True picture is somewhere in between

As the two main political parties continue to blame each other for the downgrading of Malta’s long-term credit rating by one rating agency, Standard and Poor’s, many are finding it increasingly difficult to get the real picture.

Some Labour Party analysts have gone to great lengths to interpret the rating agency’s report in a way that makes one think that this country is on the brink of a financial precipice.

Of course, those in the Nationalist Party camp prefer to stick to the bright side of the picture.

As is often the case, however, the true picture lies somewhere in between the two scenarios that is being painted by the two rival parties.

Malta is not on the brink but there are bad patches in the picture that need to be seen to urgently.

The national debt that the country has accumulated over the years is not something to be dealt with lightly.

A chunk of that debt represents the money that, for years, had gone into ailing State firms. One such State enterprise was Malta Drydocks. The yard might have been the storehouse of the country’s industrial skills but it had never been able to shake off its Admiralty mentality, a disadvantage that crippled it till the end.

No effort had been spared to turn the enterprise around but no management, foreign or local, could pull the yard out of the red. Not even Dom Mintoff, possibly the only person then thought to be in the best position to find a solution, could put the dockyard on a sound, commercial course.

The debts that Enemalta piled up over time represent not just capital expenditure but also the energy subsidy successive governments chose to retain to keep the cost of living down.

The Nationalists had not been wrong in their bold move to reverse the situation. The country could not possibly continue to subsidise the water and electricity tariffs in the way it had been doing at a time when the price of fuel was shooting up.

However, while it was right in addressing an already precarious situation, the Nationalist Administration was seen to have stumbled badly in the way it chose to do it when it decided to raise the rates drastically at one go rather than reduce the subsidies gradually.

The Government is now paying a heavy price for that decision.

The price of fuel has continued to rise but, this time, the Government has preferred dishing out further subsidy than facing the wrath of the consumer again. The fact that a general election was round the corner did not help much.

There is no question that the national debt has to be brought down because there is also no doubt that, whichever party is returned to power in the March 9 election, it will have very little option but to keep financial consolidation as the prime target of government policy.

The Government has made efforts to establish a sound financial base, which is also the slogan chosen by the Nationalist Party for this election campaign.

One honestly hopes that the Labour Party would, likewise, be careful with the country’s finances so as to keep in line with the programme that has seen the deficit go down to below the three per cent threshold required under European Union rules.

The fact that Labour has said it will keep the framework of the Government’s Budget if elected presupposes an intention not to disrupt medium-term fiscal policy. Hopefully, therefore, Malta will keep to the course it has taken and that no unforeseen circumstances, external or internal, will make the new government, Nationalist or Labour, change course.