The Malta Independent on Sunday
27th June 2004
In the last 15 months we had it all. A referendum confirming that a thin majority wanted EU membership, confirmation through a general lection of an exhausted government that was the only default solution for executing the referendum decision, a change of Prime Minister when the elected one decided that he did not want to execute the mandate he had lobbied for, celebrations for the actual accession to EU membership, and most recently EP elections which showed that the electorate was for EU membership not for the government.
Yes we had it all but only by the way of preparation for the real thing.` Now, no more empty talk.` No more fudging of issues. No more escaping reality. No more postponement of issues till this or that event or electoral contest gets out of the way. The real thing really starts here.
Now we have a chance to make it or to blow it. There is nothing in between. Making it means that we do what we have to do to re-structure our economy at a fast pace, to make the economy competitive again on international markets, to invest wisely to sustain and spur economic growth, to cut waste and useless subsidies, and, if we do all this, then to be in a position to attract new Foreign Direct Investment (FDI) to stimulate growth and render the re-structuring exercise less painful than otherwise.
Blowing it means that we think we can continue with our old games where government tries to please most to preserve its electoral popularity, but only at the expense of burdening the economy with huge financial debt-loads which is suffocating it and leaving little room for economic manoeuvring to engineer a reasonably painless re-structuring.
Blowing it means not living up to our EU commitments to bring the fiscal deficit to sustainable low level within three or four years and instead continue to plod along by raising taxes here and there to extract blood out of the economy to finance government`s inaction.` It means we fail to address the fiscal deficit from the expenditure side by cutting public sector operational expenses, including headcount and cost thereof, and be forced to see co-acceding countries with lower standard of living but also with` lower deficit and debt, gradually overtake us as they beat us in attracting FDI which makes their economy grow whilst our stagnates.
Obviously government has made the job much harder for itself in depicting EU membership as some easy panacea for our ills of excess consumption and low efficiency.` It is therefore` quite unavoidable that government has to absorb punches on its chin by the electorate that protests for being misled at least about the short term negative impact of EU membership.
What government has to decide, and very quickly so, is whether it has what it takes to take mid-term punches on its chin whilst pushing ahead with real re-structuring hoping that a few years down the road government can prove that in spite of the immediate negative impact of transition to EU membership, in the long run the tangible benefits emerge. This could result through tighter fiscal discipline, real re-structuring to render the economy more efficient, and success in attracting new FDI to promote sustainable growth.
In the process it is unavoidable that standards of living will have to be scaled back to what is affordable until consumption is stimulated again as a result of economic growth rather than stimulate consumption in a vain and often damaging attempt to generate economic growth.
If the government is not successful in putting this re-structuring through than it would be seriously risking forcing the electorate to elect a Labour government by default in 2008. As a deep-rooted labourite I would like nothing better than to have a change of government next time round if only to give chance for democratic alternation of power to cleanse the PN from the arrogance and nonchalance of some of its elements who seem to assume that they have a natural God-given right to stay in government for ever.
But I think it is neither fair nor opportune for Labour to be elected by default. Because that would mean that Labour will face in government problems much bigger than those it faced in 1996. Some succeed in working miracles as President Lula of Brazil seem, and I underline seem, to be succeeding. But they tend to be the exception, not the rule.
Following a series of incompetent and corrupt governments in Brazil which left an endowment of under-development and huge foreign debts, President Lula was elected in October 2001 on a platform that many understood to involve defaulting on Brazil`s extensive foreign debt so as to apply more resources to internal growth and improvement from popular poverty levels.
Lula the President is unrecognisable from Lula the union leader and presidential candidate. Not only Lula as President ruled out the Argentina-style default route, but effectively regained confidence of international banks by honouring all agreements even at the expense of sacrificing internal growth.` For doing this Lula is not as popular in Brazil as he used to be though he is much more popular on Wall Street. But as he explained when visiting Wall Street this week he is prepared to take the electorate`s blow for the slow growth on his chin, knowing that this is sustainable and avoids the acute hardship of an internal banking crisis which an external loan default unavoidably brings.
But we do not have President Lula calibre on the left side of Maltese politics. It is therefore much in Labour`s interest to be part of a solution which the government has to put together without further delay, rather than adopt politically narrow-minded obstructionism which means that when eventually elected by default, such problems would fall squarely on Labour`s lap.
The success of British Labour government since 1997 owes much to the political price Margaret Thatcher and John Major had to pay for revitalising the British economy permitting a Labour government to focus on growth and employment rather than on addressing structural deficits.
For the opposition as much as for the government the real thing starts now.
27th June 2004
In the last 15 months we had it all. A referendum confirming that a thin majority wanted EU membership, confirmation through a general lection of an exhausted government that was the only default solution for executing the referendum decision, a change of Prime Minister when the elected one decided that he did not want to execute the mandate he had lobbied for, celebrations for the actual accession to EU membership, and most recently EP elections which showed that the electorate was for EU membership not for the government. Yes we had it all but only by the way of preparation for the real thing.` Now, no more empty talk.` No more fudging of issues. No more escaping reality. No more postponement of issues till this or that event or electoral contest gets out of the way. The real thing really starts here.
Now we have a chance to make it or to blow it. There is nothing in between. Making it means that we do what we have to do to re-structure our economy at a fast pace, to make the economy competitive again on international markets, to invest wisely to sustain and spur economic growth, to cut waste and useless subsidies, and, if we do all this, then to be in a position to attract new Foreign Direct Investment (FDI) to stimulate growth and render the re-structuring exercise less painful than otherwise.
Blowing it means that we think we can continue with our old games where government tries to please most to preserve its electoral popularity, but only at the expense of burdening the economy with huge financial debt-loads which is suffocating it and leaving little room for economic manoeuvring to engineer a reasonably painless re-structuring.
Blowing it means not living up to our EU commitments to bring the fiscal deficit to sustainable low level within three or four years and instead continue to plod along by raising taxes here and there to extract blood out of the economy to finance government`s inaction.` It means we fail to address the fiscal deficit from the expenditure side by cutting public sector operational expenses, including headcount and cost thereof, and be forced to see co-acceding countries with lower standard of living but also with` lower deficit and debt, gradually overtake us as they beat us in attracting FDI which makes their economy grow whilst our stagnates.
Obviously government has made the job much harder for itself in depicting EU membership as some easy panacea for our ills of excess consumption and low efficiency.` It is therefore` quite unavoidable that government has to absorb punches on its chin by the electorate that protests for being misled at least about the short term negative impact of EU membership.
What government has to decide, and very quickly so, is whether it has what it takes to take mid-term punches on its chin whilst pushing ahead with real re-structuring hoping that a few years down the road government can prove that in spite of the immediate negative impact of transition to EU membership, in the long run the tangible benefits emerge. This could result through tighter fiscal discipline, real re-structuring to render the economy more efficient, and success in attracting new FDI to promote sustainable growth.
In the process it is unavoidable that standards of living will have to be scaled back to what is affordable until consumption is stimulated again as a result of economic growth rather than stimulate consumption in a vain and often damaging attempt to generate economic growth.
If the government is not successful in putting this re-structuring through than it would be seriously risking forcing the electorate to elect a Labour government by default in 2008. As a deep-rooted labourite I would like nothing better than to have a change of government next time round if only to give chance for democratic alternation of power to cleanse the PN from the arrogance and nonchalance of some of its elements who seem to assume that they have a natural God-given right to stay in government for ever.
But I think it is neither fair nor opportune for Labour to be elected by default. Because that would mean that Labour will face in government problems much bigger than those it faced in 1996. Some succeed in working miracles as President Lula of Brazil seem, and I underline seem, to be succeeding. But they tend to be the exception, not the rule.
Following a series of incompetent and corrupt governments in Brazil which left an endowment of under-development and huge foreign debts, President Lula was elected in October 2001 on a platform that many understood to involve defaulting on Brazil`s extensive foreign debt so as to apply more resources to internal growth and improvement from popular poverty levels.
Lula the President is unrecognisable from Lula the union leader and presidential candidate. Not only Lula as President ruled out the Argentina-style default route, but effectively regained confidence of international banks by honouring all agreements even at the expense of sacrificing internal growth.` For doing this Lula is not as popular in Brazil as he used to be though he is much more popular on Wall Street. But as he explained when visiting Wall Street this week he is prepared to take the electorate`s blow for the slow growth on his chin, knowing that this is sustainable and avoids the acute hardship of an internal banking crisis which an external loan default unavoidably brings.
But we do not have President Lula calibre on the left side of Maltese politics. It is therefore much in Labour`s interest to be part of a solution which the government has to put together without further delay, rather than adopt politically narrow-minded obstructionism which means that when eventually elected by default, such problems would fall squarely on Labour`s lap.
The success of British Labour government since 1997 owes much to the political price Margaret Thatcher and John Major had to pay for revitalising the British economy permitting a Labour government to focus on growth and employment rather than on addressing structural deficits.
For the opposition as much as for the government the real thing starts now.
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