Disconnection

Maltastar

Disconnection

`is it fiction or fact,` am I really going mad go` the lyrics of Malta`s entry for this year`s Eurovision song contest` - Ira Losco`s 7th Wonder.

And I can ask the same question about` what is was going around in Malta in the financial and political spheres` last week..

Take the financial aspect. Stock Exchanges the world over had a bumper week. On average they registered an increase of 5% and in case of Japan the increase was more pronounced in the region of 9%. Apart from that,` the increase is not considered speculative but well under-pinned by an array of economic data which provides compelling evidence that both the US as well as the European economies have started to grow again and that there are some indications that the growth will be stronger than anticipated. Increase in manufacturing output, reduction in stock levels and increase in non-farm employment, added with positive indices of business sentiments are considered by market analysts as positive harbingers of a fresh wave of economic growth leading to increased consumption and corporate profits.` The up-turn in share prices world-wide price this growth into equity valuations.

In Malta the local stock exchange, had its third consecutive negative week. Investors continue to shun Maltese equities` preferring the bond market and other capital guaranteed investment products. The share prices` of the major banks and of Maltacom, the relative big caps on the Exchange, continue to drift aimlessly with the direction inclined south whilst all other international` bourses are moving north.

What`s the source of the pronounced disconnection of the local finance market from international capital markets sentiment` Reality is that local business sentiment is still gloomy and` investors feel that the government has no serious plan to place the local economy on a serious and sustainable growth path.` They feel that government`s only success in more efficient tax collection mechanisms,` rather than addressing the underlying deficit problem, is facilitating government avoidance to control its excessive expenditure and wasteful consumption habits.` It permits the government to continue buying a dozen Alfa Romeo cars for the consultants in charge of administering the hundred million direct order of the Tal-Qroqq hospital!

Business pessimism` leads to restrained consumption which threatens corporate profitability and leads to suppressed equity prices. Whilst other countries that in the nineties got their deficit problem under control have had the facility to pump prime their economies through fiscal demand management and lose monetary policy, in Malta government`s tight fiscal position constrain it to apply the fiscal brake on an already fragile and contracting economy. Hence the disconnection.

The political disconnection is the government`s feel ( or lack of it)` for the mood of the electorate. Whilst Labour should avoid interpreting local council election success as a near guarantee of similar achievements in the general election, the nationalists cannot but admit that their disconnection from the population is now achieving chronic and irrecoverable proportions.` If Labour cannot assume that they will win the next election the nationalists must necessarily assume that unless they engineer a turnaround of mega proportions they are well in line to lose the next elections.

May be the nationalist could learn a lesson from this.` Stop telling the people that all is well,` that there are no problems ahead, that you have all the answers to their questions and that all they should do is just continue to place blind trust in you until Brussels start raining funds upon us.` People have been bitten enough and now they are twice as shy.

The electorate is feeling disconnected from its government. In fact they feel they are not being governed at all and show more faith in Labour local government`s achievements. People feel disconnected from its government because government is not being honest and keeps pretending that all is well in spite of their feeling the pain of economic retrenchment.

People are demanding the truth about the state of the economy and seek real practical solutions from whoever expects to govern them. They know they can`t get them from the present government and some feel that this can only come from the EU and therefore choose the EU option for the wrong reasons. In the remaining months to the next election Labour has to prove that it has the right solutions for the country`s problems and that it deserves to be trusted to implement its good housekeeping policies at the local level to the national economy. The disconnection with the people needs to stop.

Alfred Mifsud





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