Robert Abela will be forever remembered as one the worst Prime Ministers in Maltese history, only comparable to Karmenu Mifsud-Bonnici and Lawrence Gonzi in the history of economic wreckage that he will leave behind. The collapse of the rule of law and the rise of the Mafia State have direct and negative economic impacts on the economy that leave their impact slowly, such as tarnishing Malta’s reputation abroad and as a consequence losing potential and meaningful capital investment. However, Malta’s economic problems are multi-pronged and they all stem from the root cause of a government that is running a rent-seeking economy, prioritised over meaningful and sustainable economic planning and growth.
These problems have been discussed at length already on this website. The Labour Party is funded mainly by construction and tourism magnates and the government’s economic policy favours them in every way possible, yet this short-sighted and opportunistic framework has given rise to an unprecedented chaotic and uncontrolled construction boom which has literally ruined towns and villages, created a construction of clogged traffic-jammed island, unaffordable property prices, jungle rules and the rapid reduction of quality of life. The social and economic consequences of the unbridled construction frenzy, unplanned, chaotic, irregular and often criminal is unstoppable. Now, the government, which is laden with debt and no economic vision for the islands other than doing the same thing over and over, is selling the family’s silver to recoup some cash and “stimulate” the economy by leasing prime-public properties to the tourism industry. Genius.
The hallmark of Labour’s economic wreckage is the closure of Air Malta: a creation of the 1970s Labour government. An incredible regression-ark which marks the decline in what used to be Labour’s economic prowess. A total disaster. This is why Labour today has no historians working for it: its current legacy is too embarrassing to write down and that is why no one of them will bother to attempt it unless it’s a cheap ONE-hack-production.
Despite its pretentious and supposed-economic genius, Labour crashed Malta’s airline and this is of course due to the rampant corruption, rent-seeking and incompetence by which it runs the same country. There is no denying that the government had to step in to help the economy with large fiscal measures during the last two major global crises, Covid and the Russian invasion, but Robert Abela proceeded to spend as much as he could from the public purse without any thought or consideration whatsoever. Voluminous fiscal measures had to take place with seriously-constructed economic and fiscal plans and strategies, but the government did none of this. For example, the government didn’t take the opportunity of the oil and gas crash of 2020. Then when 2022 came, the government panicked and bought long-term gas contracts at premium prices because it believed that Russia was going to win the gas war. Today, the government is forking out hundreds of millions of Euros in electricity subsidies not because the price of oil and gas is high, but because the government is still purchasing gas at premium prices fixed with bad contracts in April last year.
From 2020 to 2022, Malta’s economic growth was only sustained by voluminous fiscal measures.
The challenge is to sustain ever-increasing economic growth whilst reducing the economy’s fiscal dependence on the government, however, Malta’s optimistic forecasts for the future are pinned on the idea that the global economy is going to recover to 2019 levels and this outlook is challenged by a potential recession. Robert Abela is pushing the idea that Malta won’t be affected if the global economy enters in a recession and this is delusional to say the least.
Malta’s government has simply taken on large amounts of debt and hoped for the best, however simply hoping may probably deepen our economic problems. The proposals being floated are ridiculous at best. Miriam Dalli wants to cover up Malta’s green fields with solar panels and apparently, this is a “sustainable investment”. Malta can enter into a very worrying trend if private and public debt increases while the economy remains dependent on public fiscal help.
Meanwhile, the private economy is still not showing strong signs of growth compared to pre-Covid years.
The cost of Labour is also increasing to a large extent due to government salaries or government incentives: note for example, the increasing labour costs of the retail sector when it was shut down during the Covid lockdown.
Meanwhile, although Malta’s wages have indeed increased, thanks to a huge government stimulus, but they are still very low compared to the cost of living, and pale in comparison to Europe’s increases while the disparity of incomes is very wide. Since 2013, wages and salaries have increased by around 25%, but the price of property has increased by more than 100% since then. Food prices have also increased by more than 25%.
Meanwhile, the Labour government tries to stimulate the economy.
So, anyone who is reasonable can understand where this is going, and it doesn’t look good. The charts scream “We need the adults in the room, ASAP.”
Mark I cannot but congratulate you for your meaningful writings. But there are instances when prejudice overtake your most of the time balanced reasoning.
Though I agree with you that Gonzi had cintributed ti much of the PN’s turbulations along the folliwing years I do not agree with your blant statement on the economy during his rulership. You had left out, willingly or unwillingly, one of the worst recession hitting the world during 2008 – 2011 and the Libya revolt both of which hit Malta so hard as putting hundreds of jobs at risk. Many of which were saved through the timely financial injection into the private sector. There is no doubt that such initiative had its toll on the publuc coffers. It was a necessary sacrifice that that paid good dividend.