This week’s local news from Brussels is that the European Commission has des-cribed Malta’s emergence from the international recession as being stronger than expected.

The Commission’s Autumn Economic Forecast is quite optimistic about our economy, and inflation has been singled out as the worrying factor. In fact, inflation in Malta remains higher than the EU average, with the prices of food and energy being the main drivers.

The deficit-to-GDP ratio is expected to narrow in 2011 in line with the government’s predictions, but it will probably increase again in 2012. This positive assessment of the Maltese economy also seems to find favour among the public in general, as consumer sentiment appears to have risen.

This week’s news from the European Central Bank is that its President, Jean-Claude Trichet, believes that although the situation is serious, there appears to be no risk to the financial stability of the eurozone. He explained to the European Parliament that both Greece and Ireland are solvent and that the financial markets (between the lines you may wish to read “speculators”) are underestimating the determination of the governments of the eurozone to stabilise their individual fiscal deficits. He said it is not the first time that the markets have not fully understood the decision-making mechanism of the European Union.

He reiterated that the aggregate fiscal deficit of the eurozone (that is, of the countries adhering to the single currency) is lower than that of both the United States and Japan. Moreover, economic growth in the eurozone has been higher than initially forecast.

In spite of these reassurances, during the week the value of the euro against the US dollar touched its lowest since September of this year, reflecting a fear that the crisis will spread into Spain and Portugal and eventually Belgium and Italy.

I believe that the way Mr Trichet has described the current situation in the eurozone encapsulates the real issue. There does not appear to be any doubt that in one form or another, the countries of the eurozone can effectively handle the problems that are coming their way because of the excessive fiscal deficit in some countries (Malta is obviously excluded from this group). However, it also seems to be the case that the eurozone countries, instead of taking a decisive stand and seeking a long-term solution, have tended to take long to come to a decision and the decisions taken have tended to focus on the problems of a single country.

For example, at the time of the Greek crisis, Germany withheld the decision-making process until after its local elections. Two weeks were lost until the leaders of the eurozone countries took the proverbial bull by its horns in the Irish crisis. On both occasions support was forthcoming but it was conditional, and there continues to remain some fudging even to the present day. Somehow every decision that is taken has to be debated and negotiated beyond what is reasonable to expect in terms of time-frames.

The names of Spain and Portugal have been made by the markets for quite some time, and it should therefore be no surprise to anyone if a crisis were to develop in these two countries on the lines of what happened in Greece and Ireland. Yet it seems that we are waiting for the crisis to happen until action is taken. And if we were to take Ireland and Greece as an example, the solutions found were circumscribed to the individual countries without addressing the stability of the euro as a single currency.

Two solutions have already been proposed to achieve the sustainability of the fiscal deficit in the long term and at the same time address the stability of the euro. They obviously require deeper thinking and analysis. They are economic policies that incentivise personal savings and guarantee the government debt of each individual member of the eurozone up to 60 per cent.

The former measure would seek to create more liquidity in the economies of the eurozone and thus minimise the impact of the speculators. The second would give a concrete message that the threshold of debt-to-GDP ratio of 60 per cent is a sustainable level.

This brings us to the local scene and the link between the situation of the euro and the local economy. Decisiveness is an important attribute to have in the management of a national economy. It should not be decisiveness for its own sake, but decisiveness aimed at securing long-term solutions.