by a relatively limited correction over the past decade, and the low level of provisions for loan impairment losses”.

We need to change the metrics to measure the success of economic strategies and tactics. We must no longer measure success by the amount of money we spend on education, health, and other big ticket budgetary items. Measuring value for money is the name of the game.

johncassarwhite@yahoo.com