Total Solution

Maltastar

Total Solution

The happenings in Argentina are a living example of the social disaster which follows a macro-economic collapse.

It is the answer to those doubters who think that the Nationalist way of money no problem can be pushed eternally into the future and that we can spend our way out of any problem.` It is the reason why Labour`s more rigorous way of economic management as experienced between 1996 ` 1998 has a strong social dimension inbuilt in it.` `It is the only serious way to avoid the social havoc of an economic collapse which will bring ruin and poverty to the most needful and unprotected.

Let me outline the step by step road which would lead us to Argentina if the people who doubled our national debt in the space of five years and who made us one of the most indebted countries in Europe were to be returned to power to continue playing their illusionary finance game.

For some time the position can be sustained through privatisation revenues which finance would` the growing budgetary gap without addressing it. But when we work our way through the privatisation revenues without addressing the underlying deficit problem, the national debt will start rocketing up again.

If this should coincide with an upturn in the international interest rate cycle the cost of financing would become increasingly unbearable.` Interest rates would have to be held up higher then the composite rate of the Maltese Lira basket in order to protect against flight of capital. This will continue to stifle economic growth.

At some point in time the general public will become increasingly suspicious of how sustainable the financial system would be and the flight of capital would gather momentum irrespective of the interest rate differential. The risk of devaluation would be perceived as much higher than the gains through higher interest.

This will build on itself forcing the government into a crisis.` Local borrowing would be neigh impossible and government would have to resort to foreign borrowing at high interest rate to sustain the financial system. At this time our international credit status would have been depressed so much that even foreign borrowing would become quite expensive.

As normally happens, reality could be delayed but never avoided. The markets or international lenders` will force the government to face reality and administer the medicine which we all wish to avoid. These measures would be a crisis devaluation, a substantial cut in government recurrent expenditure including public sector payroll and social security benefits and the pension system.

At that point in time the Maltese people will receive an overdue wake-up call returning them from the PN illusion to the economic hard reality. Then it would be too late to avoid the pain as the Argentine lesson is so painfully showing.

Labour must provide solutions to avoid this grim scenario. It must ensure that solutions protect those most in need and who are faultless for the economic mess we are driving ourselves into. Rather than allowing the whole edifice to crush burying beneath it the most needful and the least responsible, Labour must propose realistic` ways to dismantle gently the wobbly financial structure they will inherit and gradually rebuilt on the sound foundations of real economic growth.` This is the only way` to ensure there is wealth to share rather than` misery to throw at one another.

Each day avoiding to address the real problems inches us that much nearer to an Argentine catastrophe making the real solution that much more difficult. The country needs a total solution not haphazard crisis measures.

Alfred Mifsud