Can the economy still be rescued

Maltastar

Can the economy still be rescued`

This is the question I am often ask myself. The economy has experienced three legislatures of benign neglect by a nationalist administration. The 22 month interlude by a short term Labour Government between October 1996 and September 1998 helped restore some sanity to an economy built on an unsustainable platform of consumption and care free spending.

But this short term respite has now run out of fuel and the ship is making water from all sides.

Obviously this is not what the government says.` But really I don`t give a damn what government says anymore. Like the captain of a sinking ship there is nothing sensible coming out from that source these days. On the contrary, rather then acknowledging the problem and trying to contain the water inflow which will sink the ship the government is more bent to convince us to deny our own senses and believe that all is well and that the ship is still sailing smoothly.

The first nationalist administration between 1987 ` 1992 found a debt free economy with capacity for consumption driven economic growth without compromising its fundamentals. The nationalists know only one recipe: money no problem. It worked like magic.

When re-elected in 1992 the same recipe was adopted but it no longer worked. The economy started running up debt at a perilous speed and debt accumulated to dangerous levels. Public deficit spun out of control and the 1996 election was forced on to the government to avoid disclosing a true fiscal deficit for 1996 of Lm120 million against a planned one of Lm 38 million. Such disclosure would have kissed their re-election chances good-bye.

Strange as it may seem the 1996 election results was a windfall for the nationalists. A one seat Mintoff dependent parliamentary majority and a Labour government firmly pledged to devote initial energy to changes in` the tax system rather than addressing the deficit, was a perfect recipe for a quick return to government permitting a totally unjustified pinning of all economic ills on Labour`s interim 22 months in government.

But problems do not just go away when a government changes.` Having exhausted the country`s debt capacity and unable to detach themselves from the money no problem mentality the government developed into two factions: John Dalli and all the rest. All the rest keep spending and pretending that the 1987 formula would work in all circumstances. John Dalli needed to somehow fund the wreckless expenditure of his `colleagues`.

Short of miracle powers John Dalli had a choice between tax revenue enhancement and generating one-off privatisation flows to contain the debt growth.` He was forced to use them both. But these measures needed to be packaged with Harry Potter Magic wrapper to make them look what they are not.

Increased taxation was thus packaged as tax enforcement. Why criticise the government for taking in more tax if we are being successful in bringing tax evaders into the net, regularly pontificates the Prime Minister. We are treated as foolish idiots. Because the problem is not that tax evaders are being reigned in. The problem is that the increased revenue is just being frittered away rather then being passed back to the lower classes who always paid their taxes to the last cent and who desperately deserve some respite.` Or if this is not permissible by the country`s state of finances, at least we could take consolation if we see the increased tax revenues reducing the deficit. But as I proved last week this is far from reality.

Privatisation revenues were disguised as new energy inputs to stimulate efficiency in the local economy. So far we experienced the shameful sale of Mid-Med Bank sale to HSBC which has benefited no one but the buyer. Regarding the impending privatisations I reserve judgment till they actually happen. But` placing itself in a position where it has to generate Lm47 million privatisation revenues` within the next 13 working days has all the omens of either playing magical window dressing accounting practices, or distressed asset sales.

So to revert to the original question can the economy be rescued` My answer is pointed and simple.` Only if a new government is elected before much more harm is done with a clear mandate and executive authority to administer the rescue medicine without expecting to have the comfort to study, consult, prepare reports or adopting trial and error solutions. The new government has to be practical and solution oriented.` Thick reports and useless seminars will not deliver.