Friday, 26 August 2005

Living Contradictions

 The Malta Independent - Friday Wisdom

Regular readers of my column probably judge that I am nagging too much about the broad chasm between flowery intentions expressed in nicely bound reports and hard reality.

I can’t help it, as the gap between intentions and reality is getting offensively wide. The government seems to know what it wishes. It has no idea of how to make it happen. But it expects our congratulations purely for cleverly expressing its wishes and has no absorption capacity for criticism about its inability to work out a plan on how to realise them. So criticism in this sense is generally ignored and where it hurts so much that it cannot be ignored, the message gets sidelined as the messenger suffers derogatory innuendos.

The Prime Minister, in one of his recent press conferences, had no kind words for columnists like yours truly. The offence of folk like me is having no inhibitions at being critical, citing facts and figures, and showing aversion to being impressed by vain wishes. My judgement is based on hard reality.

So you can imagine my surprise at receiving a personalised letter from the Prime Minister enclosing a copy of the A Better Quality of Life – 2006-2010 Pre Budget Document. I had already publicly expressed my views on the said document which was available from the government’s website. I hardly needed another copy. But in his covering letter, the Prime Minister told me that:

“We want to discuss with you the choices that will guarantee a future of excellence for you and your children. Government’s decision to publish the Pre-Budget Consultation Document was prompted by the firm belief that your contribution will help us prepare a better budget. Your company’s commitment is decisive for
Malta to excel.”

What a living contradiction! Being criticised in public and congratulated in private irritates me. Sending me personal letters extracted from most impersonal computer data-bases reinforces my suspicion that the government is more interested in pretending that it means to do something rather than in actually doing it.

If this were a new government that could disclaim responsibility for the problems we need to address, than the approach could make sense. But for goodness sake, this is a government that has been in office since May 1987 when
East Germany was still communist and the Berlin Wall was standing tall as hard evidence of the failure of communism which was soon to come.

My commitment has been there without interruption. What is missing is the government’s own commitment to address the problems at their source and to desist from the shameful practice of pretending to solve problems by writing a cheque from public funds leading to further taxation and debt, in the process gaining for itself political patronage at the expense of tomorrow’s well-being.

Let’s take another contemporary example of how the government has no idea of where it is going and is wrapping itself in contradictions. The Malta Tourism Authority (MTA) is conducting a broad-based re-branding of the
Malta tourist product. The exercise will take several months to conclude and will cost much, much more than a cup of coffee. This is a much-needed overdue exercise. We cannot continue to make false claims that back-fire when we do not deliver what we promise.

We cannot offer sea and sand as if we were the
Maldives when tourists here will have difficulty in finding a free square metre at our scarce sandy beaches. However, we can and should promote our uniqueness, our being so near and yet so different. Our smallness which enables tourists to see in less than one week what in other countries would take several weeks. Our varied and rich history, our bastions, our churches and our village traditions – festas and fireworks included. Our versatility in meeting the different scene locations required by creative film directors. Our ability to speak and teach various languages. Our beautiful and historic harbours and the magic scenery of Gozo and Comino. We need to build an aura around our pre-historic monuments and around sites linked to mythology and famous legends.

Yet while we are trying to re-brand ourselves on who we really are and what makes us different from competitors, in the same breath the government is proceeding with plans to deface us by going for golf courses which can sit comfortably in Dublin or Surrey but can hardly be a distinctive feature of a Mediterranean sun-drenched island. What goes for St Patrick and St George does not necessarily go for
St Paul.

If we cannot be led with clear determination and sense of direction, we will continue to spread our resources all across the board with conflicting pressures from different directions forcing us to continue running on the spot.

Sunday, 21 August 2005

False Competition and Cooking the Books

The Malta Independent of Sunday

There is no place like Malta. It is the only place on earth where competition works to disadvantage the consumer rather than to provide more value for money.

The first lesson in economics is that competition is healthy. It brings efficiency in allocation of resources and consequently packs value in the final product or service as suppliers compete to win consumers’ custom.

Where competition is absent the consumer will have to take whatever is on offer at the price the monopolist decides. Having total control over the market the monopolist supplier has no commercial pressure either to improve his product or to price it competitively. Profit margins are huge and suppliers laugh all the way to the bank.

Many remember the times in the early 1980s when colour TVs were exclusively distributed by a private monopoly that was literally given a legal right to extort money from consumers’ pockets. The introduction of competition there worked wonders as it was true competition. The consumer was given a choice to buy the same or similar products from a multitude of suppliers who started falling over themselves to improve efficiency in acquisition, distribution, sales, credit terms and after sales service to ensure that they could sell their stock at a profitable price even though margins were much tighter. Often what was lost in the margin was gained in volume as the low prices enticed more consumers to buy the second, third or fourth TV for their home, something which was beyond their reach under the previous monopoly supply rules.

Moving closer to our times, many will remember the high mobile rates we used to pay when Vodafone had all the market to itself. The arrival of the second supplier offering a competitive product lowered mobile rates considerably and a sudden explosion in the use of mobile telephony, which left both the old and the new supplier sufficiently profitable through deeper market penetration. Everybody was happy, but most of all the consumer who benefited from true competition.

So the second economics lesson one learns quite early in his O level studies is that competition will only benefit the consumer if it is true and genuine. If competition is not true, if cartels are created, or if artificial barriers are set up to block the working of true competition, the benefits never cascade down to the consumer. Quite often the consumer is rendered worse-off under the new pseudo competitive regime than under the former plain vanilla monopoly.

Imagine what would have happened if rather than giving Go Mobile a licence to compete with Vodafone across the whole market spectrum, competition was introduced by giving Vodafone the right to install their mobile network in one half of Malta with Go Mobile installing their network in the other half.

Such false competition, rather than working to the advantage of the consumer, would have worked against him/her as mobile users would have been constrained to buy both services in order to have access to the whole country.

This example seems so unreal; it is laughable. No government or regulator in their right senses would allow competition to work so perversely against the consumer.

But this is exactly what seems to be happening with the false competition coming on stream for paid TV services. Until recently we had one monopoly supplier Melita Cable. The service had all the hallmarks of a supplier not subject to commercial competitive pressures. Because of the high cost of their services, many consumers just booked the reception package, which was the cheapest and provides only free-to-air stations without the reception problems of home antenna systems.

Consumers looked forward to the day when the opening up of the market demanded by EU membership rules and the advancement of Digital Terrestrial technology could buy them a better service at a cheaper price. But because our Regulators forgot that they are there to protect the consumers rather than the suppliers, the false competition brought in for paid TV services will add to the consumers’ pain rather than remove it.

Up to the last football season I could watch most English and Italian leagues matches through Melita, the then monopoly supplier. For this new football season, if I want to watch the English league fixtures I have to have Melita Cable and to watch the Italian league fixture I have to have the services of the new DT TV supplier Multiplus.

Rather then compel both suppliers to share the rights and then compete for patronage through price and service quality, the regulator allowed the operators to split the rights forcing football fanatics to buy and pay for both services. This is false competition that extorts money from consumers’ pockets rather than deliver enhanced value. If this is competition give me a monopoly anytime.

But the syndrome of let’s pretend is all pervading in our economy. Let’s pretend we have competition in pay TV services when in reality the measures taken work against not in favour of the consumers.

Now we seem about to play a let’s pretend game with our national debt by creating the illusion that it is being reduced when in reality everything remains the same. The let’s pretend agent there is called securitisation – a modern high tech financial term for the old fashioned “cooking the books”.

Securitisation is normally used in the financial world when banks want to get assets off their books in order to respect capital constraints without hindering growth. So it is quite normal for financial institutions with large consumer credit assets on their books (credit card dues, consumer loans, mortgages) to package these products through securitisation and float them on the market where savers, often institutional like insurance companies and pension funds, buy these products directly thus reversing the intermediation role initially performed by the banks in coming between savers and borrowers.

The government is now proposing to use the securitisation method to sell its property assets (retaining the right of buy back) and income streams to raise lump sums in order to reduce the public debt to within euro rules.

If this let’s pretend scheme is hard to believe, please read pages 49, 58 and 59 of the 2006-2010 Pre-Budget Document that government took so much credit and that I liked so much without mentioning my clearly professed doubt on government’s own willingness to put into practice. I bet you this. Of all the proposals in the said document, the securitisation will be one of the few that will actually come into being, in full honour to the well ingrained let’s pretend syndrome.

Friday, 19 August 2005

Selling Castille

The Malta Independent - Friday Wisdom

There are four ways by which the national debt could be brought down from the current 72 per cent of GDP to under 60 per cent, or at least firmly pointing south in that direction, in order to gain the credentials for acceding into the euro in 2008.

The most challenging and most rewarding method to achieve this is to grow the economy at a faster pace than the rate of debt accumulation. So while the absolute level of the debt will keep growing through the accumulation of the dwindling budget deficits, in relative terms to the GDP, the size of the debt will start reducing as the GDP will be rising at a faster rate.

This is the most logical and practical way to solve the debt problem, but government seems to have given up on it. It projects real growth rates far below our capacity and below those of most of our trading partners or competitors.

For the economy to grow at a faster rate, we need substantial private sector investment in productive capacity and the injection of substantial flexibility in the economy to render it globally competitive and agile to grasp opportunities as they arise. In the current economic scenario, both aspects are conspicuous by their absence rather than by their existence, and our rate of exchange regime remains a barrier to their realisation.

Another way of reducing the ratio of debt to GDP is by creating exceptional non-recurring one-off revenue flows which will help either to reduce the incremental borrowing needs and/or reduce the absolute level of debt itself. Such exceptional non-recurring revenue flows generally come in two distinct forms.

Firstly, through dismantling past reserves. The government has been doing this since 1998 by taking over the sinking funds of maturing government loans, which are rolled over without the obligation to build a fresh sinking fund. The sinking funds accumulated for the old loans are taken as a special financing item, which reduce the need to raise loans to finance the annual deficit.

Secondly, exceptional one-off revenues are generated by selling off public assets through privatisation. The problem with creating these one-off revenues by dismantling past reserves and through privatisation is that the government has already sold most of its assets and after the upcoming privatisation of its 60 per cent holding in Maltacom and 40 per cent in MIA, not much will be left to sell.

The third way of reducing the debt to GDP ratio is by incurring budget surpluses, which is then used to pay off debt. In the local context this is impractical: we have a slow-growth economy which is trying to solve a chronic budget deficit and there are no practical prospects of running budget surpluses anywhere in the near future without causing a deep economic slump which will kill rather than cure the patient.

Having exhausted the above-described three ways of addressing the overgrown debt problem, the government has turned to the fourth way, involving creative financing methods in order to appear to be solving the debt problem without actually doing so.

This fourth method carries the cool name of “securitisation”, which gives a respectable label to old-fashioned “cooking the books”.

Read the following extracts from the 2006-2102 pre-budget document attractively stamped all over with “A Better Quality of Life” branding.

“Government is looking at the possibility of moving forward the idea of securitisation of property. This entails the formation of a public company owning government property with an invitation to the public to invest in it leaving its management in private hands. The aim is to commercially exploit to the full a major government asset without the need to sell that asset but rather to create an investment vehicle open to the public.”
This might look like a complicated financial structure but in reality it is quite simple. Through cool securitisation, the government could sell Castille to a government-owned public company which raises bonds from public subscription to pay the funds to the government.

The government will then lease back Castille from the public company to give it cash flows to pay interest to bond holders and agree either to buy back the property at the end of the loan or to roll over the lease for a further period if the public financing vehicle rolls over the maturing bonds into new bonds.

Suppose Castille is thus valued at Lm50 million and is sold at this price to a government-owned company called Castille Wonder Land plc (CAWLA). CAWLA would raise 15 year bonds at, say, five per cent for Lm50 million to pay the government for the acquisition of Castille. The government will pay CAWLA rent/lease of Lm3 million a year, which enables CAWLA to pay annual interest of Lm2.5 million and keep an annual half-a-million reserve for other running expenses.

The government applies the Lm50 million to pay off outstanding public debt and somehow has to invent revenue enhancements (taxes) to cover the annual lease outgoings of Lm3 million without increasing the deficit. After 15 years the whole deal is reversed or renewed, depending on the rate of interest and the state of public financing prevailing at the time.

“Government will present to parliament a Securitisation Act to make possible the conversion of receivables and other assets to securities that can be traded in the capital markets”

This quote from the same document extends the above concept not only to property but also to receivables. So the government could sell its annual receivables (eg annual profits from the Central Bank) in order to obtain an immediate lump sum to reduce outstanding public debt and come within the Maastricht criteria.

I get the impression that government is focusing on this fourth hi-tech way to solve the public debt problem through securitisation of public assets and revenue flows rather than on delivering a durable real solution to the problem.

The let’s pretend game continues. It could give the impression of solving or reducing our over-blown public debt problem. Whether it delivers a better quality of life is another matter.

Friday, 12 August 2005

No to New Taxes - Yes to New Tariffs

The Malta Independent - Friday Wisdom

In this strange country, one finds it difficult to call things by their real name. It is almost impossible to comment objectively on anything political (and what is not political here?) without being conveniently misquoted or half-quoted.

Take the piece I wrote in the Sunday sister of this paper regarding the pre-Budget document 2006-2010 issued by government to enrich our pool-side reading during this hot August.

In a nutshell, I wrote that the document per se makes not only interesting reading but adopts many of the ideas I have repeatedly professed in my writings, including those featured in this column. I did, however, express great reservations on government’s ability and determination to execute what it was itself proposing, as it was generally painful stuff – the sort of measures governments normally take in the first half of a legislature hoping to reap the popularity benefits when elections start getting visible on the horizon.

I emphasised that reports alone would get us nowhere and that we need focused action to do what we have to do before more damage is done to the economy. “Reports are as easy to write as measures are hard to take,” I stated verbatim.

The PN media eulogised my appreciation of the general orientation of the report without reference to my apprehension over government’s ability to translate words into action. If the government thinks that writing positive reports can solve our economic problems, then it is completely off target.

As each day passes, my doubts as to government’s determination to translate its own plan into action grow. And with good reason. And not just one reason – let me give you three.

Firstly, in the report itself, government seriously under-estimates, or purposely understates, the severity of the economic problem we have. It seems that government is happy with our anaemic growth performance, which has left the 2004 GDP at the same real level of the 2000 GDP. How else could one interpret the following excerpt from the Report?

“The Maltese economy, although still suffering from a certain amount of slack, is still performing creditably. The resilience of our manufacturing enterprises, the improvements in our tourism sector, the increased momentum in construction and agriculture and the improved levels of activity in our financial and other services sectors are increasing employment opportunities and drops in the number of unemployed persons. This resilience gives room for optimism in our country’s future. Our country is working and is managing to create wealth.”

If only it were so! If we are increasing employment without registering economic growth, then our efficiency per capita is deteriorating and we are losing our international competitiveness. Hardly a source of optimism for the future! If government cannot make a serious diagnosis of the state we are in and what brought us to it, it does not augur well for its ability to guide us to greener economic pastures.

Secondly, government is already being conditioned by its own fortunes for the next election, which in all probability is a little over two years from now. How else can one interpret the laughable uttering by the parliamentary secretary that at the next budget there will be no new taxes, as government’s budgetary position is improving beyond expectations?

It is only natural that government’s budgetary position should be improving beyond expectations because the government has benefited from substantial revenue from the Investment Registration Scheme that was not included at the budget stage. But this is a one-off revenue item that will not recur, so the underlying trend in government finances is still a cause for concern.

But what does “no new taxes” mean? Does it also mean no new tariffs, charges, levies, rates, contributions or whatever other gentler names revenue-raising measures are often given in order to avoid the tax word? Hardly! Pages 76-78 of the Report are already indicating that government needs to raise Lm20 million annually to fill the gap in financing the health sector. Unless reports are written purely for the sake of being written, the parliamentary secretary should stop telling us half-truths. No new taxes, maybe, but surely he cannot remain credible and give similar assurances regarding taxes by other names.

Lastly, my doubts are based on the fact that government has totally ruled out an exchange rate adjustment. Of the 10 measures I had recommend to engineer an economic turnaround, the exchange rate adjustment was the last measure in the pack. My argument was that if the nine preceding measures were adopted, the 10th exchange adjustment measure becomes an optional. But whereas without the exchange rate adjustment the other measures would take several years to produce positive results, with the exchange measure included in the pack the time for the cure package to prove effective could be shortened to between 18 to 24 months.

Now, of all the commodities that politicians have, time is the scarcest. They need to keep the electorate on board to ensure that they can deliver the economic bacon without losing their tenure in office. They need to deliver results fast. Time is rarely on their side. The last time a government was forced to seek re-election when it could only show the two years of pain without the ensuing gain was the Labour government in 1998. They lost office even though they could fairly claim that they were trying to solve problems inherited from preceding governments.

When politicians say they prefer to choose the long hard road, and promise to start on it two years before the election, I can be permitted a wry smile. Also when they promise no new taxes.

Sunday, 7 August 2005

Pre Budget Document 2006-2010 Just Do It

The Malta Independent of Sunday
Early in 2004 I had published a series of articles in my Friday column in The Malta Independent suggesting a ten point plan to get us out of the economic logjam we were and still are in.
The main headings of the ten point plan were:
  1. Rebalancing the rights and obligations of workers across the whole economic spectrum facilitating the mobility from public to private sector employment.
  1. Funding a massive training and re-training mechanism in order to render our employees multi-skilled and employable as technology continues to kill old jobs and create new ones.
  1. No new taxes/tariff deal from the government to ensure that we stop the addiction to tax and spend policies.
  1. A deal whereby additional revenues from better tax enforcement are allocated specifically as to 50% for reduction of the tax burden to the lower and middle sector of society, especially those in employment who never needed any tax enforcement mechanism to pay their tax dues, and 50% to fund re-training schemes.
  1. A freeze on public employment recruitment and on public sector payroll costs ensuring that benefits are mostly given in re-training opportunities and in subsidising/promoting transition of excess public sector personnel to productive jobs.
  1. A freeze on all public sector operating expenditure
  1. Restoring flexibility to the labour market by rendering the economy more market driven by moving away from COLA wage increases and adopting only increases in minimum wage level to keep the protection for non-unionised employees who normally operate at or near minimum wage levels.
  1. No new debt until we get the debt level down to 60% of the GDP. Any capital expenditure has to be financed by one off revenues (privatisation, sinking fund and similar arrangement) to avoid recourse to new debt issues, other than roll-over of maturing debt.
  1. A cap on social transfer payments. Keep social benefits at their current real level and forget all possibility of giving tax incentives for private pensions before government finance comes in good shape to make this affordable.
  1. Make a one-off adjustment to our rate of exchange to re-establish our international competitiveness and prepare for joining the EURO at a rate which is sustainable and which attracts FDI and promotes economic growth.
With the exception of point number 10 which has been flatly refused, all the other nine points not only find themselves in different shapes or form in the 2006 – 2010 pre- Budget consultative document but are essentially the backbone of the visions expressed therein.
I am therefore enthused by the contents of the consultative document and by way of negative criticism I would just list the following:
  1. It severely understates the severity of the economic performance we have had since the year 2000. Clearly government has political difficulty in underwriting the paternity of the dull economic performance best exemplified by the fact that GDP in 2004 was stuck at the same real level of the year 2000 and that the GDP for the first quarter of 2005 shows yet a further real contraction.
  1. From a practical point of view whilst it is an inspiring document in defining the final destination quite a few years down the road, it is pretty void on defining an action plan of how to get there. It very much resembles a wish list. Often the solution is the formation of a committee, task force or some other cross-disciplinary subset which has to report on the specific measures necessary to enable us to hit the road to economic salvation. Experience shows that problems are not solved by committees but by true leaders.
The Prime Minister seems irritated by columnists/economists/commentators who have no inhibitions in calling a spade a spade and in defining an economic problem by its real name. He ought not be, as economists and commentators like yours truly, unlike others on government payroll, are doing the country a service in raising awareness to the true state of the economy.
Only by so doing can the government expect to garner wide acceptance for the necessary measures needed to get us where we are all now agreeing we should be. These measures are no piece of cake. They are measures that no government would like to take on its own. To limit the political fallout from such measures government will make a further attempt to seek broad consensus in order to share the burden of their guilt. As the social pact experience has shown consensus for guilt sharing purposes is quite elusive.
Perhaps this is best represented, purely as an example of which there are many others, by the evident need to introduce co-financing in health service in order to lighten up government’s burden in financing the status quo of universally free entitlement. The Central Bank has been making it clear that the deficit targets cannot be met unless co-financing is introduced, meaning that health services would no longer remain universally free of payment but would start being rendered against some sort of financial contribution from consumers.
In para 04.4.1 of the 2006-2010 pre budget document government lays down the financing problem of the health services flatly and clearly. Health services will not be funded from the N.I. fund. It will be funded from the 3% Vat revenues introduced in 2004 and from excise duties from cigarettes, beer, spirits and tobacco. On 2004 and 2005 figures this leaves a gap of Lm20 million in the annual financing and we are told that in order to preserve the sustainability of the health sector a number of institutional and structural reforms will be introduced in 2006”.
Reports are as easy to write as measures are hard to take, especially in the last half of a legislature when the next election starts appearing on the horizon.
So I can only say I will only believe it when I see it, though I hope that in the national interest, government would choose to sacrifice its political fortunes rather than avoid doing what should have been done much earlier. Just do it.

Friday, 5 August 2005

George Three Times

The Malta Independent - Friday Wisdom

The PN media is making brouhaha about a reported incident where Dr George Vella, former Deputy Leader of the Malta Labour Party and current Opposition spokesman on EU matters, was supposedly instigated by some party officials to contest the leadership of Dr Alfred Sant who is often perceived as the PN’s best asset and the last remaining barrier between the MLP and the next government.

In the absence of an official denial one surmises that there is substance in the story even though one should be neither scandalized nor surprised about it. A political leader that cannot execute a democratic political mandate and then loses two consecutive elections is certainly liable to being challenged. The essence of democracy demands it. It is the duty of those whose loyalty is to the party and not to individuals, to challenge anything that stands between the party and its ultimate objective of operating from government.

So I would be more surprised if such efforts to achieve a leadership change within the MLP before next election are not made rather than at their being made. Speaking from experience I was out-rightly critical of the way Dr Alfred Sant achieved his fourth leadership mandate following the disgraceful election defeat of 2003. As a true laborite I considered it my duty, after exhausting all possibility of using internal channels of persuasion, to expose the illogic of electing the incumbent leader before delegates were given the faculty to study the analytical report of the 2003 election defeat which at the time of leadership elections in May 2003 had not yet even been commissioned.

I had made reproaches to the incumbent leader and the general secretary, urging them to postpone the leadership elections till the analytical report is prepared. All I got was a legalistic reply that all was being done according to statute. According to the word of the statute may be, but certainly not according to the spirit of the statute and definitely not according to most basic standards of simple logic that it did not make sense to confirm an incumbent leader for the next five years when the voting delegates were not illuminated as to who was to carry the blame for the electoral disaster just suffered. Does one need a statute to understand that the cart cannot be put before the horse?

When I had exhausted all hope of convincing the incumbent leader to postpone the elections and when it became clear that he had engineered an abuse of party resources to whip up emotions in his favour between 14th April 2003 and 1st May 2003, then in the interest of the party I decided to make one final approach.

I phoned Dr George Vella and urged him, almost pleaded with him, that in the interest of the MLP he should contest the leadership election making it clear that he would be an interim leader for a 12 month period until the party could analyze the why’s and wherefores of the 2003 electoral defeat and then proceed to choose a new leader calmly and on a properly informed basis, away from the confusion and the pain of the disaster just suffered; a time when logical cool heads would prevail over hot emotions.

I argued with Dr Vella that as he was the only person who could carry credibility for such a proposal, having already refused the leadership offered to him on a silver platter by Karmenu Mifsud Bonnici following the electoral defeat of 1992, he had a moral duty to stand as an interim leader to ensure that the party would not be constrained to face yet another election with the disadvantage of a failed leader.

In those early days of May 2003 Dr George Vella like me had the bad taste of the ultra-unorthodox way Dr Sant behaved until he announced his leadership bid on 1st May 2003, and saw the logic of my suggestion. However, whilst promising to think about it, his immediate reaction was that he was more inclined towards lowering his political profile rather than raising it, as he had promised to make space for others in case of an electoral defeat. He also added that Alfred Sant had made a similar gentleman’s agreement with him and therefore he was amazed and puzzled by the roundabout turn just executed by Dr Sant in public view in Freedom Square on that 1st May 2003.

Obviously Dr Vella did not contest leadership and the rest is history. I was forced to resign from the MLP early the following September purely because I had the courage to challenge and question openly the irregularity that was committed in electing a leader before analyzing the reasons for the second consecutive general election disaster.

Whilst it still hurts inside, at least I can hold my head high feeling I did all I could to make the party electable, as well as to remain loyal to the organization and its principles and not to individuals who abuse their temporary authority by putting their own interest before that of the organization. In my limited way I did my bit for the party.

Dr Vella refused three times to make his bit for the party. He refused KMB’s leadership offer in 1992. He refused my suggestion to contest as interim leader in 2003. And more recently he seems to have refused suggestions to challenge again for leadership, whether permanent or interim not yet clear.

On each of these three occasions Dr Vella has failed the party. Failed it for not accepting to lead it. And failed it again for attempting de facto to lead it when he had officially refused to lead it. Because there are clear indications that Dr Sant is overawed by Dr. Vella and gives in to his demands even when all else beg to differ. May be Dr Sant feels he owes his leadership to Dr Vella in refusing it three times when it was clearly within his reach or for coming to Sant’s rescue whenever his leadership appeared doomed.

In January 2003 the whole corpse of Labour’s national executive had counseled Dr Sant to accept the PM’s offer for a binding referendum on EU membership provided the referendum was preceded by a general election. Dr Sant eventually unilaterally conditioned this simple logic by a farcical 60% level of approval in the referendum. It is widely believed that this was done to appease Dr Vella who was not present at the meeting of the national executive and could not judge its mood. Unfortunately for Labour it seems that Dr Vella’s tragic view, that EU membership needed changes to entrenched clauses in the constitution and hence why a 60% approval in the referendum was required, prevailed over everybody else’s. The general election was lost in January not in April 2003.

No one will ever have the privilege of being offered to lead Labour three times. George Vella has had this unique privilege but has not used it properly. He carries the guilt of constraining Labour to face the next election without the necessary credibility that old faces cannot give to new policies.