Time- the Best Judge

The Malta Independent on Sunday 

 
In the first quarter of 2001, when the debate about membership of the EU was raging on, government and the Malta EU Information Centre (MIC) had made great issue with a Eurostat publication that showed that Malta stood, using 1999 data, at 52% of the EU -15 GDP average. Consequently we were told that given the threshold of 75% of GDP average under which we will continue to qualify for the highest level of regional aid, commonly referred to as Objective 1 funding, Malta stood to benefit for a long time from such EU regional funding at maximum level as we had a long way to go before reaching the limiting threshold.

I had contested such assertion and expressed the view that Malta could soon fall out of Objective 1 funding as the 75% of the EU average GDP would statistically be reached much sooner than was being indicated. I based my opinion on two points;

Firstly that Malta statistics were not compliant with ESA 95 standards so the comparison was not on a like for like basis. I opined that when Malta would eventually bring its statistics in line with ESA 95 standards Malta will in fact be much closer to the 75% threshold. Secondly I argued that the 75% has to be measured on a much lower EU - GDP average covering the enlarged EU of 25 or 27 countries and that for the next EU budget covering 2007-2013 we may consequently go above the 75% threshold for objective one funding.

Quoting specifically from articles titled "MI(C)s representation" (April 4 and 5, 2001), I had argued:

 

"What this means in practice is that the figure of 52 per cent of GDP average being widely banded about by EU enthusiasts to support their claim for EU funding upon accession will not stand up when it matters. When, sooner or later, our statistical methods are updated to Eurostat standards for consistent conversion of the nominal GDP in Euro into GDP in PPS units, which is used to establish our GDP as an average of the whole EU, the figure will look very different.”

I had strongly criticised MIC for making assertions without making sufficient caution warnings on the inadequacy of our statistical regime - a caution specifically made in the Eurostat publications on which MIC were basing their assertions.

Specifically, Eurostat had warned that:

 

"Malta however is using a dated system established in 1954 with some elements of SNA 1968. The statistics in this publication should therefore be interpreted with an appropriate level of caution - full comparability with EU states cannot yet be guaranteed".

My warnings had given rise to wild reactions from MIC, (then) Minister Josef Bonnici and from the Prime Minister himself. MIC had accused me of persecution and Prof. Bonnici had argued that I am exposing a wish for Malta to be denied the EU funding due to it (still unanswered -The Times, May 14, 2001).

Both had argued that when our statistical methods are updated, no major changes from the 52 per cent of EU average should be expected. MIC had said specifically (The Times, April 6, 2001): "Once Malta's conversion to ESA is complete, there are no dramatic changes, whether downwards or upwards, that can be expected to its GDP statistics and certainly no changes that will effect Malta's eligibility for EU funding as an Objective One region".

I had retorted that

"Perhaps we should let time to unfold and be the best judge. Let's leave the final say to the test of time. Let's become EU members if we so collectively decide. But let's not allow such decision be taken on the basis of half truths and untruths about funding bonanza".

Time has now spoken. It is my best friend. It is an unerring judge as to who makes objective analysis and who just interprets data whichever way it suits him. The latest data issued by Eurostat shows that we are over the GDP 75% threshold of the EU 25 and if things stay as they are we will not qualify for Objective One regional funding.

And lest I be misunderstood, I repeat what I had written in The Times on May 29, 2001 (What funding?):

"For all the reasons that can be brought forward as to why we should join the EU, funding ought not be one of them. Which is not the same as saying that the argument should stop there".

I admire the determination exposed by Foreign Minister Dr Michael Frendo in drawing a red line and asserting that Malta will be willing to use its veto power for approval of the EU Budget for 2007 – 2013 if a way is not found to keep Malta’s eligibility for objective one funding. The argument that the statistical methodology of ESA 95 is skewed against small densely populated countries as the scarcity of the land produces undue rise in real estate prices which impact to raise GDP for the non-realised increase in property values carries weight. Whether this will be strong enough to force the EU to change a well ingrained structure of methodology is quite another matter.

However the point I make here is not whether we will succeed or not to change the rules to limit the damage. The point is that in the run-up to the monumental decision regarding EU membership, those on the No side who tried to argue sensibly were shouted down and practically ridiculed by high level assertions which were based on wishes and fantasies.

Much the same is happening at the moment when discussing the present economic problems. We continue to pretend trying to solve the issue of loss of competitiveness but the moment I mention that this should not exclude a measure to realign downwards the value of the Maltese lira to neutralise the over-valuation that his been allowed to creep in due to our higher inflation, I am shouted down illogically. The arguments are generally that the measure is too painful. Nobody disputes that it could be very effective if taken in conjunction with other measures.

Avoiding the right medicine because it is painful is hardly conducive to solving the underlying problem that needs to be addressed. Avoiding surgery because the convalescence period could be quite painful is no way to treat a malaise that cannot be treated with just oral medicine.

Time will again prove to be the best judge in this matter as well.