Friday, 30 April 2004

Getting Serious About the EURO

The Malta Independent 

On page 47 of the Central Bank of Malta Annual Report for 2003 chart 4.5 (reproduced herewith) is titled REAL AND NOMINAL EXCHANGE RATE – INDICES FOR THE MALTESE LIRA. This adopts 1995 as the 100 index base and shows that as at the end of 2003 the real rate of exchange of the Maltese lira had overvalued itself by nearly 10% over its 1995 base.

To quote the Central Bank of Malta verbatim as to what this actually means

“A rise in the Real Effective Exchange Rate (REER), ceteris paribus, suggests a loss of price competitiveness and vice-versa. Given the nature of the Maltese lira exchange rate basket, movements in the Nominal Effective Exchange Rate(NEER) are rather contained. It is therefore movements in relative prices that exert the major impact on the REER. The NEER rose by 0.5% during 2003. At the same time, the REER gained 1.1%, as a decline over the first three quarters was offset by a rise towards the end of the year, when year-on-year inflation in Malta picked up and exceeded inflation abroad.”

A 10% overvaluation is a major misalignment by all counts. In a highly competitive world it makes our export product and tourism uncompetitive. This is showing in our dismal economic growth performance, stagnant exports, declining tourist counts, and structural current account deficit in the balance of payments. It is not yet showing in our reserves position but this is more due to savers’ inertia and an interest rate policy allowing a premium over relative overseas market rates. I contend it has little to do with an appropriate rate of exchange value for the Maltese lira.

I am not arguing that a realignment of our rate of exchange to the 1995 base is an automatic solution to our problems. I am on record several times that such adjustment on its own will have very short-lived benefits as it feeds further rounds of inflation necessitating further exchange rate adjustments. But as a part of a total re-structuring package there is ample case to be made that a re-alignment in the exchange rate could deliver the desired results better and quicker.

I just cannot fathom therefore how the Governor in his report declares that

“The Maastricht inflation and long-term interest criteria have been met on a sustainable basis, and there are no indications of major misalignment in the value of the Maltese lira.”

Arguing the virtues of maintaining a stable rate of exchange policy is understandable, but negating one’s own research presented in the same report and describing a 10% real over-valuation as giving no indication of major misalignment is negating bare-faced facts.

But the wrong assumptions in the Governor’s report go even further. He categorically assumes that the fact that we have so far managed to pass the Maastricht criteria test for inflation and long term interest means we can put our mind at rest about continuing to adhere to such criteria even whilst addressing the fiscal deficit and public debt in trying to bring them within the EMU benchmarks.

If only it were that simple. The economy is under stress from lack of flexibility, lack of efficiency, insufficient productive investment and a general waste of resources. This is the fire under a kettle with boiling water where the vapour is coming out of a spout in the form of excessive annual fiscal deficit and horrendous rapid accumulation of national debt.

We need to remove the fire from underneath the kettle by performing real economic re-structuring along the lines of the 10 objectives I had explained in this column in my contributions during the first quarter of this year, and as further explained in a recent address I made at a Seminar of the Institute of Financial Services ( full text and presentation can be downloaded from my web-site). Otherwise as soon as we try to block the vapour outlet from the spout of fiscal deficit the pressure will start showing elsewhere. The pressure will come out from the next point of least resistance in the form of higher inflation, higher interest rates, loss of reserves and eventually a forced rate of exchange re-alignment.

Joining the Euro is a national effort which cannot be guided by the Central Bank alone or even by the government alone. Joining the Euro without conducting a priori real economic restructuring will eventually put all the stress of economic adjustment on the real economy, on growth, on employment and on general macro-economic stability. While other countries would score points as they use the Euro to attract investment having undergone proper economic re-structuring prior to joining, we might have to do the re-structuring through the Euro discipline after joining when the only variable left at our disposal would be economic contraction of the type suffered by communist economies when they were suddenly opened to market forces.

The Central Bank is right in demanding urgent re-structuring. It is wrong in applauding the government for promising to adjust the deficit by 2006 without explaining how. Applauses should be reserved for deliveries not for promises. It is also wrong in negating the existing misalignment in the value of the Maltese Lira.

Sunday, 25 April 2004

From the No Side - A Year Later

The Malta Independent on Sunday 

What has happened to the substantial minority that had voted against joining the EU this 1st May? Have they changed their mind or have they simply accepted EU membership as an irreversible reality?

As someone who had argued with conviction that there was a better choice to EU membership I can well explain where I stand now and where I stood before the referendum.

I believed then and still believe now that given our particular characteristics, EU membership has substantial disadvantages through disproportionate costs of bureaucracy to comply with the rigour of the acquis communitaire. I still think that it would have been more smart for us to negotiate on a bilateral basis something which was more tailor-made to our requirements rather than enter into a structure which is certainly unsuitable for countries of our size.

So as a matter of principle my views have not changed. I am however one year older and one year wiser and certain doubts which I used to have about the feasibility of the alternative solution have intensified.

I personally never argued the case for or against EU membership in black or white terms. I have never argued or even hinted that if the majority decision would be to choose the membership route then that would be a straight ticket to hell. I always kept my distance from the unofficial but well cycled clich├ęs of senior MLP exponents who argued against EU membership in terms of ‘allaharesqatt’ (God forbid).

My line has been consistent. There is a better alternative outside membership that suits our characteristics of size and flexibility much better, but that in the end we can survive both in and out as both policies offer opportunities and threats. The real difference is ourselves, our determination and our readiness to do what we have to do with discipline and consistency and to stop the practice of throwing all caution to the wind for cheap propaganda gains to extend, seemingly perpetuate, political hold on power at grave economic costs.

Let me explain this in cola and lemonade terms. Let’s say membership is cola and non-membership is lemonade. I used to argue that lemonade is better than cola but I never argued that cola is cyanogenic and kills instantly.

I am one year wiser because the trust I had that in the No side of the fence there was the stronger sort leadership that is necessary, in the absence of the EU membership discipline, to make a success of it, has gone. It has evaporated when I saw those who used to argue that cola kills instantly, re-positioning themselves unashamedly and argue that cola, while not being the elixir of eternal life that the Yes campaign often tried to depict, is quite ok provided you drink it from lemonade bottles.

Even the best marketing guru would have problems selling cola from lemonade bottles. The perception is just not right and in business as in politics perception is reality. So when I see much lesser mortals seeking to perpetuate their stay in power by adopting a complete reversal of their formal policies, then the doubts I had on the availability of the leadership qualities to make a success of the No policy grow to the point of conviction that for all its theoretical merits it lacked practical application.

And quite frankly I think that the narrow margin that gave a majority to the Yes side had exactly this on their mind. They were and still are not enthusiastic about membership. They know that membership is no magic solution for our economic ills. But they believed that on the No, as much as on the Yes side, there was no quality leadership to impose the sort of discipline to stop this country from destroying itself and they preferred the external discipline of EU membership and eventually the much tighter discipline of Euro membership in order to save us from ourselves.

For me the issue is closed. No matter how much I still believe that with the right sort of leadership we could have cut a much better deal with the EU outside membership, we have to operate within the boundaries of available or accessible resources. Our leadership qualities could only get us an off the shelf package warped and twisted to be made to fit us for a transitory period until we deform our characteristic to fit the off-shelf shape of the acquired structure.

Now that we know that membership does not kill we have to give it whatever it takes to ensure that we make the most of it. And the advantages of membership is the discipline it should enforce on our leaders to perform the economic re-structuring without further delay. Without such re-structuring we cannot make the most of membership.

Membership success has to be measured in terms of the flow of foreign direct investment we are able to generate because we can be perceived as members of an organisation with clear rules and guarantees that go with the single market and eventually the single currency. Without such investment flows we will wither away as membership on its own is no guarantee of prosperity. Real and productive investment is! We therefore need to waste less energy and resources protecting unproductive jobs and we need to apply all our resources and energy in creating new productive ones. Re-structuring is not about avoiding closures and redundancies. It is about ensuring that there get created far more job opportunities than the unavoidable job losses.

And for those who still believe that membership is poison leading to instant death let me just say how much I admire their consistency. Let me assure them that there is ample space in a democracy for them to continue seeking to persuade the majority of their views that the membership deal needs total re-negotiation. But let’s all understand that the priority is now investment attraction and job creation and that this is best achieved through a common effort to re-structure and not by obstinate resistance to change. And if there a case to be made about the constitutional validity of the referendum then the place to argue this is in the Constitutional court and ideally it should have been done before the referendum, though there is no legal bar for a post-event contestation.

The real challenges are just about to start. Whether they enrich or impoverish us depends entirely on us.

Friday, 23 April 2004

The Two Sides of the Pensions Problem

The Malta Independent 

The so called pensions problem can be simply split into two parts. The first is how we are going to maintain the existing system when it is clear that unless the parameters are re-aligned, the changing ratio of beneficiaries to contributors, as a result of demographic changes and longevity beyond retirement, will break the financial structure of the National Insurance scheme.

The second is that even if we find ways and means of re-aligning the parameters to make the current system sustainable under the changing demographic pressure, it is insufficient even at its maximum to maintain the standard of living of a growing segment who earn much more than the maximum pensionable salary.

Several reports have been written about the former, the latest by the World Bank, which indicate how the various parameters could be re-aligned to keep the present system sustainable. Foremost among these is the extension of retirement age from the present 61 years to at least 65 years, and alignment of benefits to the actual quantum of contributions made, rather the present mechanism which makes a very loose link between the overall level of contributions and the benefits entitlement.

Sooner or later, when government finds the conviction to manage the necessary change even at the expense of some electoral unpopularity, or when the system approaches its breaking point, we will have to do what we have to do, whether we like it or not.

Regarding the latter there are proposals for the introduction of an additional funded pillar which for those still under age 50 could contribute to increasing the maximum level of pension to ensure an adequacy of retirement income.

I have my doubts how necessary this really is. If we force people to save further for their supplementary pension we could create pressure for wage increases which could further complicate our international competitiveness. Furthermore, if government has to give fiscal incentives to stimulate the adoption of this funded pillar, it could compound its fiscal position at a time when its focus should be on re-sanitisation of the fiscal system.

My doubts were confirmed this week when the NSO issued statistics about home-ownership in
Malta. It is indeed heartening that 77.6 per cent of Maltese households own their residence and 11 per cent have an additional property. Upon retirement, all these will be the owners of their debt-free residence which probably is the best inflation-proof investment they can make.

So we can hardly argue that the Maltese are not saving for their pension and they need to save more. If there is anything which has so far shielded the country from financial disaster caused by recurrent strategic public fiscal deficit it is the thrift culture which has facilitated the financing of such deficits to the point that it made it possible to avoid taking timely curative measures.

So the solution to the problem of pensions insufficient to maintain the life-style of the work years should be found in devising systems of generating supplementary cash flow by residence equity release over the period of retirement.

The state system cannot guarantee sufficiency of pensions to maintain working-years living standards. This will unavoidably lead to a dilution of heart-warming notions of leaving one’s residence to one’s children to be replaced by the reality that one needs the savings made through paying a mortgage during working life to enjoy a comfortable and healthy retirement. In any event, with life expectancy at retirement exceeding 80 years, there is little scope for leaving a house to the children when they themselves will be nearly at pension age before they inherit it.

To address the second part of the pension problem, what we need is a stable monetary system with long-term low interest rates to make it easier to service a mortgage. Many people forget that local mortgages are on a variable rate basis and that the current low interest rate scenario may not last forever.

Sunday, 18 April 2004

Like St Thomas

The Malta Independent on Sunday 

It was the 25th November 1995. The incumbent Finance Minister was presenting his fourth consecutive budget in parliament, this time for 1996. It was the first budget following the introduction of VAT which had made a root and branch change to the system of indirect taxation.

We were told that the deficit for 1995 would finish around Lm36 million estimated at just over 3% of the GDP which was growing at a real rate of 6.7%. That was a rate that truly reflects our growth potential if we are ever to catch up to EU averages. The deficit for 1996 was planned to remain stable at around Lm39 million which in the face of a fast growing economy would reduce the deficit to 3% a level which the Minister had targeted in his first budget presentation for the year 1993.

Indeed in that first budget the Minister had pledged to be guided by sound financial housekeeping rules promising to keep deficit within acceptable boundaries of the then freshly enacted Maastricht criteria and to reduce the share of government in the national economy through privatisation and a operation of a leaner and more efficient central government.

In his speech for the 1996 Budget the Minister made bold statements like “This government is committed to have public expenditure reconciled with public income”. After singing self-praise verses of optimism that government revenue will balloon as a result of momentous economic growth and more efficient tax collection and enforcement, the Minister announced several measures of fiscal largesse. In their due course these measure were to prove a huge burden on public finance and hardly in line with the determination to reconcile expenditure with revenue.

The fiscal giveaways were so widespread and so sizeable that one could hardly resist the temptation to conclude that that budget or 1996 clearly had an eye on the approaching election even though in theory the Minister had the opportunity to present a further budget for 1997 before the legislature term would expire.

Now I want to fast forward you a bit to the month of November 1996. Labour had just won the election. The Clinton syndrome of “it’s the economy stupid” did not seem to work here. In spite of the substantial fiscal boost given to the economy, the electorate was not impressed and in perfect synchrony with the two legislature cycle of Maltese politics sent a Nationalist government to refresh on the Opposition benches. Labour was elected in spite of the feel good factor and all.

In November 1997 the new Minister of Finance was Lino Spiteri whom I well remember expressing with a sense of despair that the Nationalist Party were really lucky to have lost the elections and thus save having to face the financial mess they left behind.

I quote from Lino Spiteri’s budget speech for 1997:

Labour Government inherited a deficit of Lm112 million that is almost three times the planned deficit of Lm39 million equivalent to 9.3% of the GDP rather than 3.2% as originally estimated.

I am saying this to establish two important points:

Firstly that 1995 was the last year where we registered healthy economic growth in the context of macro-economic stability.

Secondly that the public finance structural problem was discovered in 1996, although it might have been contributed to by earlier measures whose impact was time-lagged, and that we have not yet addressed it 8 years later.

We had a deficit of Lm112 million in 1996 and we still had a deficit of Lm176 million in 2003 which even if stripped off the exceptional Lm58 million Shipyards write-off is still higher than the 1996 deficit in absolute terms. In relative terms we had a deficit of 9.3% of GDP in 1996 and a deficit of 9.7% of GDP in 2003.

The only difference between 1996 and 2003 is that we have since trebled our national debt, eaten the reserves we had in the sinking funds and sold some of our best public assets the funding from which simply disappeared in the big black public deficit hole. And of course we are eight years older and should ideally be eight years wiser, though I have my doubts about that.

Eight years is indeed a very long time; certainly a time long enough for a problem as that identified in our public financing in 1996 to be addressed in a gradual but determined manner. The fact that eight years seem to have served for nothing but to pay lip service to the problem is in itself shameful and a great waste of resources which we just cannot afford.

The new Prime Minister has pledge to make restoration of sanity to public finance as a priority agenda item. For those of us who have heard this before we can be permitted to express that, like St Thomas following the Resurrection, we will believe when we see it and not we hear about it.

Friday, 16 April 2004

Perversity in Iraq

The Malta Independent 


The first anniversary of the invasion of Iraq by a US led coalition was marked with extreme instability. It was one of the worst weeks, in terms of human costs, since the fall of Saddam Hussein.

President Bush is learning through bitter experience that America`s military might, effective as it is in winning wars, is much less so in keeping peace. The expectation that the majority of the Iraqis would consider the US and its allied forces as liberators and would co-operate to install some form of democracy that would remain grateful to the US for ridding it of a tyrant, is proving totally misplaced and unrealistic.

Anyone who dares to read the history of Iraq and Mesopotamia should have known that democracy and freedom are quite alien to the culture of that land. It is clear that whilst the method and cost of entry into Iraq could have been well calculated, the cost and method of exit are much less clear and have not been properly planned. Unless handled with extreme diligence both the permanence or the exit could bring incalculable strife and pain which would make Saddam`s atrocities look mild.` It would also provide very poor credentials for President Bush`s re-election bid come November.

Events are adding credibility to the claim that upon acceding to Presidency the Bush administration was obsessed with the elimination of Saddam and neglected much more serious threats which culminated in the September 11 terrorism disaster. Chief White House counter-terrorism expert Richard Clarke in his recent book `Against All Enemies` indicts the Bush administration that it not only had misplaced priorities prior to September 11th, but perhaps more seriously, it compounded such misjudgements by attempting to re-assert US dented ego by invading Iraq rather than persist in the pursuit of the true terrorists holed up in the Afghan caves.

President Bush is being forced to approach his bid for re-election with a record of misjudgements which make him unfit to occupy the most powerful post in the world. He misjudged the threat of Al Queda before September 11th (his recent defence that if he knew that terrorists were going to attack New York on that day he would have taken all precautions, is pathetic). He misjudged unproven links between Al Queda and the Saddam Hussein regime. His misjudged Iraq`s possession of weapons of mass destruction. He misjudged the timing of the invasion of Iraq which could have assembled more gradually allowing time consensus building around UN approval, and he misjudged the reaction of the Iraq people to the invading forces.

It is very doubtful whether such liability could be countered by a very rich election campaign funds chest and the fact that the American economy seems to be consolidating its growth and producing employment in good time to reach a peak by next fall.

The truth is that President Bush was planning to spearhead his re-election campaign on a tridente of solid economic performance, strong leadership in countering the terrorist threats and the successful elimination of the regime of one world`s most despicable dictators, installing instead a pro-American nascent democracy to serve as a showcase for the rest of the Middle East. Two of these three strengths are turning into political liabilities as the campaign ticks off the remaining weeks till the start of November.

The perversity of the situation in Iraq could be dawning on Bush with cruel intensity. Rather than being considered as liberators US troops in Iraq are being considered as occupiers and are being persecuted by the same people whom they liberated at very great expense. Even if withdrawal were to be possible, the fallout from an unplanned withdrawal which would leave a power vacuum to be filled by a nearly certain bloody civil war, will hardly be conducive to the image of a US pretending to use its sole super-power status with responsibility and due leadership.

Attempts to fabricate some sort of power transfer to some domestic representative body which would invite the US and coalition forces to stay over to restore law and order seem unlikely to succeed in the time frame that Bush requires them for his re-election bid.

On the contrary what is emerging with a cruel dose of perversity is that Bush is providing the best form of defence for Saddam when he is eventually charged. A disparate society as that in Iraq is impossible to keep together except with an iron fist.   

Sunday, 4 April 2004

No Divorce Please - We`re Maltese

The Malta Independent on Sunday 


The growing minority that wish to see Malta join the rest of the world by legalising divorce are hoping that the election of a younger Prime Minister would permit the issue to be placed on the country’s agenda.

The fact that our staunchly pro-EU government has been refusing even to discuss the issue let alone consider legalising divorce, could only lead to the simple conclusion that the power of the Church in Malta is unmatched in any other country.

Malta is a civil state that acknowledges in its Constitution the right of individuals to exercise freely whatever religion they wish. Whilst the Catholic religion is acknowledged as the national religion it means not that this religion and its practice can be imposed on any individual.

Whilst the Church obliges believers to follow a ritual of events, like hearing mass, fasting on specials days etc., which rule the life of believers, the State takes a completely neutral view on such issues and makes no provisions in the civil code obliging anyone to follow such Catholic rituals.

When it comes to marriage and divorce the State behaves differently. Not only it does not provide the civil mechanism for divorce in case of purely civil marriages which the Church does not recognise, but the State has shamefully agreed to divest its authority to the jurisdiction of the Church in cases of annulment of marriages, executed both civilly and in Church, entered into after a certain date where one of the party elects for such Church jurisdiction.

It is the only case where a civil contract concluded by two adults in terms of civil law cannot be brought for adjudication by any of the parties in front of the same civil law which bound them in the first instance. Its legality is at best questionable and would in my opinion be an interesting case to bring before European Courts who are much less impressed by the power of the Church than is the case with local legislators or adjudicators.

Those who are against the legalisation of divorce bring several arguments to sustain their case. None impress me. The first argument is that the majority is against the introduction of divorce. Whilst this could very well be the case, though I have no doubt that such majority is getting smaller and smaller, divorce is a civil right which belongs to the individual irrespective of the views on the subject of the majority. By the same majority reasoning we should not provide free hospitals because the majority does not make use of them, we should abolish smoking because the majority does not smoke, and we should stop teaching Spanish because the majority has no interest in learning Spanish. Democracy is about executing the will of the majority as much as it is about preserving the rights of the minorities. Divorce is one such area where the rights of the minority, and a significant minority, are being trampled.

Another argument which prima facie tends to make more sense is that divorce would weaken the institution of the family and would harm society in general. Whilst this argument could have been true in the days when we were a closed insular society one must question whether it holds true in the current state of play. Firstly if divorce is harmful to society how is it that all present and prospective EU countries have legalised divorced and Malta would be the only exception inside the enlarged EU? Even staunchly catholic Ireland and Poland recognised the right of the minority to have a civil remedy for a failed marriage. Even if we take a wider view beyond the EU, Malta is one of two or three remaining countries without legalised divorce. Are we right and all the others wrong or is our society still ruled by the Catholic Church who seeks to impose its teachings by the force of civil law rather than by faith and conviction?

Let me make it clear that no one is suggesting any liberal form of divorce in Las Vegas style. But for couples whose marriage has broken down irreparably and beyond any reasonable doubt, who have been living their separate civil lives for years on end, who no longer have minor children to take care of, how can such couples be deprived the remedy of a new marriage through divorce?

I have looked with interest at some EU social statistics for the year 2002 to try to find corroboration or otherwise to the claim that divorce is harmful to society. The marriage rate in Malta is 5.7 per 1000 inhabitants in comparison to 4.9 per 1000 inhabitants in EU -25. The absence of divorce in Malta is not dissuading people from getting married. There is no case to assume that its introduction would so dissuade.

Birth outside marriage in Malta is 15% of all births in 2002 compared to 29% average in EU -25. One would have thought that the facility to re-marry in other countries should lead to a lower birth rate outside marriage but clearly this is not the case. I can only conclude that in other countries families are being formed without first or second marriage irrespective of the facility of divorce. If we benchmark ourselves to particular countries with strong Catholic cultures we find that the marriage rate in Poland is 5.0 to our 5.7 per 1000 inhabitants and the births outside marriage are 14.4% of all births compared to our 15%. Without divorce Catholic Malta is in the same league as divorce-permitting Catholic Poland. This hardly lends any sniff of corroboration to the claim that controlled divorce would weaken the institution of the family or that it is harmful to society.

On the eve of our joining the EU there is a strong case for the divorce debate to be put on the national agenda and to stop pretending that the growing minority that needs a civil solution to broken marriages can continue to suffer in silence according to the will of the majority. Divorce is not for the majority. Like hospitals, smoking and Spanish it is for those who need it and wish it in the exercise of a civil right already enjoyed by the 500 million with whom we will be sharing the EU same passport. If we start now we might get there by the time we are ready to share the same currency.

Friday, 2 April 2004

Managing Change at KM

The Malta Independent 

Problems which were allowed to accumulate over a long period of time can never have easy, quick or simple solutions. Successful change management ensures that problems are avoided rather than addressed, on clear evidence that prevention is less painful than cure even where the cure is correct and timely, let alone where it is belated and inappropriate.

The resistance to change from the Unions side is predictable and understandable. They have seen it before in State controlled organisation where after a lot of big talk about change through bullying tactics, the State backs down under grass-roots pressure to organise some expensive fudge which pretends to deliver change whilst essentially preserving the status quo.

In a small country where everybody knows everybody else, where voters that will be negatively effected by the proposed changes can easily bring pressure to bear on their politicians, and where members` pressure on their Union and competition between Unions for membership, make it difficult for Union leaders to be pragmatic about the changes desired by management, the Unions` reaction can hardly be expected to be anything but total resistance.

In Air Malta`s case the issue is compounded by the fact that many of their corporate ailments are sourced from past strategic decisions related to huge investments in wrong configuration unsuitable for their core needs and a large investment in an Italian airline subsidiary which never really took off.

The perception that the workers are being made to carry the burden of management `strategic mistakes whilst management is not `carrying its fair share of the adjustment pain, especially with the engagement of an expatriate CEO with a remuneration package totally out of line with Maltese standards, can only re-inforce the unions in their rigidity to refuse change. While paying lip-service to the need for change they make their readiness to implement it so conditional as to make it impossible.

All the indications are that the negotiations going on are unlikely to lead to a fair resolution of the crisis and unless there emerges from the negotiating table a source of leadership capable of twinning change with equity and fairness, we risk industrial strife which could damage the wider tourist industry when it needs support rather than obstruction.

And when I say equitable and fair solutions I mean that it has to be fair not only on the management and the employees but it has also to be fair on the shareholders, i.e. on you and me who as private citizens paying taxes to the State deserve to be given value for whatever money the State has invested and means to invest in Air Malta.

Which forces me to conclude that the negotiations are being conducted with wrong tactics. Giving employees an assurance that there will be no redundancies is neither conducive to acceptance of change nor is it economically sensible.

If Air Malta can and should be doing much more with much less resources, why should they continue to waste resources through no redundancy guarantees? Why should employees at state organisations enjoy guarantees that their brothers and sisters in the private sector cannot enjoy? Where is the social justice if we are going to leave one social sector over-protected and another totally unprotected? 

Which leads me to conclude that it is wrong tactics to try to solve Air Malta`s problems in isolation. We need to see the much larger picture. We need to create a mechanism where employers, public or private, who have to conduct Air Malta type re-organisations to save their business from financial collapse, will have the facility to place their excess manpower in a state-sponsored re-training scheme. Such scheme will give redundant employees an opportunity to find alternative employment through acquisition of new skills, whilst remaining employees accept a freeze in their pay plus efficiency changes to ensure that their employer can survive and offer back, through sustainable growth, a productive job to those that had to be shed out to the State sponsored re-training scheme.

By taking a wider view of the problem we can put on the negotiating table the missing equity component which is currently leading employees to ask with honesty and conviction ` why me`? Why are others in central government and state organisations not subject to market competition pressures like Air Malta, exempted from re-structuring when in fact they could be costing the taxpayer much more and contributing much less?