Sunday, 30 November 2003

Missed Opportunity

The Malta Independent on Sunday 

Every first budget of a new legislature presents a rare opportunity to restore sanity to an economy abused for political convenience through budgets presented in pre-election mode.

If the first budget of a new legislature happens also to be the last one before we join the EU in membership, and one of the last before we join the Euro monetary system, than the rare opportunity turns into a unique one which would be fatal to miss. In presenting the budget for 2004, the Minister did just that. We can just as well cry for it.

There are two major problems which are drawing blood out of our economy leaving it lifeless and just ticking whilst the economies of other candidate countries keep roaring forward.

The first problem is the structural public deficit which in absolute terms is still were it was in 1996 when it was first discovered by an incoming Labour administration. Seven years later we still have a three digit million gaping hole in public finance. Over these seven years some Lm225 million of extraordinary funds (through sale of assets ` privatisations- and draw-down from the sinking funds accumulated in the more financially sober days to build a reserve for repayment of the national debt) were put through the Consolidated Fund. Without these the public debt would be Lm 225 million larger than it presently is.` Yet public debt has more than doubled since 1996, from Lm517 million as at December 1996 to Lm1175 million projected for December 2003.

Unless we address the structural public finance deficit, the public debt is destined to continue growing faster than the economy so that the percentage of public debt to GDP has risen from 40% in 1996 to 69% presently and still growing way out of the Maastricht limit of 60% necessary to gain a ticket into the monetary union. How is it that many (including the Prime Minister, the Minister of Finance and the Governor of the Central Bank) sing praises to the virtues of joining the Euro at the earliest possible date but stop short of explaining how we are going to reduce the debt level to within Maastricht criteria remains a mysterious local version of trivial pursuit. 

The other even graver problem is that the economy is not growing healthily and the anaemic growth it is registering is dependant on unsustainable bad habits of over-consumption and government spending largesse.

The budget presented last Monday attempts to address the first problem over a medium term but gives scant, if any, attention to the latter graver problem of growth.` This is short sighted and counter-productive. Restoring healthy economic growth could of itself make a substantial contribution to the resolution of the public deficit problem.  

 Indeed during this very same week France and Germany forced the ECOFIN ( Meeting of EU Finance Ministers) to accept to interpret the Stability Pact underpinning the monetary union more flexibly to avoid tightening the fiscal screws to address the deficit and dampen the nascent growth.

On the contrary enforcing Lm59 million (3% of the GDP) additional tax revenue to flow to the government purely to reduce the fiscal deficit by less than 1% of the GDP will do nothing to restore growth. It will dampen it.

What was called for was a balanced solution which put as much emphasis on growth as on deficit reduction. Measures to render the economy more competitive globally and more agile internally should have been coupled with revenue raising measures. At least if domestic consumption is squeezed to make up for past excesses, our economic units, especially in tourism, manufacturing and tertiary services would have been in a position to use their spare capacity to compete successfully externally.

Making the economy more agile internally means identifying the under-utilised labour resources across the whole public sector and invest in their re-training to make them employable in the productive sectors. This is the social pact that is needed and that the unions so often demand, a social pact that re-balances the rights and obligations of employees whether they work in the public sector or in the private sector. A social pact where those remaining in employment give up a small part of their standard of living to permit those losing their job through re-structuring, to find alternative productive employment. This is the sense of real solidarity! Solidarity is not that abused by the political leaders when they expect citizens to accept the pain of more taxation so that the government can burn up more resources without addressing the real underlying problems.

Unless we make our economy globally competitive again we will not attract investment and without investment economic growth will grind as the government tries to squeeze within the EMU criteria solely relying on increased taxation through better enforcement and new fiscal measures.

We continue to stare at the problems looking us in the face and yet go for the wrong solutions. What skills does one need to raise more revenue by jacking the general VAT rate up by 3% What skills are needed to raise excise duty on cigarettes in each and every budget with monotonous regularity?

What we need is real solutions through leadership and creativity. Such solutions cannot be painless and fiscal enforcement would have a part to play in the whole package. But the greater emphasis must be on economic growth, on measures which though painful can give reasonable expectations that they can make us again competitive.` We need leadership to work a social contract where the pain of adjustment is equitably shared with the motivation that economic growth will be restored to roaring levels in the medium term.

Indeed an opportunity has been missed. It is a pity. Rather than devise real solutions the government is more bent on massaging the media so that they refer to hard tax increases politely in their next day headlines as `revenue raising measures`. Pull my other foot!   

Friday, 28 November 2003

From Where the Growth

The Malta Independent 

The Budget presented last Monday is a deja vue. In 1999 the Minister of Finance published a projection of public finance up to 2004 which targeted that the budget deficit for 2003 to be 5.38% of GDP and Public Debt to be 57.36% of GDP.` Instead 2003 deficit will be 6.31% of GDP and the Public Debt will be 68.93% of GDP.

By everybody`s admission the patient is sick and the medicine is not working. Yet the Budget presented last Monday does nothing more than prescribe more of the same tax raising measures which were somewhat eased between 2002/2003, certainly with the elections in mind, and are now being put back in 2004 to the same level of 1999-2001.

Tax revenue growth which had come down from Lm60 million in 2000 and Lm53 million in 2001, to Lm41 million in 2002 and Lm 33 million in 2003, is expected to grow again next year by Lm59 million.

Yet just as the deficit was not controlled in 1999-2001 despite of hefty increase in the tax take, the same will happen again. In Appendix D to the Budget speech there is stated:
"The deficit (for 2003) would be equivalent to 6.3% of the GDP. One should note that, were it not for a serious and timely cost cutting exercise that was made half way through the year, in the expenditure of Government Departments and Public entities, the deficit this year would have certainly gone up to 7.3% of GDP".

Does the Budget Minister expect our gratitude for reining back after the election the control he let go of before it? Are we playing political games with public finances? Why was such control exercised only half way through the year and not on each and every single day of the year for the last seven years since the problem of the exploding public deficit was exposed late in 1996? 

The government insists on solving it own deficit problems by taxing its citizens.  Growth is nowhere to be seen and indeed government is only targeting nominal growth of 3.5% in each of the next 2 years. What the budget should have done is take measures to ensure that we get real growth in the order of 6% p.a. on a consistent basis. This can only be done if we get our economy competitive again and efficient enough to attract substantial FDI flows. Nothing of this sort has been provided for in the budget. It is the work of an accountant and not of an economist. It provides for deficit reduction through taxation rather than growth.

Taxation is easy. Using the middle class as sitting ducks to extract their purchasing power and compensate them on a minimum wage basis, requires no ingenuity. Raising excise duty on cigarettes has become a budget bore.` Raising VAT by 3% is a simple administrative step. But such measures will simply make the economy even less competitive as inevitably they raise inflation rendering real growth more elusive.

The fallacy of this approach is borne out in the government`s approach towards the Euro. The Governor of the Central Bank has gone on record that he favours early entry of the Maltese Lira into the Euro.` The Prime Minister expressed his willingness to oblige. The Budget Minister in his speech was even more specific.` He made a categorical declaration that he was `in favour of an early adoption of the Euro. This being so, it would, therefore, be appropriate to take the first step by applying soon after membership next May to participate in ERM II by early 2005.

This means that Malta is planning to join the Euro in early 2007 after the obligatory two years waiting period in the ERM II. To do so we have to reduce not just the budget deficit to 3% by 2006, which is at least on paper is provided for in the budget projections, but we have to reduce the public debt to below 60% of the GDP. However appendix D to the budget speech shows that by end 2006 in spite of Lm135 million extraordinary revenues from privatisations expected over the period 2004-2006, we would still have a public debt of 68.4% of the GDP. The 8.4% excess over the Maastricht criteria is equivalent to Lm160 million. No flick of the fingers really!

Not even on paper are we trying to get close to the Maastricht criteria and reality has a consistent habit of turning out worse than paper projections. Without growth there is no solution to our economic maladies and this budget does not provide for growth. Quite the opposite!   

Friday, 21 November 2003

Insulting our Intelligence

The Malta Independent 

On two separate occasions last weekend, main government exponents, in an endeavour to condition public opinion for the tough budget measures to be announced next Monday, chose to insult our intelligence.

The first occasion was the speech delivered by the Minister of Finance at the Bankers’ annual dinner where the Minister spoke of the tough issues that need to be addressed through specific measures in next budget. He chastised those who argue for re-structuring but always act as barriers to reform as they try to put justice at someone else’s door.

I could not disagree with most of what the Minister said. The insult to our intelligence was his forgetting this will be his 10th budget in 11 years. He spoke as if this was to be his first pretending he could place the blame elsewhere. If today we are in a situation where everybody agrees that government has no choices but to take tough measures the Minister need look no further than the Cabinet table when searching for culprits. Most participants in the economy inevitably defend their patch and try to shift the burden of adjustment onto others. But government has overall responsibility and it was elected with to lead us out of the trouble it has led us straight into.

Perhaps the Minister should have explained what has gone so awry in less than 9 months considering that this short while ago he was emphasizing so vigorously, in pre-election mode, that government finances were on sound footing and that the economy was growing stably. At that time he often tried to ridicule critics like me who exposed the real situation which government is now forced to accept, as pre-election soft dreams change into hard reality.

The second insult to our intelligence came from none else than the Prime Minister himself. In his closing address to the party general conference he admitted his apprehension at the size of the accumulated national debt. But in a vain attempt for self-justification he proclaimed that there were assets to justify this debt. He mentioned infrastructure investments like energy and water generation, production and distribution, airport development, Freeport, telecommunications, and Gozo Channel vessels. This apart from other investments in social and non-productive infrastructure, like roads, housing, hospitals, education etc.

The truth is that the productive investments mentioned by the Prime Minister were in their large majority not financed through borrowings which accumulated in the national debt. They were financed by separate direct bank loans raised by the para-statal entities concerned. So Enemalta has its own debts with which it has financed the power station development and this does not form part of the national debt. The same applies for Water Services Corporation, Gozo Channel/Gozo Ferries, Maltacom and Freeport Corporation. The Airport was financed by its own debt and has since repaid to the government through the part privatisation deal much more than government had originally invested in it.

Furthermore one has to remember that the government has had special privatisation revenues and special revenues from dismantling of accumulated loan sinking funds which have financed a large part of the social infrastructure. Without these special funds the national debt would be much bigger than it presently is. Just to recall, the special one-off privatisation revenues were generated from sale of 100% of Mid-Med Bank, 75% of Bank of Valletta, 100% of Lombard, 40% of Maltacom, 40% of MIA and others of lesser importance together with an average of Lm12 million p.a which has been drained from the sinking funds since 1999.

No, Prime Minister! The national debt has not financed productive or infrastructure investment. It has financed, tertiary education that strokes students to think that success is equivalent to high consumption but starves the library from funding for new publications, building hospitals we cannot afford, roads that get re-done with monotonous regularity and wasteful subsidies which postpone the problems without addressing their cause.

The best proof of this is that whilst the economy is growing anaemically the national debt is galloping forward at double-digit rates and will take a step increase as hidden debt start being converted into central government debt. The first such step will be taken as shipyards debts with the banks and loans to the shipyards from the Treasury Clearance Fund will unavoidably have to be covered by central government debt paper once shipyards loans are being written off as part of their re-structuring exercise.

The national debt is already 65% of GDP and bound to increase. Nothing will in the next few years bring it back to within the 60% to permit early entry into the Euro. Economic growth is just too slow to balance the equation from its side and attempts to solve it through further tax squeezes, just when other countries are loosening their fiscal screws, will only help to depress the economy and augment the problem.

Whichever way you look at it if we really mean to join the Euro at an early date as the Central Bank Governor has recommended and the Prime Minister stressed he wishes, we unavoidably have to render the economy competitive again through an across the board downward adjustment of our rate of exchange which all have to accept as an unavoidable re-structuring measure to roll-back the excess consumption financed by the national debt and bring it in line with EMU criteria.

Attempts to solve the problem without facing this reality is just more waste of time and resources which we can ill-afford.


Sunday, 16 November 2003

Why Me?

The Malta Independent on Sunday 

This is what 900 shipyards workers who were declared redundant and unfit for the development plans of the new shipyard company were loudly asking last week.

Downsizing the shipyards’ work-force is inevitable for its survival. Given that we are struggling to get more work throughput, efficiency cannot be gained by doing more with same resources. It has to be achieved by doing the same with less resources. Less resources means labour redundancies.

This plan was negotiated with the GWU and voted in by the employees themselves. Yet when it came to the selection process of those employees who had to leave to give a chance for the enterprises to remain afloat and secure the jobs of those who were chosen to remain, those affected inevitably asked why me?

I contend that the way the exercise was handled this time is strategically superior and more sensible than earlier similar exercises. Those employees who are needed to stay have been ring-fenced and are not being offered any early retirement scheme. In earlier versions of slimming down programmes early retirement was generally open to the whole workforce, leading the shipyard to lose some of the most talented hands which were desperately needed in the survival plan. It makes no sense to offer those you need most cash handouts encouraging them to leave.

This time at least the management has protected the human resources it needs for the survival exercises and offered retirement schemes to those it considers surplus to its requirements. This by no means assures that the exercise has been thoroughly objective and driven solely by efficiency considerations. It would have been, and still is, much more preferable if management offers more visibility on the criteria used for the selection exercise to give confidence that decisions were made solely in the best interest of the new shipyard enterprise.

But I think that the “why me?” should be asked to the government in a wider context by the whole shipyards work-force. Why have the shipyards been chosen as a show of force for the government’s determination to stem the financial haemorrhage caused by State subsidies? This is all well in so far as it goes but it definitely does not go far enough.

Who is going to address the far more severe over manning that still remains in the public sector? The fact that this overmanning is camouflaged by direct budget expenditure votes rather than isolated as subsidy to State enterprises does not make it any less serious.

It is in fact far more serious than the shipyards’ problem. At least the shipyard workers used to punch in for work, work a few hours of the punched-in time and earn some foreign currency for the State. Many of the surplus workers in the public sector do not even care to punch in or out, do not bother to work at all and produce absolutely nothing.

In the interest of fairness the labour re-structure programme for the public sector cannot start and end with the shipyards. And it would be wrong to continue relying on early retirement schemes as a viable solution for public sector downsizing. This is expensive and unproductive. We cannot bring about efficiency if we continue to allocate substantial scarce resources to motivate people to drop out of the workforce.

Furthermore, as I have long been arguing, it is atrocious social discrimination for the State to allocate so much resources to free itself of unneeded labour resources while leaving totally unprotected those citizens who lose their jobs through redundancy in private sector enterprises.

Those who profess social democracy, including political parties, the unions and the Church just cannot pretend that it is OK to create such gross discrimination between citizens who work in the public sector and those who work in the private sector. Resources have to be fairly allocated to balance the rights and protection among all citizens who equally contribute taxes on their earned incomes whether earned from public employment or private enterprise.

If we have financial resources to oil the re-structuring process these should not be applied to pay excess resources in the public sector to opt out of the labour market. They should be applied to re-train excess labour resources, whether in the public or in the private sector, to learn new skills to facilitate the transition to new productive jobs.

This is what social justice demands. This is what good economic management demands. Resources applied on re-training will be repaid through economic growth generated when the re-trained resources are placed into productive jobs. On the contrary resources spent on putting people out of the labour market will simply produce more demands as these people claim their rights in social support schemes.

Yet in the face of all this social injustice everyone seems to have lost interest in protecting private sector employees by insisting on fair re-balancing of workers rights and obligations across the whole labour market. Everyone seems blind to the plight of those who are being forced to retire early from private sector jobs not because they chose any cash bundle through some early retirement scheme but because at their advanced age with out-dated skills they have no chance of finding a new job in an economy which is losing jobs at a faster rate than it is creating them.

The plight of these middle aged redundant former private sector employees who daily lament “why me?” remains unheard by those who have the social responsibility to do better.

Friday, 14 November 2003

Euphemistic Flexibility

The Malta Independent 
The September Quarterly just published by the Central Bank features on page 33 a chart showing the NEER and REER. For those not conversant with economic acronyms NEER means Nominal Effective Exchange Rate while REER is Real Effective Exchange Rate.

The NEER measures the value of the Maltese lira with a weighted composite of the currencies of our main trading partners and competitors. The REER, that is a more reliable indicator, adjusts the NEER to take account of inflation differentials between those prevailing locally and those applicable in the benchmark composite.

The chart shows that compared to a starting position as at January 1995 of 100, both the NEER and the REER index were at around 108 as at end of last July. In layman’s terms this means that our rate of exchange has hardened by 8% beyond what is justified by inflation differentials.

Many consider devaluation of the Maltese Lira a dirty word to mention let alone to contemplate. There is a strong argument that with an open economy like ours using the rate of exchange as an instrument of economic policy would have scant results given that we import most of what we consume and export most of what we produce. The argument for stable exchange rate is pervasive and the monetary authorities have always considered stability of the rate of exchange as an objective in its own right.

This differs quite distinctly from the behaviour of the Central Banks responsible for the main trading currencies. They profess emphatically that the fixing of exchange values is a market function and their role is to ensure that the market remains orderly and not to suppress it. May be the exception to this is the Japanese Central Bank that is known to intervene heavily on exchange markets to influence the rate and not just to retain it orderly.

Robert Rubin, the former Treasury Secretary under the Clinton Administration, accredited with the strong dollar policy, has just published a co-authored book titled ‘In An Uncertain World’ where he explains how careful he had to be in using consistent and vague phraseology when reply to pressing questions about the US administration exchange policy. He always maintained that the administration favours a strong dollar policy but the actual level is a market function which the Authorities would intervene to influence only in case of undue market disturbance. The level of the rate of exchange should be the consequence rather than the cause of economic performance

On the local front the Maltese Lira is not traded internationally. Its level is determined through a transparent peg against a basket of currencies. The intention is that gradually the basket will be replaced by a straight Euro peg until the Maltese lira is fused into the Euro when eventually we will join the EMU.

But should we disregard the 8% overvaluation at a time when clearly the local economy is struggling to maintain its international competitiveness? Regaining this competitiveness through inflation differentials looks quite impossible. Our partners/competitors inflation rate is very low and getting much lower than that would raise the spectre of deflation. Furthermore this will take time which cannot be afforded either by consequences of our having to compete with an over-valued currency or by the timing schedule for euro-accession.

The risk of locking into the Euro at an over-valued rate that cannot be subsequently corrected, is too grave to contemplate. The pressure to come within EMU criteria solely through fiscal measures will deliver social pain which will be carried by a narrow segment of society i.e. those who are forced to lose their job in the re-structuring process.

An adjustment in the rate of exchange to remove its declared over-valuation will automatically render us internationally competitive, bring us within the EMU criteria avoiding the need for hard fiscal measures, and spread the adjustment pain on a wide spectrum of society and not just on those unfortunate enough to lose their jobs.

If devaluation is too dirty a word to contemplate let’s euphemistically refer to it a adjustment, removal of over-valuation or flexibility of the exchange rate. After all that how the G8 recently referred to the USD fundamental over-valuation. The objective of exchange rate stability should not be taken to mean that we should tolerate or condone an unjustified overvaluation of over 5% which has been carried for over 5 years with clearly dismal economic results.

Friday, 7 November 2003

Abstract Agenda

The Malta Independent 

The general conference of the Malta Labour Party that should conclude its business this weekend is forced to deal with an abstract agenda.

This being the first meeting following the election defeat of last April (the special conferences of May were purely for the election of the leadership) the general conference should be discussing the analysis report which the Party executive commissioned to an autonomous working group` Ever since the working group handed in its analysis report this has been treated with strict confidentiality. It was rapidly buried in the Party`s darkest vault.

The conference delegates collectively form the Party`s highest organ. They have not been allowed to get the slightest glimpse of the analysis report.` They are not being given the opportunity even to air their views in demanding accountability as to why the election victory they were assured was close at hand, in fact resulted so far off. Instead they are being forced to take sides between the present and past leadership in a two-versioned motion on the Party`s future EU policy which ought to leave as much room for discussion as yesterday`s weather.

If the Party is to bring itself in the mainstream of the electorate`s thinking it really has no option but to accept that Malta has decided to seal its future as an EU member and that this is an irreversible step that leaves no room for further discussion. KMB`s motion to keep open the possibility of renegotiating the accession treaty is far less practical than dismantling the Delimara power station he had vehemently objected to and rebuilding it at Benghajsa where he seemed to prefer it. Certain things that happen cannot be made to unhappen.

The wonder of wonders is why has the Party administration allowed, indeed stoked up,` the confrontation with KMB to mature into a full blown debate at general conference level when what KMB is proposing could be accepted in spirit but without the commitment to renegotiate the Treaty.` As events unfold inside the EU, opportunities will present themselves to re-interpret or move away from certain negative aspects of the treaty in deals where we trade our consent on other matters where our vote would carry weight. Inside the EU this happens quite regularly and we have to learn to do it.` Recently Italy got the OK for a long standing dispute on milk quotas in exchange for lifting its objection to endorse a totally unrelated EU savings directive.

One gets the impression the Party administration was not at all displeased to allow the KMB debate to escalate the way it did. Debating the issue with KMB on a third party media bears witness of the wish to stoke up rather than kill the issue. It offers a very effective diversion from the compulsion to demand accountability for last electoral defeat. Had the conference delegates not been alienated by the confrontation with KMB they would probably demand an answer from the Leader and the outgoing administration to very simple questions.

Why did Labour have to lose an election to change its view on EU membership? Why were genuine Labourites forced to vote against their own party when they were offered a choice between Malta as an EU member or Labour in government? Why was Labour`s non-EU membership policy considered so sacrosanct before 12th April as worth losing an election for? Why the rigidity on EU policy before the election and now this flexibility after condemning the party to an overstay in opposition? 

I have repeatedly asked these questions. I never got any reply if not in the form of an admonishment that my questions were harming the Party. Indeed these questions bear no answers that will not place the burden of Labour`s electoral defeat right at the door of those championing the pro-EU resolution. By rubbishing KMB they can avoid being held accountable to the general conference. On the other hand KMB et al continue to damage the party not only by trying to keep it out of the mainstream of modern political thinking but also by giving a pretext to the leadership and the administration to use their stance as a diversion from the real issues that the conference` should be discussing.

Meanwhile the government continues to break every electoral pledge with impunity as the country suffers not only from a fatigued government but also from an opposition that seems more bent to protect individual positions rather than collectively positioning itself as an alternative government.

The general conference agenda is an abstract one indeed!

Sunday, 2 November 2003

Just Another Expensive Patch-Up

The Malta Independent on Sunday 

Drydocks employees this week approved the structure of the agreement so ably negotiated for them by the GWU. Indeed they should be thankful and appreciative of the solid defence that the GWU made on their behalf. Re-structuring at the shipyards is unavoidable not so much for EU commitments undertaken but more to stem the financial haemorrhage that has been going on for the last 18 years and that has piled up debts exceeding Lm320 million.

Yet taken in a wider macro-economic view this agreement is likely to be just another expensive patch-up. It also raises serious doubts about government`s true resolve to address the issues which have been left festering uselessly for so long and which have burnt up so many scarce resources. Rather than wasted these resources should have applied to achieve real re-structuring that has always been promised but never delivered.

Look at it from the taxpayers` view. Nine hundred employees are being lifted off the books. Assuming that these are surplus idol labour I would reckon that these were costing the shipyards some Lm7 million to maintain.` The remaining 1700 workers will remain employed with the organisation that is to succeed Malta Drydocks and Malta Shipbuilding.` If on average we have been subsidising the shipyards to the tune of Lm15 million p.a. (more in recent due to the financing of early retirement schemes) what assurances have been built into the agreement that efficiency gains of at least Lm8 million have to be included. Where are these coming from? Or is it just the saving in financial charges on the amount of debt that is being written-off? Saved finance charges on written-off debt of Lm320 million could amount to some Lm20 million that added to the Lm7 million saved wages for the 900 workers being lifted-off the books, will render the company profitable without delivering a single impulse of increased productivity. 

And yet only increased productivity that can deliver our shipyards to a state of commercial sustainability. If notwithstanding EU rules and all, the slimmed down organisation does not generate a sharp increase in productivity than we are just wiping-off one slate clean to start writing up another one. Productivity improvements comes from investments, flexibility of the workforce, and management obsession with control on timely deliverables on the agreed quality levels and within budget. It takes management systems which track and reward efficiency and discipline defaulters. Are the work culture and work practices so much embedded within the shipyards ready for this change?

Tax-payers will still have to foot the bill of the Lm27 million `saved` expenses which although no longer on Drydocks` successor books are still on the taxpayers` back. The wages element of the savings could be mitigated through the operation of early redundancy schemes. But on a macro-economic basis these schemes are a very expensive method of delivering the necessary labour mobility and flexibility and on a social basis they are an absolute heresy.

Early retirement schemes, especially if operated on a voluntary basis, tend to attract the most able-bodied of the work-force who are more likely to find alternative employment given the skills they possess. They are attracted to the idea of cashing a lump sum of money for a change in the work environment. This could leave the organisation with the least productive layer of employees which will make the achievement of productivity gains within the successor organisation so much harder if not neigh impossible.

On a social level what sense does it make to give such lump sums to those who have no real problem to find alternative employment rather than use such funding to train the whole workforce to gain new skills. It is this multi-skilling which best guarantees efficient job mobility and flexibility. A trained worker is both productive within the organisation and can easily find alternative employment outside it.

And taking it further in a wider context what social sense does it make for the State to offer generous early retirement schemes to employees in para-statal organisations and leave relatively unprotected employees in the private sector whose only protection in case of redundancy is a maximum of 12 weeks notice` Are Maltese working in the private sector an under-privileged lot? Are they taxed any less than their brothers, sisters and friends in the public sector? 

As long as we continue solving problems in this patch-work method we continue feeding the system of political patronage which is the main source of our economic problems. Voters will continue to make pressure on their political representative to procure them public sector jobs where redundancy comes with an `if-you-please` message and a bundle of cash. Why choose a private sector job where you have to work much harder, including full days in summer, and were job-security is not much better than a closed door and 12 weeks pay? 

We are all witnessing the structural financial problems of the country. We have been warned of a stern budget as a result. Does it make sense to continue burning resources in this unsociable and unproductive manner rather than address the problem in a holistic manner and devise re-training schemes for the entire over-manning across the whole public sector?  

And how can we promote early retirement schemes with one-hand and push for extended pension retirement age with the other? Can we go both left and right at the same time?

We seem to have lost all sense of creativity and all elements of true leadership. The taxpayer will unavoidably have to pay the price, yet again, of this just another patch-up.