If, last May, participants in a Eurobarometer survey feared an unannounced sudden downturn, how would they feel today with so much upheaval in international money markets? Three months ago, Europeans were beginning to feel more optimistic about the economy’s outlook, with more respondents saying that the worst of the crisis was over. Not only is the crisis not over yet but fears of a new recession are gaining ground as economic growth figures drop and austerity measures bite into the pockets of a swathe of European nationals. What a difference - for the worse - three months make!
A meeting of the German and French leaders has failed to ease debt concerns and the gross domestic product figures for the second quarter, just published, are bound to depress prospects even further. GDP rose by only 0.2 per cent in the eurozone in the second quarter over the previous quarter. The figure for Malta, which posted a rise of 2.3 per cent in the first quarter, is as yet unavailable.
As politicians struggle to solve their deficit and debt problems, which are weighing so heavily on the stability of the euro, they obviously also keep an eye on their chances of remaining politically afloat.
Take, for instance, the situation in Spain. The leader of the opposition conservative party there, Mariano Rajoy, has gone so far as to pledge “austerity without pain” if he is elected to power, as he is likely to. Countries grappling with programmes to cut deficits and reduce national debts are, no doubt, wondering if Mr Rajoy has a magic wand. Since he is also against raising taxes, the likelihood is that he would have to do what most governments, including that in Malta, have pledged to do, cut spending. Magic wands are best left in the hands of magicians.
Of course, Malta has its own set of problems. Inflation is beginning to bite hard now and, insofar as the deficit is concerned, the country is not out of the woods. Will the progress being made be maintained? It depends on how the situation in Europe pans out.
If it leads to another recession, then it goes without saying that the country will also be hit, as it did in the last recession. The government had dealt with the impact of that recession well and managed to save quite a number of jobs.
Rather than launching a stimulus package for all, it preferred to deal with firms hit by the slowdown on a case-by-case basis. Its policy worked and those that received the aid had carried on and in some cases even went on to employ more workers. In fact, according to the Eurobarometer survey, 47 per cent of the Maltese respondents to its survey were satisfied with the government’s performance in the handling of the international crisis.
But, of course, the Labour Party is not and, going by the comments made recently by its relatively new finance spokesman, Karmenu Vella, it would seem that his party will want to tackle the problems differently if it gets into power in the next election.
If this is so, would the party let the country know exactly how it would handle the deficit and debt problem? Until it does, many would regard its talk as mere rhetoric, devoid of any meaningful substance. If the party wants to be credible, it has to be open with the people whom it wants to elect it to power.