A Rent-Seeking Regime vs Reality

Robert Abela became Prime Minister with an adventurer’s mindset: following his ambitions and thinking that taking over the country would be the same as taking over a village. His own personal and vain joy ride. Not only did he fail to restore rule of law and bring justice by covering up for criminals and conserving the rent-seeking regime, but he will now be responsible for ruining our future potential economic recovery. It will take even longer than predicted to achieve the economic affluence of 2019 due to the global effects of Russia’s war on Ukraine, and by then Robert may not even be premier.

All previous debt and economic growth forecasts have been made redundant. Our debt was forecast to hit 12 billion Euros next year, but we have already hit that mark by now. Never mind the crisis, let’s spend public money to get elected instead. Meanwhile, Miriam Dalli keeps secret our energy contracts despite the fact that energy is currently our biggest challenge and thus requires an open and honest discussion about it. At the current pace of subsidizing all our fuel and energy expenses, debt is going to go higher much faster. In response to the Covid pandemic and today’s soaring energy prices, Robert Abela turned to public debt and took a lot of it. One would argue that what could he do? And maybe it’s true. Faced with unprecedented challenges and economic collapse, turning to debt may be the reasonable option. The problem is that he didn’t do anything else. Incurring debt means that you are projecting to earn as much as to be able to pay it off in the future. We are not doing that. Robert is banking that his joy ride would pay off until he exits the stage, handing over to his successor debt and potential economic stagnation. I’m genuinely impressed at how Robert Abela continually and successfully enriches himself and accumulates power from the public purse at our great expense.

Clyde Caruana has a lot of problems right now, but making calls for national unity to solve his problems sounds like we have to bow our heads and accept our government’s recklessness, fraud and corruption. Clyde Caruana should not be asking us for help because there can be no unity between civil society and political criminals. Instead, Clyde should ask for help from his boss.  He should ask Robert to start understanding that the challenges are serious and he is not on a joy ride. Then he should simply explain to Robert that basing our economic model on clientelism and what the party-donating construction magnates demand is not necessarily the right thing to do. He should also tell him that an energy policy based on rampant corruption is also draining public money irregularly. He should basically tell him to snap out of it: it’s not a game. After Clyde tells these things to his master-prince, he can come back to us and ask us for help.

Then Clyde should come up with a proper plan for public finances along with an economic plan showing where the money is going to come from instead of just throwing public debt at every problem. Our debt problem was being addressed under Muscat’s administration, but now we have lost track again. Once again we may very well enter into the same kind of economic stagnation we had during Gonzi’s years, for different reasons. And a prolonged war in Europe may also prolonge inflationary pressures and public debt.

In 2019 the Central Bank of Malta forecasted two risk factors for Malta’s government debt: an increase in interest rates by the ECB and lower GDP. These risks have both materialised but their toll on government is greater than forecasted given the war in Europe. Public debt will become more expensive for the government as the ECB increase its interest rates, and the only silver lining is that the ECB, with nearly 5 trillion Euros of national bonds, hasn’t yet stopped propping up national governments, yet even this won’t be enough to save Southern European economies, especially with debt getting more expensive. The next risk for Malta is the European debt contagion that may start from Italy, dragging the Euro once again into another crisis.  If fiscal restraint from the ECB will be the only option available to curb inflation, given that national governments don’t serve the energy and food issues, then highly indebted economies are approaching more pain. The energy problems are not going to go away soon, either and they can even get worse by Winter when the energy demand would be higher. If recession solves our energy prices we still would have a recession to deal with, a lack of growth and more debt. Startling how risks are so high yet Robert is busy frauding the nation over Comino to let friends make some pocket change. When oil was at zero during the Covid pandemic, Silvio Schembri was out campaigning for the hunters’ votes. Now, they subsidize oil and gas because “imsieken, xi tridhom jagħmlu?” For starters having an intelligent and responsible government could definitely be a positive change.

Half of the Maltese population is already facing very serious financial challenges. With half of the workforce earning less than the average salary of €20,000 per year, inflation isn’t easy. The minimum wage is below €1000. A new study shows that most of the people renting pay around 600-700 Euros per month, while the number of people renting vs the number of people buying homes is also increasing. Yet, a recession may not bring down property prices either. With €24 billion in bank deposits (€12 billion in BOV alone), there are plenty of Maltese who will be snapping properties at a discount. Young people who have been priced out of the property market, may still not get a break. It’s going to be a gilded recession for the resourceful, but a devastating time for wage-earners. Robert is going to solve it by taking on more debt to issue you a restaurant voucher or maybe send you €100 before the next election. Counting the MEP elections, we may probably receive two or three more checks until the next election.

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