The analogy made by Finance Minister Tonio Fenech the other day when he likened the economy to a car running with two punctured tyres was somewhat unfortunate. It is inadvisable to drive a car with one punctured tyre, let alone two, as it damages the wheel rims! Wise drivers generally stop the car and change the tyres, rather than drive on. Even so, the minister's message is understood, though it may be a bit too early in the year to see how the economy is going to shape up in the wake of all the difficulties industry and tourism are facing today. To its credit, though, the government has been wisely helping out firms directly hit by the slowdown in an effort to save jobs in manufacturing, even if comments made by the IMF in this regard deserve attention.

According to the Finance Minister, the economy is now showing signs of stability, although if the situation remains fragile. Economic forecasts have been revised and the island is expected to remain in recession this year. Yet, despite the difficulties and the setback in the programme to bring about higher living standards, the government still shows plenty of confidence in its work for recovery. Self-confidence is vitally important as it helps generate enthusiasm to meet new challenges as they arise.

One credit rating agency, Standard and Poor's, appears to be showing confidence in Malta too. It has come out confirming its stable outlook for the island, saying the stable outlook balanced expectations of a fiscal consolidation in the medium term against the challenges of economic reform and the high debt burden. It believes that the island's creditworthiness could improve if a more competitive economy emerged and the debt burden declined significantly. The European Commission has set 2010 as the deadline within which Malta has to balance its books. The IMF says this will happen in 2013.

The government thinks it can do it but not at the cost of losing jobs. It is continually stressing that its priority remains that of protecting jobs. And it would seem that its work in this direction is managing to do just that. One worrying sign is that, according to the latest figures from a European Commission agency, gross fixed capital formation has gone down by over 18 per cent in the first quarter this year. This is not a very encouraging indicator, suggesting perhaps a wait-and-see attitude.

This makes the government programme to help out firms in difficulties even more important as, otherwise, industry could risk seeing investment migrating to other locations. According to information given by the Finance Minister in Parliament, no fewer than 26 firms have sought government aid but of these only six have so far been given assistance. These are mostly suppliers of manufactured parts to the car industry and employ over 1,800 full-time workers between them. In all the cases approved so far, the government has agreed to finance the wages of employees for one day a week for a period of time that would be reserved for training purposes until the company brought over or invested in a new manufacturing line. The government was also giving tax credits. On their part, the firms have committed themselves to invest €13 million and raise the number of jobs by 200 between this November and December 2010.

If the situation in industry remains unchanged, the government would need to retain this aid scheme in the budget for next year.