Last week the European Commission adopted a package of recom-mendations, which it submitted to the EU Council, for budgetary measures and economic reforms with the objective of improving financial stability, boosting growth and creating employment across the European Union.
The recommendations are country specific, taking account of the individual situation of each member state.
The EU Commission also issued recommendations for the euro area as a whole and presented its conclusions on reviews of 12 countries (Malta is not one of them) in the light of their excessive fiscal deficits.
Malta was also given a set of six recommendations.
These point to the fact that further economic reforms are needed in spite of the significant progress registered.
We have also been put on guard against potential traps that could trigger problems for the banking sector.
All in all, the recommendations made by the Commission sound rather familiar as they centre on the issues that we have been talking about for a number of years.
Thus it is worth having a look at them again. The first recommendation deals with the need to have a medium-term plan for our fiscal policy targets.
The Commission is asking us to reinforce the strategy of fiscal consolidation (therefore any relaxation in the strategy to reduce government expenditure is not allowed) to ensure that our deficit remains below the threshold of three per cent of the gross domestic product.
It is also asking us not to resort to one-off measures that can only provide an element of respite.
What is interesting is that the EU Commission is asking for a binding and rule-based medium-term plan, thereby eliminating the possibility of vote catching promises at election time.
The second recommendation is on a subject where there seems to have been a collective sense of fear to tackle it – the pensions system. In Malta we have already raised the retirement age to 65.
That was a courageous decision by the government who was criticised by some sectors of the trade union movement.
The EU Commission is asking us to raise it even further by creating a link between the retirement age and life expectancy. This is a perfectly understandable recommendation.
If investment in healthcare has been so great that it has had a very good impact on life expectancy, then the best way to pay for a free health service that yields results is through a longer working life.
The EU has also asked for measures to encourage private pension schemes. We have not yet faced this aspect of the issue head on and we need to do so sooner rather than later.
The next recommendation was about the need to take steps to reduce the high rate of early school leavers, that is students who leave education at the age of 16.
We need to appreciate that the rate some 25 years ago was twice what it is today, and so we have come a very long way in a short period of time.
In these 25 years we have proved that there is a strong positive relationship between investment in education and employment, even if there are some who are still wondering why the country needs so many qualified people.
Linked to this aspect is the need to increase female participation in the labour force, which although it is still low when compared to other EU countries, it is much higher than it was 25 years ago.
Fourth is the need to reduce our dependence on imported oil. This means increasing investment in renewable energy and completing the inter-connector with Sicily. Again, we have achieved a great deal in this regard when one considers where we were a couple of decades ago.
However, we also have to admit that Malta cannot be in a position where it produces less solar energy than other countries in Northern Europe, who envy the long hours of sunshine we have.
The fifth recommendation is about the banking sector that is deemed to be highly exposed to the property market.
The Commission claims that although local banks have maintained healthy solvency and profitability ratios during the recession of the last four years, there has been a noticeable increase in problematic loans all linked to the property sector.
This is making our banking sector vulnerable to a further deterioration in the quality of their loan portfolio.
I have purposely left the most contentious recommendation to the last. It is about the need to link wage increases to labour productivity rather than the cost of living index.
The business sector has long been clamouring for this as our current system (although it has proved to be very good in achieving stability in industrial relations) is leading to a loss of competitiveness, which will eventually lead to a loss of jobs.
The way forward must be by finding a balance between the need of employees to improve their standard of living through better remuneration for their work and the need to safeguard competitiveness that would in turn safeguard jobs. It is not an “either/or” situation.
I do appreciate that different business and trade union organisations may have different solutions to the various issues raised by the Commission.
So does the government have its own views on what policies to adopt.
However, it is critical that the various policy options are made public by the interested parties.
The fact that the issues mentioned are nearly the same as the issues mentioned in previous reports requires us to have an objective debate on them.
If we address them success-fully, each and every one of us would stand to gain, while if we do not, each and every one of us stands to lose.
To my mind, not putting forward solutions would imply an abdication of one’s responsibility.