The
Ever since the Prime
Minister decided not to go for a general election on this side of Christmas I
perceive a certain loss of composure and self-confidence on the PN’s side diluting the boost they had received through the
impact of the Budget novelties.The decision to hold the election after the Euro changeover date should have been a sign of confidence by government in its ability to engineer a smooth changeover without any abnormal inflationary impulses due to the rounding up of prices upon conversion of the currency.
Yet government suddenly seems to have been gripped by fear that it has allowed itself hostage to fortune, as it is practically impossible to avoid some rounding up price pressures. Though insignificant in the grand scheme of things of how inflation is measured, such price pressures coming during an election campaign could be quite powerful points of criticism in the hands of the opposition and could very well prove a useful tool to discredit the image of a safe pair of hands that the PN wants to portray upon their leader.
Reality is that prices increase all the time. It is unrealistic to expect zero inflation and indeed such a hypothesis could be economically dangerous as it could tilt the economy into a depression, i.e. a general level of price reductions which would kill off demand in the economy as people will wait to buy tomorrow at a cheaper price what they can buy today at a higher price. The European Central Bank has an official inflation target of below but close to two per cent.
What must be avoided as much as possible is a widespread process of rounding up of prices as a direct result of the currency changeover. Government could have passed a law to prohibit price increases but given that we have a market economy and given the difficulty in policing and enforcing such law, government opted for something more effective and more practical. The voluntary agreements for price stability until March 2008 are not intended to ensure eternal price stability. They are merely intended to ensure that suppliers voluntarily bind themselves to keep prices stable over the currency change over period; to ensure that the consumer is given time to adjust to the new currency regime. Of course price increases after March 2008 are possible and indeed probable. But by then the consumer would know that these are price increases in the normal course of things and not price increases through abuse as a result of the currency changeover.
The best safeguard against price increases is free market competition and easily accessible information where the consumer can compare prices. After March 2008 we will have the same price policies based on the free market concept as we had in every March of recent years.
Government seems to have lost its confidence to explain such simple things and is somehow allowing the virtue of price stability agreements to be changed into a perceived vice of possible price increases after March 2008 without effectively explaining and defending its totally rational position.
Another sign of government losing its composure is the pitiful reply which the Prime Minister gave to a Super One journalist about the expected completion date for the Manwel Dimech bridge project. This project is celebrating its quccija these days.
It should have been completed by now, yet work is still proceeding on the St Julian’s Bay side of the bridge. The work on the Swieqi side has yet to start. The Prime Minister simply refused to be committed to a completion date for the project.
The obvious answer should have been that the contractor involved has been committed to finish the project by such and such a date and failure to do so would involve penalties which the government will invoke with rigour.
Yet the Prime Minister’s obstinate refusal to commit his government to a definite completion date shows he is not in control things and that is hardly typical of a safe pair of hands.
I have no idea what made the Prime Minister discard the idea of seeking a refreshed mandate on this side of Christmas.
Maybe the hope and expectation of a Christmas laden with feel-good factor, a smooth currency changeover and tangible result of budget – measures which will be included in the January pay slip – has persuaded the PN that it stands a better chance in February than in December.
They are possibly under-estimating the perceived, not necessarily the real, inflationary effect of the Euro and may be they are expecting lasting gratitude from the electorate for the economic boost families have been given by the Budget measures. Possibly the PN have under-estimated the reality that novelty wears out quickly and budget measures quickly solidify into a given and the electorate would be more impressed by fresh election campaign novelties rather than by yesterday’s news.
The PN could possibly soon regret their decision not to go for a 2007 election. On the other hand, they could find some comfort that their faux pas is well matched by Labour’s misplaced criticism of the quality of health services being provided at Mater Dei instead of focusing their criticism on the gross absence of value for money in this project.
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