It remains to be seen whether Joseph Muscat’s top-heavy Cabinet will give value for money, as the Prime Minister said he expects to, but there is no question that splitting the finance and economic affairs ministry into two is a good move. There is more than one reason for this, however, the principal one is that, given the way the economic situation is developing in Europe, it is crucial that Malta keeps the economy under strict scrutiny all the time.
Contrary to what some leading Labour politicians declared during the election campaign, and to what others continue to say even today, the Government has inherited an economy that is in a relatively good shape. ‘Relatively’ as compared to that in many other countries in the European Union, for the island’s national debt as a ratio to the gross domestic product is still high and there are other hotspots in the economy.
Taken overall, and given today’s turbulent economic circumstances, Malta has managed to do well. It is, therefore, important that this economic sentiment is kept up as confidence breeds greater confidence and can help in efforts to stimulate growth.
In the new Cabinet, one minister will oversee taxes, budgets, the Treasury and financial regulation and another, aided by a parliamentary secretary, will take charge of economic policy, small business, external trade, industry and maritime affairs. Both portfolios involve heavy commitments, with the first in particular underpinning the course of direction in an economic environment that remains fluid and so threatening.
The set of economic circumstances prevailing here may be different to Cyprus, now hitting the international headlines, but if Malta is to keep defending its patch and working for growth, there would have to be clear thinking. The recent European Union summit brought to the fore the debate over growth and financial discipline against a background of rising unemployment, particularly among the young.
The IMF chief, Christine Lagarde, insists that growth versus austerity is a false choice. She believes both can be achieved but she has also warned of the risks in cutting spending sharply. Her views are shared by others but people in the countries hit by austerity measures are growing impatient.
How is this country going to promote growth in such a difficult environment?
In the heat of the election campaign, politicians from the main political parties sometimes sounded as if they have the formula to how this can be done. They do not, as others in much larger countries have found out. However, there are ways in which growth can be encouraged.
Even though the economic climate is difficult, greater efforts would need to be made to bring in new foreign direct investment. The microinvest scheme introduced by the Nationalist Government is meant to help small businesses expand and it makes sense to retain it. Cutting unnecessary bureaucracy will also help. The problem here does not lie in what ought to be done but in how and in what time to do it.
There are other measures, besides structural reforms, that can be taken but the Government would need to continue giving priority to fiscal consolidation.
In splitting the finance and economic affairs ministry into two, it has wisely laid the ground for greater efforts to be made in sectors that are vitally important and to explore new areas for development.
Whether Labour has selected the right person to handle the economy side is, of course, another matter.