Relativity

The Malta Independent

Relativity

Human nature is built on relativity. Hardly if ever there are any absolutes. Does one spoon of sugar in a cup of coffee make it too sweet` Yes for anyone used to drink coffee without sugar but no to the coffee drinker used to two spoonfuls.` So the same cup of` coffee with one spoon of sugar can taste very differently to different people.

Typical is the Prime Minister`s instant reaction to the replica delivered by the Leader of the Opposition to the budget presented by the government. The poorest budget reply he had ever heard` claimed Dr Fenech Adami just as I had thought that Alfred Sant had delivered his best ever budget replica speech.

I liked it because Dr Sant did not just` criticise; he actually showed the way forward with real and practical solutions. It is what serious voters should` expect from the opposition. Criticism comes easy. But anyone aspiring to be trusted with the responsibility to lead the country out of the identified problems should responsibly offer serious alternatives and practical solutions.

Apparently this is no coffee for our Prime Minister. He seems more comfortable with destructive criticism; with empty platitudes and demagogic assertions.` Dr Sant`s determination to assemble a wide social coalition to work out a broad based consensual restructuring plan seems to hit a sore psychic nerve with our Prime Minister. He expects to continue being` trusted to fix` the financial mess which he and his colleagues have so successfully engineered these last 14 years.` He expects that electors who were promised tax credit on a payments as varied as health insurance premium to house loan repayment instalments, should silently suffer and approve the savage attack on their standard of living by the passive impact of direct and indirect taxation.

Also relative is the definition of such intangibles as` greatness and wisdom.` Lou Bondi` thinks that I lack greatness and make immodest claims of wisdom. I often find myself at variance with Lou`s opinion which I all too often find motivated to deliver a specific though subtle agenda which always happens to disfavour the Labour Party. Malta must be unqiue in the democratic world. By Lou`s journalistic standards the opposition party deserve more criticism than the party in office. This weak I was interviewed by a pro-PN person supposedly on the 2002 budget but he was more interested to extract from me minute details of what the first budget of an eventual Labour government would contain,` rather than seek details of how the budget Minister is claiming that he can cash in Lm47 million in privatisation revenues within the next 19 working days from obscure negotiations still going on.

Still on this one Lou and I drink from the same cup of coffee. I never made any claim to greatness and restrict my claim for wisdom only the Friday morning.` In relatively terms though` that can hardly be defined immodest when from Lou`s side of the fence we have many contenders to eternal springs of wisdom 24 hours a day 7 days a week.



I also sense so much relativity in critics who so persuasively try to influence public opinion that Alfred Sant has missed the bus that could win him the next election. Such assertions by neo-believers in democracy who during their stint of power had publicly declared their unwillingness to spend five years in opposition under a newly and democratically elected government,` shows that such thoughts and sentiments persist. Only that it is now` being seen from the other side of the fence and that the vantage point is changed to suit the side on which the bread is buttered rather than the principles one believes in.

Budget Analysis 3 -An Assault on the Middle Class

The Times of Malta



In this last part of the analysis I test the budget against mainstream social criteria. Does the Budget for 2002 help to render Maltese society more socially just, more caring, more confident about the future for themselves and their children`

There are some minorities for whom special measures announced in the budget will bring welcome relief to their hardships. Foster parents receiving Lm12 a week for each child they foster is fully deserved.` `Full social assistance for mental health rehabilitation patients whilst they work is laudable. Increase in ceiling of capital assets before being disqualified from Non-Contributory Age pension is most welcome by its beneficiaries. Deduction from taxable income of alimony paid under marriage separation is a belated addressing of a very unfair situation. The increase in tax ceilings for couples who make a joint declaration only marks how unjust it is that ceilings of single or separate declaration married tax-payers have remained without similar adjustment.

But these measure effect a very small section of society. The mainstream of society, those who were hard hit by the last three budgets, those whose were promised most by the administration in their 1998 manifesto have again been given the short end of the stick.

Take a married couple where both parents work and have to sustain children attending private schools. They probably jointly master a gross of Lm10,000 and make separate declaration for income tax purposes. The Lm3 per week joint cost of living award will probably be taxed away at 25% (depending on how the joint income is split between the spouses) and the 10% N.I deduction will leave them with a net Lm1.95. If one of the spouses smokes one packet of cigarettes a day they are left with Lm1.25 per week. With inflation touching an actual rate of 4% they needed Lm7.70 to stand still. Their real standard of living will again reduce by more than Lm6 a week after they were hit again last year when the tax bands where lowered and fringe benefits were taxed.

The couple had heard the Minister of Finance saying that the worst was over and that the Tax Compliance Unit was getting well into gear thus reaching those who have been having it good at the expense of the majority of employees who pay tax right down to the last cent, fringe benefits included.` Hopes were high that as tax revenues were augmented by enforcement on evaders, the honest tax-paying middle class would be showered with relief.

Hopes were dashed!` The additional tax revenue, assuming it materialises,` is` needed to continue funding expenditure which the Minister just cannot keep in check.

This time it was even worse as the IMF obliged the Minister to pass through the Consolidated Fund payments to the tune of Lm20 million which in previous years were hidden in the Treasury Clearance Fund. Past payments which were understating the deficit remain buried in the Treasury Clearance Fund for future generations to make up for this administration`s past excesses.

Excluding this extraordinary inclusion, recurrent expenditure is planned to increase by only 3%.` Basically a freeze or outright reduction of recurring expenditure in real terms.` Judging by the Minister`s professed inability to control the expenditure addiction of his peers and with government going increasingly in election mode I give little credibility to the chances of expenditure being kept within targets. Where is the much needed additional spend on education, health, environment and law enforcement coming from`

Our mainstream family should rush to the electoral manifesto of the PN to remember what they were promised in order to attract their vote. They will remember they were promised a tax rebate on private schooling fees. This was given in 2001 but soon eroded by increase in school and transport fees. They were promised tax rebates on health insurance premia (promise no. 165) and on house loan repayments (promise no. 197). Paying some Lm1800 p.a. on such committed expenditure would give the mainstream couple a tax saving in the region of Lm 450 p.a. This is what they voted for.` Instead they are seeing again their real wages being eroded for the third consecutive year.

And to add insult to injury our mainstream couple are being told that this was a good budget and that the worst has passed. They shudder to think what it would be like when the Lm400 million hidden debt in the Treasury Clearance Fund and the dead bank loans of public enterprises which are still being serviced by the Government will have to be addressed. And when all public assets are sold and there is nothing left to generate the one-off revenues to keep the structural deficit from continuing to blow the national debt out of control.

And the mainstream couple can`t understand why the Minister continues to blame the 22 month Labour stint in government for all these economic ills when he has already had opportunity to present 8 budgets, 4 before and 4 after Labour`s tenure.` `What on earth can a short term government that orders a recruitment freeze do in 22 months that cannot be corrected in four budgets`

The Minister claims to be very optimistic about Malta`s future. Hope springs eternal. But with the economy effectively in reverse gear, the deficit obstinately unaddressed even though clearly expenditure has been under-estimated, assets being disposed of wholesale, tax reservoirs being sucked in and frittered away,` it sounds like the optimism of fools rather than the self-confidence` of experts.

Our mainstream couple take courage only from the fact that at best they have to endure only one more budget of senseless talk, figure manipulation, divisionary language and subtle but consistent assault on the standard of living of the middle class.

Budget Analysis 2 - God Helps my Successors

The Times of Malta



The success and failure of the Budget for 2002 has to be measured against the criterion of whether it is stimulating economic growth. This is a very important test.

Ultimately budgets and other economic tools are not used to reduce or augment the deficit, cut or add taxation, increase or decrease government expenditure. These are all intermediate targets.` The final objective is solid and sustainable economic growth because only this could lead to improved standard of living for the entire population.

Tackling the budget deficit in a practical and sustainable manner must include strong economic growth as an indispensable part of the policy mix. We have been grappling with unsustainably high public budget deficit since 1996 and on budget figures would still have not resolved it by the end of 2002. 7 years of deficit accumulating at an average real rate of Lm100 million p.a.` has added no less of Lm700 million to our financing needs which translated itself into doubling of the national debt from Lm500 million at the end of 1996 to more the Lm1 billion presently. The remaining Lm200 million odd were or are to be financed by privatisation one-off revenues.

Had we maintained stability in our expenditure and revenue patterns so that additional tax revenues went to reduce the deficit by` just Lm10 million p.a. after meeting the unavoidable expenditure creep,` a deficit of Lm110 million odd at the end of 1996 would now be Lm60 million. Economic growth of 8% pa. nominal compound would have given us a 2001 GDP of Lm 1764 millions. The deficit would today stand at comfortable` 3.42% of the GDP and we would not be talking about it except in terms of achievement.

I use the 8% factor because I firmly believe that a small nation like ours needs an annual average real growth rate of 6% which loaded to an inflation rate of 2% gives the 8% nominal growth.

The truth is that this budget is hostage to the ones before it.` You cannot achieve this sort of success if` first you get elected on a platform that the deficit identified by your predecessor was a myth, and then the first thing you do on getting elected is to` settle electoral obligations by giving generous wage increases to an over-bloated and inefficient public sector.

Next year the budget is projecting nominal growth of 5% slightly up on the 4% being registered this year. But these are nominal figures.` Translated into real figures with real inflation hovering around 4% we are actually travelling in negative GDP territory as was the case in the 3rd quarter of this year. And that was before the 11th September effect started to impact the international linkages of our economy.

Being content with a near zero real GDP growth for next year and doing little or nothing about it is indeed pitiful and should give a thumbs down to the assessment of the budget against economic growth criterion.

Other countries, that because of their size and advanced state of development are happy with 2% - 4% real growth rates, are taking active measures to stimulate growth. Particularly after the events of 11th September monetary policy has been eased reducing interest rates in successive notches to stimulate investment and consumption. And fiscal policy is revisiting Keynes to leave more spending power in the hands of the consumers.

Financial mismanagement by the same Minister who presented his 8th budget allowed him little or no room to manoeuvre with similar measures. Instead of tax rebates we get higher taxes intended to whip away a further Lm 53 million of disposable income through increased tax transfer to the government.

An in order to contain the worrying growth of the public debt which forces additional interest burden each year the government is having to resort to wholesale privatisation at a time when the scenario is more conducive for share buybacks rather than share issues.

Privatisation has become a funding exercise so much so that the government needs to net Lm47 million in the course of the next 4 weeks.` Not much room for negotiations to get a fair price!

To see the difference between macro-economically responsible privatisation and irresponsible funding motivated privatisation compare the floatation of 40% of Maltacom to the 70% sale of Mid-Med to HSBC. Maltacom today returns annual profits in the Lm15 million region as against to the Lm2 `Lm3 million that its predecessor used to generate. Under the admirable leadership of Tony Meilaq first and Maurice Zarb Adami later, it is offering products at the very edge of technology at an internationally competitive price and still delivering enhanced value to both clients and shareholders. The government`s 60% remaining equity` is worth much more than the 100% it owned prior to privatisation even at the currently depressed equity price levels.

Mid-Med privatisation` is a different affair. Government has no equity left in the Bank to enjoy the efficiency growth. In reality the Minister himself had to criticise the Bank for showing efficiency growth only in selling its parents` wealth management products rather than in assisting the local economy to revert to sustainable growth paths.` HSBC profits are showing scant growth over that of its predecessor even though it shows little social respect in establishing the price for its services.

Failure to achieve sustainable economic growth is forcing the government to fritter away privatisation revenues rather than re-invest them in new growth generating projects or debt reduction. The budget motto could well be God helps my successors that will find little or no resources to help engineer a real` economic turnaround.

Budget Analysis 1 - Words and Figures Disagree

The Times of Malta



How do you form an opinion as to whether the budget is good, bad or neutral` I suggest the adoption of three criteria against which I will analyse the budget in this three part series.` The first criterion is whether the budget is actually helping to address the structural fiscal deficit.

The answer is a straight no. To arrive at these conclusions one has to make a substantial effort to re-arrange the figures in a consistent manner in order to allow a proper like for like analysis.` The accompanying tables do just that. It takes a lot of effort to arrive at it as the published figures seem to make purposeful re-arrangement of figures making like-for like comparison very difficult to achieve.

To give an example whereas prior to 1998 public debt servicing was taken as a recurring expense in the current version it is only public debt interest which is taken as a recurrent expense. The difference between servicing and interest is around Lm12 million contributions to sinking fund, which the Minister is no longer providing for due to pure internal administrative decision. Another example is grant revenue. Traditionally grants were considered a financing item and not as recurring revenue as is current practice.` For next year this inflates revenues by Lm8.5 million.` Yet another example is Lm7.4 million which the government expects to net from the one-off foreign investment registration scheme, which will operate only until next year.` Can this be considered as ordinary recurrent revenue` To my mind this is better classified as extraordinary non-recurring item.` It makes a difference of Lm7.4 million.

Making these adjustment as in Table 1 will turn a reported projected deficit of Lm 77.7 million to a true deficit of Lm107.1 million on the same level of year 2000 and 9% more than that projected for the current year 2001.

Comparative Government Finance Data: January-September 1998 - 2001

















Description

Jan - Sept Jan-Sept` 1999 Jan-Sept` 2000 Jan-Sept` 2001

1998







Lm thousands













Total Revenue

507,134 530,313 459,446 545,951 consisting of:











Grants

8,054 7,874 6,001 456

Loans

110,000 84,000 0 79,059

Receipts from Sale of Shares

35,336 37,511 12,000 0

Other extraordinary receipts



0 0 0

Ordinary Revenue A 353,744 400,928 441,445 466,436 of which:











Customs and Excise

35,342 40,921 41,714 38,937

VAT & Replacement

52,437 63,623 77,539 83,315

Income Tax

76,778 90,327 104,463 113,447

Social Security

93,768 99,025 112,017 120,554

Others

95,349 107,034 105,712 110,182













Total Expenditure B 441,775 492,467 510,567 554,543 consisting of:









Recurrent Expenditure

356,674 382,078 402,765 433,601 of which:











education

28,064 29,559 30,689 35,080

social security (benefits)

118,492 126,239 129,829 134,341

others

210,118 226,280 242,247 264,181













Public Debt Servicing

40,822 46,090 49,547 51,722













Capital Programme

44,278 64,299 58,255 69,219 of which:











Productive Investment

15,494 35,653 25,336 28,144

Infrastructure

18,089 17,956 16,800 23,474

Social

10,696 10,690 16,118 17,601













Gross Government Debt [1]

726,272 858,403 900,238 1,003,175















Deficit B-A 88,031 91,539 69,122 88,107













[1] At end of











Table 1

Clearly one might be tempted to say that this is still lower than the reported Lm150 million of 1998. Hold your breadth. The reported deficit of Lm150 million for 1998 was conveniently fabricated in the last quarter of 1998, soon after the current administration took office. As can be seen from the Table 2 on a January to September basis the 1998 deficit was Lm88.1 million which by co-incidence is exactly the same deficit for the same period of 2001.` This is a perfect like for like comparison quoting only official figures from CoS publications.` If you can believe that in the last quarter of 1998 the accumulated deficit shot up from Lm88 million to Lm150 million whereas this year it will reduce to Lm82 million as the Minister would have us believe than you are free to fool yourself.

Reality is that next year we will collectively be transferring to the government some Lm220 million more than we did in 1998. That is an average of incremental tax of Lm55 million each year. With decent expenditure control it should have taken two years maximum to reduce the structural fiscal deficit to within 3% of the GDP. Yet here we are 4 years and Lm220 million tax revenue later still suffering from a fiscal deficit, which if the economy grows as projected at the end of next year it will still be 6.2% of the GDP.

Comparative Government Finance Data: January-December 2000 - 2002















Description

Jan - Dec Jan - Dec Jan - Dec 2002vs2001

2000 actual 2001 Revised 2002 budget % increase





Lm thousands















Total Revenue

629,652 722,355 820,160

consisting of:











Grants

9,549 1,332 8,543



Loans

454 1,415 416



Receipts from Sale of Shares

12,000 47,000 85,000



Other extraordinary receipts





7,400



Ordinary Revenue A 607,649 672,608 718,801 6.87% of which:











Customs and Excise

55,140 62,450 67,800 8.57%

VAT & Replacement

104,065 116,000 126,500 9.05%

Income Tax

149,511 167,400 186,100 11.17%

Social Security

162,018 178,500 193,400 8.35%

Others

136,915 148,258 145,001 -2.20%













Total Expenditure B 716,229 771,143 825,925 7.10% consisting of:









Recurrent Expenditure

549,837 616,918 657,651 6.60% of which:











education

40,038 47,238 49,266 4.29%

social security (benefits)

175,883 183,500 189,600 3.32%

others

333,916 386,180 418,785 8.44%













Public Debt Servicing

67,840 71,933 72,850 1.27% of which:











Contribution to Sinking Fund

12,250 12,285 11,800 -3.95%

Interest Payments

54,441 58,620 59,750 1.93%

Repayment of Loan

1,148 1,028 1,300 26.46%













Capital Programme

98,552 82,292 95,424 15.96% of which:











Productive Investment

35,807 25,364 25,000 -1.44%

Infrastructure

33,800 29,858 30,731 2.92%

Social

28,946 27,070 39,693 46.63%















Deficit B-A 108,580 98,535 107,124 8.72%

Table 2

Clearly the problem is not from the revenue side.` On the contrary the Government can claim credit for starting to get serious about tax enforcement and tax collection. The problem is from the expenditure side. Recurrent expenditure planned for next year at Lm 658 million is 28% more than the Lm516 million unduly inflated figure of for the whole of 1998. Add to this the increase in servicing a bloated public debt and load upon it capital expenditure on projects like the Tal-Qroqq hospital that is galloping out of control and you get a situation where all additional tax revenues are being frittered away. The fiscal deficit in absolute terms is still largely at the level it was when first discovered by the incoming labour administration in the fall of 1996.

On the first criteria of whether the budget is addressing the structural public deficit the budget fails. Tomorrow I will analyse whether is helping to address the deficit in a relative way by stimulating the growth side.

Beware Boxing Day

Maltastar Beware Boxing Day

A month today it will be Boxing Day. Beware it!

I don`t think I missed any of the predictions I made in last week`s article `Squaring the circle` about the contents of the budget announced last Wednesday.` It was all too predictable.` Particularly predictable was the Minister`s assertion, contrary to some earlier indications, that privatisation of Public Lotto, Malta International Airport and Kordin Grain Terminal will be concluded by end December next and will net the government Lm47 million without which` government accounts will not balance.

I well remember Easter Monday of 1999.` It was exactly the 5th of April. Many were on holiday. I was still at the breakfast table of a` hotel in Gozo where I was spending a break with my dear family. The mobile rang and someone gave me` the breaking news that John Dalli had just publicly announced the suspension of Mid-Med Bank shares on the Malta Stock Exchange as the government had agreed to sell its 67% stake in Mid-Med Bank to a foreign institution.

Choosing Easter Monday for making such a strategic decision when most critics are on holiday and parliament is closed had a clear aura` of being a manipulative choice. This suspicion increased when the Minister broke new ground in the lack of corporate governance for taking care of the State`s assets. It soon transpired that the Minister had not even informed his cabinet colleagues of the decision he had just made public and that the Minister without any bidding had` conducted the negotiations single-handedly.

It raised suspicion` that making it official to the nation before even informing the Cabinet was part of a scheme to overcome cabinet resistance. And so it was. Cabinet convened the next day and in just a few hours gave its OK to the deal. The cabinet memo which was subsequently revealed at the Public Accounts Committee was very generic and bereft of the necessary details which such a strategic decision should have demanded.` In fact no valuation calculations were made available to the Cabinet other than that the price struck was above the price last traded on the Malta Stock Exchange. Who cares that the price should have demanded a substantial premium even on the basis that the share transfer involved giving total control to one foreign institution of a very solid and profitable bank commanding 50% of the local banking market`

It is elementary that the price for trading a few thousand shares on the Exchange should be very different from the price when majority control was being transferred.` But even these elementary details were denied to Cabinet.` Denied to Cabinet was also the fact that in arriving at the valuation the Minister had discounted the future cash flows of the Bank by a factor of 12.25% by including a risk premium of 6% on top of the 6.25% risk-free rate.

Just think of it.` The Minister as the guardian of national assets in making a calculation of the fair price,` rather than using the normal discount rate of 6.25% for risk free investments,` loaded the discount rate by a further 6% risk premium. He was` thereby` suggesting that the asset he is selling is risky even though in fact its trading record and income streams had just earned it an international award as` one of the best managed banks in emerging or small markets.

I don`t really believe that the Minister did this.` It is much more credible to assume that the calculations were made by the buyer who had every interest to include a high risk premium in order to lower the price. The Minister, without seeking independent professional advice, then swallowed it hook, line and sinker leading his Prime Minister to admit shamefully and` belatedly that the deal was too rush but that in the end Lm10 million ( should read Lm50 - 70 million really!) here or there does not really matter.

Here we are two years eight months later, in spite of many promises and White Paper that future privatisations would be transparent, the Minister is just about to play it again on us.`

This time instead of Easter Monday it is likely to be Boxing Day. On that day or thereabouts whilst we are completely in the dark and probably in high Christmas spirits to dampen the economic monotony of the rest of the year, the Minister will play it again.` He will` sign away a licence to give control to all gaming revenues for next 7 years to a foreign dominated consortium without any social and economic protection against the consequences of having a sizeable portion of the nation`s disposable income shifted to gaming from ordinary expenditure on food drink clothing and entertainment consumption.` He will also give a strategic, indeed effectively controlling,` stake in Malta`s only airport to a foreign dominated consortium.

In doing these deals the Minister will forget another elementary lesson in conducting privatisations.` Technology can be bought without sacrificing equity positions. Indeed even the purchasers will still charge the local company a full commercial price for their technology inputs. The only difference is that the country would be locked up into equity with the technology provider and cannot seek better opportunities as they evolve. We will be giving foreign technology partners the right to control two national cash cows with a minority stake.` In this sense it would be even worse that Mid-Med`s sale.

Beware Boxing Day!

Bad diagnosis - wrong medicine

The Malta Independent

Bad diagnosis ` wrong medicine

The day before the budget the CoS published the GDP figures for the third quarter which showed a reduction in real terms over the same period of last year. By all measures this is a worrying development .

One would have expected the budget to make a sober assessment of the serious situation and to prescribe the right medicine for the prevailing tough circumstances. It was not to be .

On the contrary the Minister wasted his energies in cheap partisan propaganda by claiming that the deficit in 1998 was Lm150 million . He unashamadely blamed Labour for the structural fault in government finances as if it is possible, let alone probable, that such a deficit could be created in 22 months.` Lino Spiteri, the ex Labour minister who presented the 1997 budget, could not have written more timely when on budget day he shredded the government`s pretensions that current budget problems have a Labour certificate of origin.

The sobriety shown when in the budget speech for 1999` Minister Dalli admitted that the `current financial situation is the result of large structural defects that were layered on each other over the span of several years` was proven to be a very rare moment of departure from the state of permanent partisanship so evident` in the management of the national coffers.

A bad diagnosis inevitably leads to prescription of the wrong medicine.` Reciting` his eight budget speech the chief architect (by his own admission) of` the structural faults in our public finances that were layered on top of each under his presidency at the Ministry of Finance, the Minister prescribed more of the same medicine that has stalled the economy and is driving it to near breaking point.

A prescription of more taxes and wholesale privatisation is exactly what the country does not need.

Tax enforcement and efficiency by all means. But drawing another Lm57 million (+9.22%) in taxes at a time when the economy is expected to grow at 5% in nominal terms (and even this looks optimistic) is sheer poison medicine for a sick patient. Economic recovery cannot be stimulated simply by more efficient tax collection. Economic recovery depends as much on growth stimulation and expenditure control as on efficient tax collection.` Together they are the three legs of the tripod that must support any serious recovery programme.

And projecting privatisation revenues of Lm47 million in the next 5 weeks by the end of the year and a further Lm260 million over the next 3 years is nothing short of crisis disposal of assets to plug a financial hole.

The Minister while persisting in his highly partisan speech and approach expects the Opposition to pronounce itself on better ways to break out of the impasse which he has brought us into. Meanwhile he is doing his best to ensure that whoever follows` will find no pool of special funds in the form of tax arrears, tax enforcement and privatisable assets which can be used to finance a re-structuring programme. God helps whoever follows seems to be his motto.

Democracy will work its way to allow ample time for the Minister to watch the Opposition`s solutions to the problems he created being applied in practice. At the time he will protest from the opposition benches that he had the right` solutions in hand. As if eight budgets are not enough to provide a real lasting solution.

True solutions to our economic woes must be largely based on growth and expenditure control even if for some time things may have to get worse. The solution lies in` massive investment in education and re-training of our workforce to make it more mobile and willing to seek productive jobs.` This will` reduce the operational expenditure of central government which otherwise will keep getting fatter and fatter demanding` more consumption` whilst all around it are starving to death.

Scarce logic and squaring the circle

Maltastar

Scarce logic and squaring the circle

Squaring the circle is the task which the Minister of Finance has to do in presenting the` budget for 2002.` He needs a circle but is locked in a square.

A circle is needed because this could be the last budget before the next election. If not,` it is definitely the one before last.. He has presented three successive budgets which have brought us to a state where we are collectively paying some Lm160 million more` in taxes, levies, fees, licences or whatever one wants to call them than we paid in 1998.

The square is that in spite of squeezing so much out of our pocket causing massive cash-flow problems to the business sector and standard of living problems to the population at large, the budget deficit is still obstinately high and unaddressed, whilst` the quality of health, education and social services we get from government have sharply deteriorated. The edges are too rough to offer much prospect for re-election.

Min John Dalli has no choice but to` play the illusion game. He will tell us that the economy is growing healthily and when everybody knows that it is stagnant and sick if not downright contracting. He will tell that although he will be raising the bottom income-tax bands to give back part of what was taken in the last three budgets, yet his tax take will increase through enforcement on the self-employed particular the professionals through the benchmarking procedures.

He will magically create a number of one-off revenue inputs camouflaged as normal recurring revenues. Strange distribution as dividends of profits accumulated over a long number of years, tax due on artificial property transfers and similar window dressing is all part of the mise-en-scene.

At the other end expenditure will continue to be postponed to accumulate under a future administration and the Treasury Clearance Fund will continue to finance expenditure which sooner or later will have to be funded from the Consolidated Fund.

Meanwhile to generate financial streams to finance the deficit without accumulating more debt, privatisation will be undertaken against all sensible advice to the contrary. The Public Lotto will go without bother about the social and economic problems that will be created by channelling a larger portion of disposal income onto to gaming and gambling at a time when disposable income is falling. MIA will be sold when the price will be heavily discounted due to much lower volume of traffic currently facing the travel` industry.` The Freeport will go against all sensible advice that its privatisation will only make sense after it is brought up and running efficiently. And if Bank of Valletta shares are also sold to a strategic investor we could risk having our entire banking industry controlled by two large foreign institutions to whom the national interest will unavoidably have low priority.

Under the shiny wrapper` with which the government PR machine will package the budget,` there is obscurity and structurally neglected problems which will need` the skills of someone much better than Min Dalli,` the chief engineer of the desperate state we find ourselves in today.

Unless the budget speech starts with a public apology its credibility will be zilch!

Permit me to shift to a case of scarce logic. A policeman was killed during a bank hold-up. It was an accident waiting to happen. It could have been avoided. Don`t just blame Bank Management for it. Management major responsibility lies in choosing a dangerous location for a branch which has been held up at least four times in the space of five years. Responsibility should also be shouldered by the Unions representing bank employees and by the general public.

In 1997 when I was Chairman of Mid-Med Bank I expressed concern at the high level of security cost the bank was incurring to guard its offices when reality the system produced poor security cover. I requested to be given alternatives for installation of a double door system with metal detectors to freeze the doors if metal is detected. I had to abandon the plan as the Union insisted that police guard would still have to be retained even if the double door security system is installed. Branch Operations also expressed concern that the general public would not accept the stricter procedure for gaining access to the Bank and could thus lead to loss of business.`

When last year we were installing my private business financial services office in Valletta, even though the security risk is next to nothing as no cash service is offered, I did not fail to install the double door concept.` I regret not being more forceful on double door installation in 1997.

The journalist

The Malta Independent on Sunday The Journalist

Unless they want to force labour to resort to the threat or use of violence with which Mintoff used to control the power network, the network must dismantle and give Labour a fair chance to govern in accordance with the electoral mandate.

I`m sure you remember the uproar raised by this simple statement I published last August. Many puritan journalists were shocked and interpreted this as my advocating the use of violence. In doing so they had an agenda to besmirch` me and dilute the following I command among the all important middle ground of Maltese society.

I suggest you read it again.` Read it slowly.` Read it carefully.` Not once, but twice, three times,` ten times. Then remember that the title of the article was Blairing the gap.

And remember that the whole trust of the article was an appeal for Labour not to compromise the middle ground whilst nursing its hard line fringes. An appeal for a new social pact where the organisations of society with power outside the political sphere strike a modus operandi with a new labour government to execute its mandate without undemocratic obstacles.

My parting shot in the said articles read something like this and I believe it says it all:

Labour on its part needs to do what Tony Blair did in making the UK Labour Party acceptable in the former hard core conservative precincts, including the financial City. Labour needs to regain the hard core without losing the middle ground. Labour needs to be perceived as a sustainable alternative to a stale nationalist administration. Malta `s labour needs to fill the power gap by Blairing it.

Now read the offensive sentence above and confirm to yourself that it says exactly the opposite to what I have been charged with by biased critics. If you read it carefully you will see that not only I am not advocating Labour`s return to violence but I am effectively scandalising myself at the possibility` that the power network of organisations would prefer to continue obstructing Labour from executing its democratic electoral mandate in the hope that Labour would be forced to defend itself through use of force.

Compare this now to Daphne`s gaffe in writing the following:

What a pity he chose to punch Mr Grech instead of il-gurnalista Joe Mifsud. There would have been a roar of approval all round had he chosen the latter option.

Read it as many times as you want. I` must have read it a hundred times.` I just cannot see any irony in it. `Not even between the lines. It is simple straight forward English.

The assailant of the ex-Commissioner of Police should have reserved his wares for Joe Mifsud. He should have assaulted Joe Mifsud instead of the former Police Commissioner .` And had he done so not only he would not have been condemned but many` would have applauded in approval. This is absolutely uncomplicated.

But the chorus that went out of its` way to turn my argument of last August on` its head and give it a meaning diametrically opposed to that intended, were scandalised that the Press Club condemned the Daphne for wishing violence on a fellow journalist. The puritans who interpreted my promotion of a new social` pact as` an instigation of violence were quick in defending Daphne by squeezing every gram of imagination in their brain corridors to` expose the non-existing irony in her straight and simple instigation of violence on my namesake journalist.

Calling Joe Mifsud as the journalist is quite appropriate. For some time Hilton`s corporate motto was `The Hilton`the Hotel`. So it is quite appropriate for Joe Mifsud to be referred to as the journalist.

Because Joe was the main, and one of the few , journalists who defended the public`s right to know that the Police Commissioner was being investigated for alleged serious criminal offences whilst being allowed in full command of both the Police as well as the Secret Service with full facility to use the wide powers of such positions to confound the investigation in process.

Whether the ex-Commissioner is guilty or innocent is not the issue. The issue is that were it not for the likes of Joe Mifsud we would never have known that people in such powerful positions were conducting private lives which could expose them to blackmail with possible serious consequences to the security of the state and to the enforcement of law and order.

And whoever thought that the ex-Police Commissioner`s case` has now been buried by his resignation is wrong. It is closed in so far as Mr Grech is concerned who as a private citizen has every right to conduct a private life and to walk the streets without being assaulted. The cowardly act of his assault is totally condemnable as is totally condemnable the risible Lm75 fine given to the assailant (though it still looks hard compared to the Lm25 fine awarded to those who assaulted my brother in his private home to celebrate euphorically the PN`s 1998 election victory). But the Prime Minister and the Interior Minister still has to answer why Mr Grech was allowed to stay in position whilst the investigation was going on.

And our puritan journalists have every right to continue using double standards. But they have no right to pretend they can be considered as the journalists.

Rajna f'idejna - ninbidlu kif jaqblilna

Il-Kullhadd B`rajna f`idejna - ninbidlu kif jaqblilna

Bhala wiehed li kont instigajt b`mod car biex il-Partit Laburista jlahham u jlibbes il-politika tieghu ta` Svizzera fil-Mediterran huwa ta` sodisfazzjon kbir li nara li dan sar b`mod effettiv.

Illum qed jikber sew l-gharfien li l-politika ta shubija fl-Unjoni Ewropeja mhix addattata ghal bzonnijiet ta` pajjiz zghir bhalna.` Mhux ghax l-UE hija xi haga hazina .` Mhux ghax ahna ghandna xi antipatija ma l_UE. Xejn minn dan.` Izda ghax l-UE hija organizzazzjoni li r-regoli taghha huma aktar disinjati biex jissalvagjardjaw il-mod ta` hajja ta` pajjizi kbar u mhux addattat ghal gzira ckejkna u sovrana f`nofs il-Mediterran.

Lanqas il-hafna emmissarji li minn zmien ghal zmien jigu fostna biex jippromwovu s-shubija fl-UE qatt ma jaslu biex jghidu li Malta jaqblilha tkun membru fl-UE.` Li jghidu huwa li l-UE tkun kuntenta jekk Malta tissieheb bhala membru basta toqghod ghar-regoli jekk mhux mal-ewwel wara zmien tranzitorju li jista jigi f`certi kazi negozjat.

Jghidulna wkoll izda li jekk il-poplu Malti b`ghazla demokratika jiddeciedi li jippreferi it-triq ta` relazzjoni specjali kif imhaddna mil-Partit Laburista allura ma jkunx hemm ostakli biex l-UE tinnegozja maghna arrangamenti bhal dawn skond ir-rieda demokratika tal-poplu Malti.

Hekk kif jikber l-gharfien ta` kemm ma jghoddx ghalija il-mudell ta` membership fl-UE jikber l-ghatx ghal taghrif dwar il-poltika ta` Svizzera fil-Mediterran biex isir gudizzju li din tevita l-izvantaggi tas-shubija bla ma titlef il-vantaggi.

U mill-esperjenza tieghi in-nies dan bdew jifhmuh.` Mhux biss bdew jifhmu il-politika ta` Svizzera fil-Mediterran izda qed ippogu din il-poltika fi kliemhom stess. U biex jispjegaw il-politika ta` Svizzera fil-Mediterran fi kliem` kemm jista` jkun semplici u li jinftiehem minn kullhadd il-poplu qed iffissirha bhala` RAJNA F`IDEJNA u NINBIDLU KIF JAQBLILNA.

U nahseb li dawn iz-zewg frazijiet huma l-essenza tal-poltika laburista ta` Svizzera fil-Mediterran. Rajna f`idejna ghax permezz ta` din il-poltika nibqghu poplu sovran. Il-helsien u n-newtralita` niddefendihom permezz ta` tharis ts-sovranita`. Ma nigux kostretti naghmlu dak li jiddeciedi ghalina haddiehor. Il-famuza shared sovereignty ta` shubija fejn il-qatra taghna tithallat u tintilef fil-garra tal-pajjizi `l kbar ma tapplikax ghal politika ta` Svizzera fil-Meditterran. Il-vantagg tal-qaghda strategika ta` pajjizna nibzghu ghalih u nuzawh fin-negozjati bil-politika ta` Svizzera fil_Mediterran u mhux inceduha mill-bidu nett bhal fil-politika ta` shubija fl-UE.

Ninbidlu kif jaqblilna huwa aspett iehor importanti tal-politika ta` Svizzera fil-Mediterran. Dawk li jridu jqarrqu jghidu li jekk ma nidhlux membri fl_UE nibqghu wahedna u ma nkunux nistghu naggornaw u ninbidlu.` Ipingu l-politika taghna bhala wahda difensiva li tiddefendi l-antik u l-istatus quo. Dan mhux minnu .

Il-politika ta` Svizzera fil-Meditteran thaddan il-bidla.` Izda ninbidlu kif jaqblilna, fejn jaqblilna u fit-temp li jaghmel sens ghalina. Dan mhux possibli taht shubija.` Ghax hemm trid taccetta kollox u kemm jista jkun malajr kemm jekk jaqbillek kif ukoll jekk ma jaqbillekx.

Ninbidlu kif jaqblilna tfisser li lil pajjizna nifthuh biex jikkumercja liberament mal `pajjizi kollha tad-dinja u mhux nifthu biss ma l-UE u ntellghu barrieri mal-kumplament tad-dinja.

Ninbidlu kif jaqblilna tfisser li nifhmu li ahna poplu zghir u jehtieg nuru solidarjeta` ma xulxin biex il-prezz tal-bidla jingarr b`mod li jaghmel gustizzju socjali u mhux thalli is-suq isuq u min hu zghir jitghaffeg u min hu kbir jissahhah.` Ifisser li l-haddiema jinghataw it-tahrig mehtieg kollu biex ikunu ppreparati ghal bidla jaccettawa, juzawha u jkattru l-gid minnha.

Bil-vantaggi ta` rajna f`idejna u li ninbidlu kif jaqblilna ghandna nkomplu nikkonvincu lil dawk li filwaqt li tilfu l-fiducja fi-partit nazzjonalista fil-gvern iharsu lejn l_UE bhala l-agent barrani bzonnjuz biex igib il-bidla tant mehtiega f`pajjizna. Lil dawn jehtieg nipperswaduhom li l-bidla l-ahjar anmministrawha ahna stess bil-kuragg u bil-kuxjenza socjali ghax inkella hafna ser jinkinsu u jwegghu bla htiega.` B`rajna f`idejna ninbidlu kif jaqblilna ahjar.

Alfred Mifsud

The manipulators

The Malta Independent

The Manipulators

Providence plans certain incidents to expose the manipulators.` Lou Bondi` and Peppi Azzopardi of Where`s Everybody` fame have been exposed as the media manipulators pushing subjective agenda whilst wearing the mantel of objectivity.

A few months back Bondi` wrote that I ruined his Italian lunch and spoiled` the taste of his carefully selected Antinori wine because I allegedly wrote an article were I advocated Labour`s return to use of violence.

All people of good intentions know that my article was doing the exact opposite. Under the title Blairing the Gap I advocated that Labour should reach for the middle ground of Maltese politics in Blair style and appealed for the power organisations to shed off their prejudice towards Labour. It was here that I made the remark that these organisations should do so unless they would prefer to see Labour return to their physical force practices so ably eradicated by Alfred Sant. I never` suggested that Labour should do so, but only speculated whether the prejudiced organisations` would prefer it to do so.

Turning my argument on its head Lou Bondi & co. argued that I was instigating Labour`s use of force when in fact I was proposing for Labour to be allowed to govern by reaching a pact with the middle ground as Blair did for Labour in Britain.

The Daphne used a totally transparent dose of irony when she claimed that if Joe Mifsud were to be assaulted in the same manner as the ex-Police Commissioner was condemnably assaulted in Republic Street, then there would be a chorus of approval. A straight undiluted appeal for Joe Mifsud to be physically assaulted. The irony is completely lost on me. And` those who know me know` that I don`t usually lose an opportunity to be ironic.

TMID editor apologised honourably. The Press Club immediately condemned the clear instigation of violence against a journalist. But Bondi who was so scandalised with my supposed threat of violence` saw nothing wrong with Daphne`s uttering even though Daphne herself had to explain that we are stupid for missing her ironic innuendos ( a simple apology would have been much more appropriate). On the contrary the Where`s Everybody` duo condemned the Press Club for their prompt statement` condemning the threat of violence against a journalist and accused the Club for using double standards.

Their measure of double standards is that the Press Club` never condemned their (Bondi` & Azzopardi) critics.` `Prime culprit is Manwel Cuschieri who continues insisting to expose their credentials and agenda.

Now Cuschieri` s style is not something I would totally endorse. I think he can be more effective by focussing on arguments rather than personalities. But Cuschieri has never come even anywhere close to instigating any sort of violence against anybody let alone claim that it would be applauded.

On the contrary Cuschieri goes out of his way to condemn violence. Cuschieri does not even pretend to be the shining example of unbiased and objective journalism, a claim repeatedly made by the Where`s Everybody` duo.

Can Bondi` please explain where is his consistency in savagely criticising me for what I have not said regarding the promotion of violence but unashamedly opposing the Press Club timely and unreserved condemnation of the use of violence against a fellow journalist`

Media manipulation is an art skilfully employed by the Where`s Everybody` duo.` They do it ten times more effectively then Manuel Cuschieri can ever hope to do. That is` unless he can convince a nationalist government to give him` peak time current affairs programmes on TVM` leaving the substantial resources of the TVM newsroom idle as standby scene watchers as` the job they were employed to do is expensively outsourced to the likes of Where`s Everybody` As the old adage goes never bite the hand that feeds you.

The manipulators

The Malta Independent

The Manipulators

Providence plans certain incidents to expose the manipulators.` Lou Bondi` and Peppi Azzopardi of Where`s Everybody` fame have been exposed as the media manipulators pushing subjective agenda whilst wearing the mantel of objectivity.

A few months back Bondi` wrote that I ruined his Italian lunch and spoiled` the taste of his carefully selected Antinori wine because I allegedly wrote an article were I advocated Labour`s return to use of violence.

All people of good intentions know that my article was doing the exact opposite. Under the title Blairing the Gap I advocated that Labour should reach for the middle ground of Maltese politics in Blair style and appealed for the power organisations to shed off their prejudice towards Labour. It was here that I made the remark that these organisations should do so unless they would prefer to see Labour return to their physical force practices so ably eradicated by Alfred Sant. I never` suggested that Labour should do so, but only speculated whether the prejudiced organisations` would prefer it to do so.

Turning my argument on its head Lou Bondi & co. argued that I was instigating Labour`s use of force when in fact I was proposing for Labour to be allowed to govern by reaching a pact with the middle ground as Blair did for Labour in Britain.

The Daphne used a totally transparent dose of irony when she claimed that if Joe Mifsud were to be assaulted in the same manner as the ex-Police Commissioner was condemnably assaulted in Republic Street, then there would be a chorus of approval. A straight undiluted appeal for Joe Mifsud to be physically assaulted. The irony is completely lost on me. And` those who know me know` that I don`t usually lose an opportunity to be ironic.

TMID editor apologised honourably. The Press Club immediately condemned the clear instigation of violence against a journalist. But Bondi who was so scandalised with my supposed threat of violence` saw nothing wrong with Daphne`s uttering even though Daphne herself had to explain that we are stupid for missing her ironic innuendos ( a simple apology would have been much more appropriate). On the contrary the Where`s Everybody` duo condemned the Press Club for their prompt statement` condemning the threat of violence against a journalist and accused the Club for using double standards.

Their measure of double standards is that the Press Club` never condemned their (Bondi` & Azzopardi) critics.` `Prime culprit is Manwel Cuschieri who continues insisting to expose their credentials and agenda.

Now Cuschieri` s style is not something I would totally endorse. I think he can be more effective by focussing on arguments rather than personalities. But Cuschieri has never come even anywhere close to instigating any sort of violence against anybody let alone claim that it would be applauded.

On the contrary Cuschieri goes out of his way to condemn violence. Cuschieri does not even pretend to be the shining example of unbiased and objective journalism, a claim repeatedly made by the Where`s Everybody` duo.

Can Bondi` please explain where is his consistency in savagely criticising me for what I have not said regarding the promotion of violence but unashamedly opposing the Press Club timely and unreserved condemnation of the use of violence against a fellow journalist`

Media manipulation is an art skilfully employed by the Where`s Everybody` duo.` They do it ten times more effectively then Manuel Cuschieri can ever hope to do. That is` unless he can convince a nationalist government to give him` peak time current affairs programmes on TVM` leaving the substantial resources of the TVM newsroom idle as standby scene watchers as` the job they were employed to do is expensively outsourced to the likes of Where`s Everybody` As the old adage goes never bite the hand that feeds you.

Free drinks tomorrow

Il-Kullhadd Free drinks tommorrow

Meta qrjat ir-rapport ta` konsultazzjoni li hareg il-Ministru tal-Finanzi lil imsiehba ta` MCSED bilfors kelli niftakar f`dik ic-cajta.

Kien hemm hanut fejn il-parrucani gergru li s-sid qatt ma kien jaghtihom xi grokk b`xejn.` U biex ma jgergrux izjed dan wahhal tabella fil-hanut li kienet tghid `Free drinks tomorrow`. U qatt ma qalaghha minn postha u qatt ma ta grokk b`xejn ghax meta kienu jghidulu li gew ghal grokk b`xejn dejjem jghidlhom li b`xejn ikun il-grokk ta` l-ghada. Tomorrow never comes hawn min jghid!

L-istess ghamel il-Ministru tal-Finanzi. Qalilni li fis-snin li gejjin il-finanzi tal-gvern tant ser jitjiebu li l-gvern mhux biss ikopri ghal kollox in-nefqa rikorrenti izda sahansitra jiffinanzja mit-taxxi parti min-nefqa kapitali.

Issa sewwa sew dan mhux xi gherf gdid.` Hekk ghandu jkun u hekk missu dejjem kien. Zgur li taht gvernijiet laburisti fis-snin sebghin u tmenin dejjem hekk kien. L-affairjiet inbidlu u hzienu meta sar inkarigat mil-finanzi il-ministru kurrenti fl-1992.

Ghalhekk l-ewwel rejazzjoni ghal dak li qal il-Ministru hija `free drinks tomorrow`. Int mhux l-istess wiehed li fil-budget ghal-1993, l-ewwel budget tieghek, poggejt miri cari ta` kemm se tinzel l-ispiza tal-gvern billi jonqsu in-nies minn mal-gvern, kemm ser jizdiedu l-impjiegi mal-privat u hafna miri ohra li lanqas biss xammejnihom.

Mela kif tigi issa ghaxar snin wara, tinsa li int kont l-engineer tad-dizastru finanzjarju li qeghdin fih, turi soghba li ma rnexxilekx tikkontrollha n-nefqa tal-ministri shabek, u issa tahseb li kullhadd ghandu jemmnek dwar x`se tgahmel fl-erba snin li gejjin.

Huwa dak li ma ghamlux f`ghaxar snin, anzi faqaw il-kaxxa ta` Malta fil-frattemp, issa bhal konverzjoni ta` San Pawl se jaghmluh u jgibu kollox f`postu fis-snin li gejjin`

Jiena dejjem suspettuz meta inizjattivi bhal dawn jittiehdu fl-ahhar sena sentejn tal-legizlatura. Ghax min irid imexxi serju id-decizjonijiet iebsa jehodhom fil-bidu tal-legislatura meta l-elezzjoni tkun ghada l-boghod. Hekk kien ghamel gvern laburista fis-96 ghalkemm kif gew l-affarijiet ma kellux zmien bizzejjed biex jahsad il-frott tad-decizjonijiet iebsa li kien ha.

Izda kif tifhem lil dal-gvern li meta tela fit-98 fetah idejh u qassam zidiet bla sens lil tac-civil li komplew faqaw il-kaxxa ta` Malta Forsi prezz tal-voti li kien ha biex kisser mandat validu tal-gvern laburista` U issa iridna nifhmu kif gvern li qed joqrob ghall-elezzjoni se jzomm iebes lil Unions ma ma jtihomx zidiet.` Kollox bil-maqlub.` Kollox rasu l-isfel.

Kultant tahseb li fil-pajjiz hawn zewg gvernijiet.` Gvern ta` John Dalli li jghid hafna affarijiet bis-sens dwar x`hemm bzonn u x`ghandu jsir u x`ma ghandux isir.` U gvern iehor ta` Fenech Adami u Gonzi li jigu jaqaw u jqumu mit-twissijiet ta` Dalli u jaghmlu dak li jidhirlhom biex ikunu zguri li jtawlu c-cens taghhom fil-poter.

Qisna qed nghixu mil-gdid l-1996 meta budget deficit ta` Lm40 miljun fil-fatt splodewh bil-mohbi ghal deficit ta` Lm120 miljun biex naqqsu it-taxxa lin-nies ha jidhru sbieh qabel l-elezzjoni u hbew il-problemi li sab ma wiccu bhal buzzieqa lesta biex tinfaqa il-gvern laburista li tela hames snin ilu.

U rizultat ta` dan il-glied ta` Gvern maqsum huwa li l-poplu Malti jkollu joqghod bil-weghda ta` Free drinks tomorrow.` Izda ghal poplu Malti tomorrow jista jigi biss meta jerga mil-gdid jeleggi gvern laburista.

Media bias

The Malta Independent

Media bias

If any proof was needed on the substantial bias of the print media against` the Labour Party we had two instances in recent weeks which puts the writing in bold format.

Super One complex was one of the first targets for the anthrax hoax scare. Unlike the post offices Super One could not close down. It does not run a monopoly service as the post offices do where clients have no option but to wait for their mail. Super One clients have a choice.` If the station does not keep up its scheduled appointment with the audiences, for whatever reason, they will just zap on to other stations.

Bravely a nucleus of executives and technical employees camped inside the station for 3 days to ensure continuity with minimum disruption to the running schedule. A tent was built overnight in the car-park to serve as a temporary studio for guests that could not make their way inside the building until the scare was proved to be a hoax.

Yet the media practically disregarded this as a non-event preferring instead to give prominence to closed post offices. Just imagine if the shoe was on the other foot. If the scare happened to the PN`s media station under a Labour government. Just imagine how many front pages of daily newspapers would have been filled with the story and how many innuendos would have been floated that it is all part of a devious plan to silence the opposition. But that`s what friends are for,` I suppose.

The next event which the media has treated as a non-event is even more serious. The PN General Secretary confirmed in black and white on` two separate occasions that he has issued instructions to all PN spokesperson to refuse all invitations to take part in discussion programmes on Super One TV.` The excuse is as laughable as it is lame. He argued that PN representatives are not treated with respect as in many cases the debating panels are biased pro-Labour and the inclusion of PN elements is just to give the semblance of an open debate. He further argued that Super One TV is politically biased by including in the political armoury also programmes of pseudo drama and satire.

Now anyone who expects a political party to own a media station and such station should not be` biased to the political party`s editorial line is expecting the impossible. Super One TV is no more biased in favour of Labour than Net is biased in favour of the PN. But it would be a sad day for Maltese journalism if debate programmes on Super One TV were to exclude PN elements and vice-versa on Net TV. With all bias it is still better than no representation. I personally attended various debate programmes on both Net and TVM and more often than not the panel was loaded against me. Yet I did not regret my presence as I thought that it was a service to tele-viewers,` even Nationalist ones to have a contrasting viewpoint on the programme.

The real reason why the PN is boycotting Super One TV( excepting Min. Refalo it seems who accepted to appear on Norman Hamilton`s Bla Agenda notwithstanding the wishes of the PN general secretary) is that they wish to neutralise the increased effectiveness of Super One media by making it appear biased and one-sided.

Labour could well be tempted to reply in kind.` It would be a mistake.` The zero-sum game would benefit the PN as their TV comes nowhere near Super One in terms of effectiveness and diffusion.

Labour should expose the PN`s devious plan and insist that serious organisations like the Malta Press Club also condemn such a negative attitude by the PN`s general secretary.` The Malta Press Club could also take some initiative to stimulate ethics for` more balanced and informative debates on political parties media.

The Press should also condemn what is condemnable whoever is the author.

Crying for Argentina

Maltastar

Crying for Argentina!

As Argentina moves close to an official default on its foreign debt many Maltese investors have good reason to cry for Argentina.

I always amazed myself at the great exposure Maltese investors accumulated on sovereign emerging market bonds. For those unfamiliar with technical financial jargon emerging market is a polite way of describing under-developed and therefore more risky countries. Because of the risk carried by such fixed interest securities they carry a high interest rate (coupon) which is attractive for unsophisticated Maltese investors particularly at a time of falling interest rates.

My amazement turned to worry whenever I quizzed such investors as to their sensitivity to the risk they are carrying through such holdings. Almost invariably I realise that they had scant appreciation of the risk involved and that they were assured by their investment advisers at the time they parted with their money` that these bonds were `guaranteed`. Clearly the advisers made no effort to explain` that the guarantee was that of the government of Argentina whose credit-rating on the market was low and falling.

I once had the opportunity to flag this concern to senior officials of the Central Bank. I asked whether the Central Bank includes such low rated securities among its portfolio of foreign reserves and was given a flat no answer. They almost looked at me as if I had sworn in church. Then I asked why the Central Bank was therefore not showing any concern to the undue exposure being built at a dangerous national level as private investors are lured by irresponsible advisors to place their lifetime savings in such emerging market fixed debt securities with particular exposure on Argentina, Brazil and Turkey. I interpreted the silent reply as an attitude of we do not care about` what we pretend not to see.

I asked one serious stockbroker about this and he replied that in his firm he has only one investor in such securities and he has a written declaration that the investment was being made against the stockbroker`s advice.` So the problem is not widespread across the whole investment advisors industry.

Be as it is today many unsuspecting Maltese investors who had not the slightest idea of the risks they are assuming are now sitting on spectacular losses on the Argentina bonds. Argentina is planning to default on at least USD95 billion of bonds which dwarfs the 1998 Russian default on USD40million domestic bonds..` Overnight interest on Peso deposits rocketed to 190% as banks in Argentina tried to stem the outflow of capital.` The benchmark price for the 2005 floating rate bond fell on Thursday to 48.75 pushing the yield to maturity to 54.5% p.a.` triple what it was last June.

The default is in the form of a forced swap where Argentina is proposing to force its bondholders to exchange high coupon for low coupon debt in order to loosen the stranglehold of high interest burden which is suffocating the growth potential of the economy. Without such debt swaps further loans from the IMF would be almost impossible and the country would economically collapse forcing a devaluation of the peso and departure` from the parity exchange regime which Argetina has enforced these last 10 years through the Currency Board arrangement.

There is a lesson in all this even for our macro-economic management. Argentina`s debt in relation to its GDP is at 55% lower than Malta`s.` Furthermore Argentina has been forced to make savage and socially painful expenditure cuts to balance its budget to avoid having to increase its borrowing. In Malta our true national debt is around 90% of the GDP and growing at an alarming rate and we still need to borrow to maintain an obstinate deficit which is not responding to increased tax revenues as expenditure keeps rising still faster.

What is shielding us from the Argentinean-style` tragedy is that our debt is mostly in Maltese Lira not in foreign currency and it is well structured on a long term basis. But further accumulation of debt will inevitable loosen the faith of local savers in the local economy forcing Argentian style flight of capital and followed by measures as painful as the Argentinians are having to swallows as their economic dreams are shattered. We have to change economic course before it is too late.` The longer it takes the more painful the solution, no two ways about it!

True Lies

The Malta Independent on Sunday True Lies

When one tells a lie so persuasively and so repeatedly that one starts believing one`s own lie it becomes a True Lie. This is what is happening to the current administration. These are some examples of the True Lies being served almost daily on our media menu.

True Lie no. 1 is that the Labour administration is responsible for the growth of public debt to its current dizzy heights. Facts show otherwise. When elected to power in the last days of October 1996 Labour expected to find a budget deficit, as previewed in the approved` estimates,` of Lm42.6 million of which Lm6.2 was covered by grants leaving a borrowing gap of Lm36.4 million. Reality is that without any warning Labour found on its hands a totally unplanned deficit of Lm124.3 million` up from Lm43.1 million in 1995. Anyone who suggests that Labour built up this deficit in the last 2 months of 1996 believes in fairy tales.

So when Min John Dalli blames Labour` administration of 1997 and 1998 for accumulating national debt at a fast pace he should first explain how he expects,` a totally new and innocent administration finding a totally unplanned budget deficit three times that of the previous year, to break the growth of the deficit and start reducing it in just 22 months if it is not to break the social fabric of the country and bring it to chaos. And how could this be done with an opposition that was opposing even such simple tax measures, eventually kept on by the current administration,` as for example the tax of credit cards.

The answer is given by Min Dalli himself when in a more sober moment when reciting the speech for Budget 1999 he said ` Public finances are in very bad shape. It is an error to wrap this problem in cheap publicity.` To come near to finding a true solution one has to acknowledge that the current financial situation results from serious structural faults which were layered on each other over a long number of years`. And just in case anyone forgot Min Dalli has been in charge of public finance since February 1992,` barring the 22 month Labour interlude.

True Lie No. 2 is that through HSBC`s presence in Malta, investors took it for granted that the country had international banking standards.` The True Lie continues that this was also creating much more employment in all the other sectors.

HSBC had a presence in Malta through Midland Bank prior to its the acquisition of Mid-Med Bank.` This acquisition has not brought any visible foreign direct investment in any sector. Quite the contrary HSBC is aggressively promoting foreign portfolio investments in the parent organisation`s product portfolio.` To do so it even resorts to` misleading advertising to achieve its primary objective of stripping the Bank of as much as possible` of its deposit base.` May be they want to` ensure that a future Labour government can do as little damage as possible to HSBC`s ambition to control the deposit base so laboriously built by Mid-Med Bank and its predecessors.

True Lie No 3 is that nobody has effectively challenged the workings of the calculations leading to the price at which Mid-Med Bank was sold on the cheap to HSBC.` I have on innumerable occasions asked the Minister to explain to the nation why in `his` price calculation he taxed the discount factor by adding a 6% risk premium. This simple measure effectively halved the value of Mid-Med Bank. I am still waiting for an answer 30 months down the road.

True Lie No 4 is that money from privatisation would not go to reduce the deficit but to reduce the government`s need to borrow money. There is nothing untrue in this except in its pretension that this is good economic and financial management.` In fact it is highly irresponsible management. Privatisation revenues are one off revenues and should not be used to finance current operational deficits. Privatisation revenues should be applied to reduce public debt or to finance productive investments to replace the productive assets being privatised.

True Lie No. 5 is the claim that privatisation is being conducted in an open and transparent manner.` Forget for one moment that Mid-Med negotiations were concluded single-handedly under cover by the Minister of Finance. It was good to have soon after that a white paper assuring us` that henceforth privatisation would be handled by broad consensus in full transparency. This white paper was quickly forgotten. The public lotto is being privatised under terms which are unknown to any of us.` The bidding documents were restricted to the few interested bidders who could afford to pay Lm7500 to obtain a copy. Transparency demands that it should have been pasted on the internet to command maximum interest and to explain to the general public the strategies being adopted.

I ask myself what precautions are being taken to ensure that we do not end up with a gaming terminal in every street corner augmenting gaming and gambling far beyond the broad economic growth rate .` Has the government calculated the social cost that a sudden surge in gaming would cause through forced recourse to usury and other criminal practices` Has anyone made any calculation of the economic costs of such sudden surge in gaming as expenditure gets shifted from other consumption with much more economically effective multiplier effect.

These and many other` True Lies continue being reverberated day in day out until we start believing our own lies. Until villains become heroes, taxes become benefits, lies become truths, sinners become saints and offending and completely incompetent government` supposedly sees a sudden increase in` its mid-term popularity rating.` True Lies!

True Lies

The Malta Independent on Sunday True Lies

When one tells a lie so persuasively and so repeatedly that one starts believing one`s own lie it becomes a True Lie. This is what is happening to the current administration. These are some examples of the True Lies being served almost daily on our media menu.

True Lie no. 1 is that the Labour administration is responsible for the growth of public debt to its current dizzy heights. Facts show otherwise. When elected to power in the last days of October 1996 Labour expected to find a budget deficit, as previewed in the approved` estimates,` of Lm42.6 million of which Lm6.2 was covered by grants leaving a borrowing gap of Lm36.4 million. Reality is that without any warning Labour found on its hands a totally unplanned deficit of Lm124.3 million` up from Lm43.1 million in 1995. Anyone who suggests that Labour built up this deficit in the last 2 months of 1996 believes in fairy tales.

So when Min John Dalli blames Labour` administration of 1997 and 1998 for accumulating national debt at a fast pace he should first explain how he expects,` a totally new and innocent administration finding a totally unplanned budget deficit three times that of the previous year, to break the growth of the deficit and start reducing it in just 22 months if it is not to break the social fabric of the country and bring it to chaos. And how could this be done with an opposition that was opposing even such simple tax measures, eventually kept on by the current administration,` as for example the tax of credit cards.

The answer is given by Min Dalli himself when in a more sober moment when reciting the speech for Budget 1999 he said ` Public finances are in very bad shape. It is an error to wrap this problem in cheap publicity.` To come near to finding a true solution one has to acknowledge that the current financial situation results from serious structural faults which were layered on each other over a long number of years`. And just in case anyone forgot Min Dalli has been in charge of public finance since February 1992,` barring the 22 month Labour interlude.

True Lie No. 2 is that through HSBC`s presence in Malta, investors took it for granted that the country had international banking standards.` The True Lie continues that this was also creating much more employment in all the other sectors.

HSBC had a presence in Malta through Midland Bank prior to its the acquisition of Mid-Med Bank.` This acquisition has not brought any visible foreign direct investment in any sector. Quite the contrary HSBC is aggressively promoting foreign portfolio investments in the parent organisation`s product portfolio.` To do so it even resorts to` misleading advertising to achieve its primary objective of stripping the Bank of as much as possible` of its deposit base.` May be they want to` ensure that a future Labour government can do as little damage as possible to HSBC`s ambition to control the deposit base so laboriously built by Mid-Med Bank and its predecessors.

True Lie No 3 is that nobody has effectively challenged the workings of the calculations leading to the price at which Mid-Med Bank was sold on the cheap to HSBC.` I have on innumerable occasions asked the Minister to explain to the nation why in `his` price calculation he taxed the discount factor by adding a 6% risk premium. This simple measure effectively halved the value of Mid-Med Bank. I am still waiting for an answer 30 months down the road.

True Lie No 4 is that money from privatisation would not go to reduce the deficit but to reduce the government`s need to borrow money. There is nothing untrue in this except in its pretension that this is good economic and financial management.` In fact it is highly irresponsible management. Privatisation revenues are one off revenues and should not be used to finance current operational deficits. Privatisation revenues should be applied to reduce public debt or to finance productive investments to replace the productive assets being privatised.

True Lie No. 5 is the claim that privatisation is being conducted in an open and transparent manner.` Forget for one moment that Mid-Med negotiations were concluded single-handedly under cover by the Minister of Finance. It was good to have soon after that a white paper assuring us` that henceforth privatisation would be handled by broad consensus in full transparency. This white paper was quickly forgotten. The public lotto is being privatised under terms which are unknown to any of us.` The bidding documents were restricted to the few interested bidders who could afford to pay Lm7500 to obtain a copy. Transparency demands that it should have been pasted on the internet to command maximum interest and to explain to the general public the strategies being adopted.

I ask myself what precautions are being taken to ensure that we do not end up with a gaming terminal in every street corner augmenting gaming and gambling far beyond the broad economic growth rate .` Has the government calculated the social cost that a sudden surge in gaming would cause through forced recourse to usury and other criminal practices` Has anyone made any calculation of the economic costs of such sudden surge in gaming as expenditure gets shifted from other consumption with much more economically effective multiplier effect.

These and many other` True Lies continue being reverberated day in day out until we start believing our own lies. Until villains become heroes, taxes become benefits, lies become truths, sinners become saints and offending and completely incompetent government` supposedly sees a sudden increase in` its mid-term popularity rating.` True Lies!

Gideb ta' veru

Il-Kullhadd Gideb ta` veru

In-nazzjonalisti jahdmu bit-tezi li jekk gidba tirrepetiha hafna` b`mod konvincenti bizzejjed allura dik il-gidba ssir verita` u kullhadd jibda jemmen il-gideb inkuz l-istess gvern nazzjonalista.

Tajjeb li min zmien ghal zmien nifakkru il-gideb li jigi ripetut qisu litanija tar-ruzarju biex infakkru li gidba tibqa gidba anke jekk tghidha b`mod mill-aktar konvincenti ghal miljun darba.

Gidba li sikwit tinghad hija li l-gvern laburista ta 22 xahar bejn Ottubru 1996 u Settembru 1998 huwa responsabbli ghat-tkabbir fid-dejn nazzjonali li issa qed jifni l-ekonomija. Din gidba hoxna.` Niftakar qisu `l bierah lil Lino Spiteri fl-ewwel jiem li fih kien dahal ghar `responsabbilita ta` Ministru tal-Finanzi jishet is-siegha u l-mument li sar ministru u li n-nazzjonalisti kienu tassew fortunati li tilfu l-elezzjoni biex ma jerfghux il-piz tat-tahwid li hallew warajhom. Zbilanc ta` Lm44 miljun progettat ghas-sena 1996 kien ser jispicca tlett darbiet oghla.` Mhux miljun jew tnejn,` izda tlett darbiet oghla.

Zgur li mhux Gvern Laburista ghamel dan l-izbuilanc ghax Gvermn laburista ha l-kariga fl-ahhar jiem t` Ottubru u l-izbilanc, li dwaru ma kien issemma xejn qabel l-elezzjoni , tant kien kbir li l-kamra tal-Ministru saret qisha purcissjoni ta` nies dehlin bil-problemi ta` nfiq mhux budgettjat, dhul ferm inqas milli progettat u kumpaniji tal-gvern li kienu qed jinzammu hajja b`mod artificjali b`sussidji mohbija mit-Treasury Clearance Fund.

Jekk gvern laburista kellu jkompli jissellef kien biss ghax in-nazzjonalisti hallew dejn straxxnet li bhal ziemel mahrub ma zzommux f`daqqa jekk ma tridx tkisser il-fibra socjali u ekonomika tal-pajjiz. Gvern Laburista biex izomm ir-rata ta` dan id-dejn kien kostrett jiehu mizuri li gelghuh jidher ikreh u mhux kabbar il-problema.` Zgur tiftakru il-friza fuq inggagg mal-gvern, tnehhija ta` overtime, cash limits to spejjez rikurrenti , zieda fir-rati tad-dawl ilma u fuel u tant mizura ohra iebsa li ma setghux jigu evitati.

Il-htija ta` dan kollu mhux tal-Gvern Laburista izda ta` John Dalli li wara hames snin ministru tal-finazi halla herba warajh fil-finanzi pubblici. L-istess herba li qed mill-gdid tinbena bhalissa.

Gidba ohra li ergajna bdejna nisimghuha hija li d-dejn pubbliku` huwa minhabba li 8000 ruh gew impjegati mal-gvern bla bzonn qabel l-1987.` Issa ghaddew 14 il-sena mill-1987 `l hawn.` Hafna minn dawk in-nies telqu, irtiraw jew addiritura mietu.` Anke kieku dawn in-nies kienu verament zejda warajhom dahlu gliegel ta` nies bl-istess snajja mal-gvern. Mela kif nibqghu insemmghu problema ta 14 il sena ilu F`erbatax il-sena waqa il-hajt ta` Berlin, pajjizi komunisti ikkonvertew ghal ekonomiji tas-suq, l-Unjoni Sovjetika inqasmet f`20 bicca u min kien ghadu ma jmurx skola wasal biex jivvota fl-elezzjoni li gejja. Lanqas problema bhal din il-gvern ma kien kapaci jsolvi f`14 il-sena`

It-tielet gidba hija li meta nbiegh il-Mid-Med Bank il-ministru ta` rendikont shih quddiem il-Kumitat tal-Finanzi Pubblici u hadd ma kien kapaci jikkwerja xejn. X`ghamlu fil-Kumitat tal-Finanzi Pubblici ma nafx.` Li naf hu li jien ili nistaqsi ghala l-Ministru fil-kalkoli tal-valur tal-Mid-Med Bank dahhal risk premium ta` 6% li effettivament naqqset il-prezz bin-nofs u s`issa qatt ma wiegeb.` L-istess kif qatt ma wiegeb dwar meta ser jaghti l-flus li suppost hadu l-impjegati ta` l-ex Mid-Med Bank ghal Fondazzjoni tal-Haddiema li baqghet ma saret qatt u l-haddiema tal-Mid-Med Bank baqghu ma gawdewx bhal ma gawdew tal-Bank of Valletta u tal-Maltacom.

Ir-Raba gdiba hija li D-deficit tal-pajjiz qieghed jonqos. Il-gimgha l-ohra tajt tabella biex nuri li dan mhux minnu u li fl-ewwel disa xhur tas-sena id-deficit ghadu ezatt fejn kien fl-ewwel disa` xhur ta` l-1998.` Iz-zieda ta` Lm150 miljun fis-sena mit-taxxi li qed jghasruna giet sparpaljata f`infiq ta` kosnum u iehor kapitali b`mod li d-deficit baqa` fejn kien. Ovvjament issa meta wiehed iqabbel sena shiha 2001 ma sena shiha 1998 isib li d-dejn naqas izda dan loghob bic-cifri.` Dan ghax lejn l-ahhar ta l-998 John Dalli li kien ghadu kif dahal mill-gdid fil-kariga ghabba hafna spejjez biex ikabbar iddeficit ta` l-1998 li hu attribwieh lil gvern Lburista halli meta jqabbel iqabbel ma deficit artificjalment gholi.

Il-hames gibda hija li dejn nazzjonali qieghed 55% tal-Prodott Gross Domestiku. Id-dejn pubbliku f`Settembru kien Lm 1003 miljuni u GDP fis sena sa Gunju 2001` kien Lm1595 miljuni. Dan jigi 63%. Izda jekk izzid mill-anqas, u nerga` nishaq mill-anqas, Lm400 miljun dejn iehor mohbi fit-Treasury Clearance Fund u dejn mejjet fil-banek li huwa garantit mil-gvern u li ghalih il-gvern qed ikollu sahnsitra jipprovdi l-imghax, allura din il-percentwali tital ghal 88%.` Dan huwa livell perikoluz hafna u perikoluz izjed ir-rata ta` tkabbir tieghu. Tant hu perikoluz li l-Ministru Dalli ammetta iswed fuq l-abjad li l-privatizzazzjoni se ssir biex id-dejn ma jkomplix jizdied.

Sewwa mela flok nikkontrollaw in-nefqa u nfejqu il-marda nbieghu kull ma ghadna biex ikollna x`nonfqu bla ma nzidu d-dejn. Qisu drogat li flok ifejjaq il-marda billi jiehu l-kura ibiegh kull ma ghandu biex ikollu biex jixtri d-droga. F`dan il-livell miskin waslet l-amminsitrazzjoni tal-pajjiz li tiftahar b`dawn l-ereziji ekonomici.

Dal-gvern kollox fittizzju.` L-unika haga ta` veru li ghandu huwa l-gideb!

Avoiding recession

The Malta Independent

Avoiding recession

Last weekend I had the rare of opportunity of agreeing with views expressed by senior government spokesmen.

Minister Dalli was perfectly right in claiming that whoever was behind the string of anthrax hoax letters has not only inconvenienced those involved, including my team at Super One, but has damaged the economy both through the cost of handling these threats but more seriously through scaring away international business from our shores. The condemnation is unreserved.

I was also relieved to hear that the majority of cabinet ministers feel that the Police Commissioner should not take the Attorney General`s decision not to proceed with criminal charges as a clean bill of health for his credentials to return to the post. These credentials were severely dented by the Commissioner`s own testimony in the courtroom. The country deserves better than having an official in such sensitive post who, even in the best hypothesis, has readily and literally exposed himself to being blackmailed in the performance of his delicate duties. I stress that this is the best hypothesis if we give 100% credibility to the Commissioner`s version of events. Anything less than that would give rise to other much more serious issues.

Where I am finding great difficulty in having any sympathy with the opinion of Minister of Finance is his argument that anybody who dares mention the word recession is actually sabotaging the economy. This is as laughable as it is hollow. Most economies in the world are travelling on the brink of recession.` Japan is actually and officially in recession. USA could` probably be there soon. Economic commentators argue about this endlessly without anyone ever daring to` accuse them that they are sabotaging the economy.

What the Minister of Finance should be doing in order to ward off a recession is that rather than try to shut up his critics he should have emulated many countries who are serious in managing their economies by re-visiting Keynes doctrine in demand management at a time the economy has developed serious problems of over-capacity.

The problem is that the Minister is hardly in a position to do so. Whilst most countries revisiting Keynes are starting from a balanced or surplus budget situation and inflation at historically post-war record` lows, in Malta the Minister is the prime culprit of engineering a horrendous budget deficit co-existing with inflation which has now topped 4% pa. year on year.

The Minister has boxed himself in a corner with no room to manoeuvre with economic tools except to continue enforcing taxation on a dull economy with serious problems of over-capacity and (lack of) profitability.

Stopping talk of recession or the risks of one is as effective as addressing a malady by ignoring its symptoms. This government`s answer to addressing the recession by ignoring it can only guarantee that when it comes it will be deeper and more painful. Probably by that time the Minister will be on the opposition benches criticising whoever has to operate surgery on a moribund economy whilst continuing to pretend, as he did between October 1996 and August 1998,` that the death-bed patient can just walk and run by simply reciting the hail mary of confidence and consumption.