The global economy is heading towards troubled waters. The emerging recession in the United States, the daily escalation in the price of crude oil, the upward spiral effect of the price of cereals and raw food, the instability in the Middle East and in other continents around the globe and the ever-increasing impact of globalisation are all factors that adversely affect our economy. The price hikes in the case of fuel, bread and other essential commodities and the blurred future experienced by leading firms, the like of STMicroelectronics and Malta Shipyards, are tangible proof that the situation on the local economic scene is not rosy at all.

The cost of living in Malta is on the increase, even if last year we had the lowest rate of increase in the EU.

It seems that so far consumption did not drop significantly, therefore it is assumed that the purchasing power of the average family remained at a level that mitigates the impact of inflation. However, economic indicators are already showing that this trend could only survive for a limited time period. The government might be acknowledging the prevailing economic hiccups through its hasty decisions but our ministers' high hopes are depicting a different scenario altogether. The Minister of Finance is predicting a further growth although it won't reach the levels achieved last year. He is satisfied with the progress registered for the first three months of this year, particularly in the manufacturing and tourism sectors. He had also mentioned the marginal increase in employment and the stability in unemployment at about four per cent. He is still optimistic that by 2010 the government would turn the deficit into a surplus budget.

But, still, John Citizen is somehow puzzled with such declarations. How can we connect the predictions of the Exchequer with the day-to-day realities experienced by the man in the street? The purchasing power is not as strong as it used to be. Just few months after the general election it's the Prime Minister himself who stated that the "goodies" announced in the PN manifesto have to be postponed and perhaps delivered at a later stage.

It has become almost impossible at this stage to implement the widening of the tax bands; we cannot afford to adjust the cost of living compensation; we need to undergo a further cost-cutting exercise on public expenditure - perhaps that is why the government announced the "temporary" suspension of the equity sharing housing scheme and that is the reason why the fuel surcharge will have to rise as from next month.

Surprisingly, these unavoidable measures had not been predicted during the electoral campaign! So one tends to understand why immediately after the first parliamentary sitting we were showered with notices of industrial unrest: the shipyard's saga, the STMicroelectronics' issue, the bakers' demands, the dispute between Mcast and the Malta Union of Teachers, The GWU's confrontation with Air Malta; the UĦM and the Malta Union of Nurses and Midwives exerting pressure on the health authorities and the Mater Dei Hospital administration and also the disagreement between the Malta Transport Authority and the Public Transport Association. Industrial instability is not synonymous with a booming economy.

The striking question is whether this situation is only the tip of the iceberg. In addition to the economic rough waters and social discontent, we are also getting closer to a political quasi crisis if not downright instability. There is no question that the government is legitimate. But with a one-seat majority the government's parliamentary business has become quite a task. The "pairing" issue would not be resolved easily and, in fact, it had already proved to be a major headache for the government. The parliamentary seat of Nationalist MP Jeffrey Pullicino Orlando would be under public scrutiny very shortly. Dr Pullicino Orlando's loyalty to his party might be challenged by the party itself if the outcome of the police investigation turns to be sour in his regard. There is no mutual agreement on the appointment of the Speaker of the House and the office of Leader of the Opposition has also presented some problems.

The situation within the party in opposition is another problem. The MLP leadership contest has been anything but a smooth-running process. The candidates themselves confirmed the pity state the party has been in. The party published the electoral defeat analysis report but it had not set an agenda as to when this report would be discussed at party level.

The party still needs to decide between a cosmetic changeover or a drastic reform from top to bottom. The new leader would have to sit on a "burning" seat collecting the bits and pieces that are left within the party after the electoral defeat and following the leadership contest. How could a political party in such a fluid mindset serve the country from the opposition benches? It takes more than a new leader to regain the trust of the people and their support.

Considering the global economic crisis, the local industrial unrest, our political instability and the challenges we have to face from now on, how can we foresee a blossoming future? The Governor of the Central Bank put it all nicely: "Guys, watch it!"

Is it possible to witness economic growth in troubled waters?

matyas@maltanet.net