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End-of-year assessment

It is easy to think of 2012 as the year when the Government was defeated in Parliament on three occasions thanks to the vote of two of its backbenchers; one of whom eventually declared himself to be an independent.

We started off the year feeling we would have an election this year because of the positions (albeit independently of each other) taken by these two parliamentarians. We ended the year with the Government being defeated on the Budget, which requires the dissolution of Parliament and the calling of an election. The election will be held five years after the last one, which means that the Government has effectively lasted a full five-year term.

Historians will spend a great deal of time recording the political turmoil of this year. Unfortunately, I do not think that they will spend an equal amount of time recording the Maltese economic scenario and the international context of 2012. Moreover, we are likely to remember some petty issues but we are unlikely to remember our good economic performance, which bucked the general trend in the EU. We have experienced economic growth, growth in employment and maintained intact the fabric of our social welfare system.

Other countries have experienced negative growth, have seen unemployment rising to alarming proportions and had to start weakening their social security system. We are one of a small group of virtuous countries that have created growth, maintained low unemployment while keeping the fiscal deficit below three per cent of the gross domestic product.

One would not have thought that throughout the year no one could really tell if the next day Government could command a majority in Parliament. Political uncertainty tends to have negative economic consequences. Yet, during the year that is about to close, in Malta this did not happen.

One needs to, however, remember the difficult international scenario of 2012. Italy had appointed a technocrat for a Prime Minister in November 2011, to regain the trust of financial markets. The Greek crisis seemed to take a turn for the worse every so often. Spain kept everybody guessing whether it needed a bailout or not. Although Portugal and Ireland had adopted tough decisions to control the fiscal deficit, their economies were suffering because of the international recession.

We spent the first few months of the year wondering whether the euro would survive or implode. The negative feeling towards most of the eurozone member states was such that it should have had a negative impact on our economy.

Unemployment and, especially youth unemployment, was no longer a localised problem but a problem that was besetting most countries. Demand was flat for most of the year and even those countries that had been the better performers in previous years, such as China, India and Brazil, started to show signs of slowing down.

The US had its presidential elections and the data that was being published every month gave no real signs that the US economy had definitely moved out of the recession.

Moreover, although the presidential race did have a winner – Barack Obama – the Republicans can still block his actions thanks to their majority in the House of Representatives, thereby creating more uncertainty.

Up to a great extent, Malta did defy all odds in 2012. All the signs seemed to show that we should have been heading for an economic crisis because of the local political situation and the international economic situation. This crisis did not occur and we must see 2012 from this perspective and not from the perspective of petty politics.

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