Ten years on from EU membership which sealed the fate of the shipyards – they only managed to survive five years without State subsidies – former political rivals Eddie Fenech Adami and Alfred Sant show no signs of softening their stance towards this controversial chapter in recent history.

The sentiment was evident when this newspaper asked the two former prime ministers to share their views on the fact that taxpayers’ money no longer financed the shipyards, which had accumulated debts of €644 million by 2003.

Prior to EU accession Malta had negotiated a deal through which it committed itself to make the company sustainable by the end of 2008. Subsequently, the government had implemented a restructuring plan through which its workforce was reduced from 2,600 to 1,600, with some 400 employees opting for early retirement schemes. The rest were transferred to various government entities.

However, after a promising start in which the shipyard was meeting its targets, the situation took a turn for the worse and the government opted for privatisation.

At the time the General Workers’ Union and the Labour Party blamed the management saying the financial meltdown was the result of some €80 million lost in what they had dubbed as the ‘Fairmount’ scandal’.

In 2010, the Italian ship repair company Palumbo took control of the shipyards.

While Dr Fenech Adami described the 2003 restructuring plan as a “bold” move, Dr Sant insisted that the entity could have been saved, while describing the EU rules as “fatal” for the shipyards.

Eddie Fenech Adami.

Dr Fenech Adami said: “We were bold enough to restructure the shipyards [in 2003] even though a lot of questions were raised about our plan. Time has proved this was a step in the right direction as finally we were no longer throwing away money in subsidies.”

Asked whether the government at the time had felt confident to address the shipyards issue since Malta’s EU membership was also at stake, Dr Fenech Adami said he was fully aware certain conditions had to be met. “We had the courage to face that situation. Looking back I do not regret anything.”

Since being elected to power in 1987 successive PN governments had been criticised for their failure to achieve a financial turnaround of the industry.

I do not regret anything

The challenge was even more daunting considering the size of the workforce and the historical close links with the Labour Party and the General Workers’ Union. It is likely successive PN administrations felt it was not worth risking industrial peace as any eventual success would be a pyrrhic victory.

“We were always careful not to give shocks to the economy and to implement reforms gradually. The smooth transition of the shipyards was in line with this strategy and not a mere coincidence,” Dr Fenech Adami said.

Alfred Sant.

Dr Sant, who is now vying for a seat in the European Parliament, said the government at the time was not even interested in making the shipyards viable and that restructuring should have been carried out earlier. “I believe there was a way out to make the docks viable but the government was not interested and its sole intent was to close them down,” said Dr Sant.

He said the government has nowadays much less manoeuvrability than it did before EU membership and this was a disadvantage. However he pointed out that EU regulations at times could be sidestepped. “One such example is that of low-cost airlines which transferred their operations to regional airports and so were eligible for state subsidies on that basis.”

Former trade unionist Sammy Meilaq, considered by many as an iconic figure during his time as leader of the workers’ council at the docks had a much more scathing view.

I believe there was a way to make the docks viable

According to Mr Meilaq, the EU policy to prohibit subsidies to state enterprises did not apply to private speculators and private financial institutions. He said the EU has been subsidising these sectors by imposing wage cuts and austerity measures. “Trade union protests against this policy are repressed by anti-union legislation, stun grenades, water cannon and tear gas,” he said.

Touching on the shipyards, he said that the best option for Malta’s yards to reach profitability was to restructure them without being part of a capacity reduction exercise.

He argued that Malta could have attracted investment to the shipyards either by staying out of the EU or by demanding an exception based on the importance of the real export economy for Malta.

Mr Meilaq insisted that the major losses were not incurred when workers were in control of the shipyards council but when the government took over in 1996.

He said the fatal blow was dealt by the ‘Fairmount’ scandal. He said that to date, the people had still been denied a public and independent inquiry to establish the facts behind this incident.

Malta committed itself to make the shipyards sustainable by 2008

He also criticised current owners Palumbo, saying they allowed the shipyards’ capital to deteriorate even though they were contractually obliged to develop it.

From a purely economic perspective the decision to curb state subsidies and channel these funds to sectors like education, health and welfare had been lauded.

Economist Gordon Cordina believes that the most important lesson Malta learnt from EU accession was that it was capable of moving out of unproductive, unsustainable sectors to ones which have a better chance to survive in the global marketplace.

“The important thing is that while firms have closed down, others have sprung up, with a total positive effect on employment, implying successful restructuring,” Dr Cordina remarked. He argued that the only acceptable form of subsidy was that which provided support for a limited period of time to encourage initiative. Such a measure should never encourage inappropriate dependence and a culture of entitlement, he said.

On a negative note, Dr Cordina expressed his disappointment that government expenditure on ‘non-productive’ items has increased considerably since 2004.

He cited the welfare system. “Is it really encouraging self-help and the move away from dependence to productive work?”

Dr Cordina noted the reduction in subsidies over the years had neither resulted in a drop in government expenditure, nor in any significant increase in capital expenditure. “A critical look at these, irrespective of the country’s performance in terms of the deficit to GDP ratio, is warranted to safeguard the economy’s future economic sustainability.”