Good Timing

 18th January 2008
The Malta Independent - Friday Wisdom

It would be flattering to think my contribution of last week inspired the very timely and informative media conference addressed by Opposition Leader last Monday about his current condition of convalescence and prospects for his state of health.

Probably it was more a matter of co-incidental timing and I believe Labour meant to deliver what they actually delivered to the media last Monday without need of any prompting. But they certainly did the right thing in being fully open about the Dr Sant’s state of health and particularly in supporting local medical opinions, competent as they undoubtedly are, by additional corroboration from international sources of unquestionable credentials.

Apart from rejoicing that Dr Sant has been certified fit to lead Labour into the next elections I consider we have been afforded credible re-assurance that from a health point of view there is a very high probability, in a world where the future remains uncertain to all, that Dr Sant can impart his duties as the next Prime Minister without any health handicaps.

So by the end of this month it would be business as usual and the Prime Minister will soon have to make a decision about the election date which could come on any Saturday between 1 March and 23 August.

Will the Prime Minister get his timing right? Is timing so important that it could influence the election outcome?

I think that the Prime Minister already missed a favourable opportunity to go to the elections soon after last budget which would have given him a better opportunity to regain the electorate’s mandate. Now the novelty of the budget has worn out. The adoption of the euro could be cheerful for economists, bankers, and business leaders but for the average voter it is an administrative headache coupled with an unavoidable impetus to inflation, whether perceived or real yet to be decided.

Consequently it is doubtful whether the euro adoption could in any way be an issue which could make a material impact on the way people vote if the election were to be held in this first quarter of 2008.

Not the same could be said if the election slips beyond this quarter. Prices that have been frozen by voluntary agreements with importers and service providers until March 2008 will find the flexibility to move upwards solidifying the perception of euro induced inflation. In addition events in the international economy do not augur well for a favourable background to sustain strong economic growth during 2008.

The US economy is gently but surely slowing down to critical levels and it is presently tip-toeing dangerously on the borders of an outright recession which will no doubt effect negatively the economic tempo in all other economic regions, including the EU.

The currency of one of our major trading partners, the UK, is in a headlong downward rush on the exchange markets making our export products and services, including tourism, much more expensive in sterling terms than they were a mere three months ago when the sterling value against the euro was 10 per cent more than it is today.

It is almost an irony that this had to happen exactly to coincide with our euro entry but it does deliver a lesson to countries joining into a monetary union at an uncompetitive rate.

The UK could never until recently, seriously consider joining the euro monetary system because its strong economic tempo and consequent high interest rates were keeping its market determined rate of exchange at an unsustainable high level certainly not appropriate for fusion into the euro.

Now that the UK economy has started to cruise along at a much lower pace it can cushion the consequences by a fall in the external value of sterling. If the UK had fused into the euro at the high rate prevailing until recently the prospect for the UK economy would presently be much worse than they already are.

The latest economic figures coming out on the local front also indicate that for the rest of 2008 the local economy will be affected by the international slowdown or recession. Government finance data available until November 2007 show that the budgetary position is worse than what it is was in November 2006 and unless sizeable one off items land in the December 2007 budgetary statement the government will not meet its target for a reduction in the deficit in 2007.

The GDP for the third quarter of 2007 was 4.1 per cent higher in real terms compared to the same period of 2006. But from figures released this week by Eurostat it results that when seasonally adjusted this growth disappears. On a seasonally adjusted basis the growth rate of 4.3 per cent in the second quarter actually shrinks to 0.1% in the third quarter of 2007.

All economic lights are flashing that an election beyond the first quarter of 2008 will strengthen the opposition’s arguments that the economy is not as strong as the government would have us believe and provide a dimming background for the PN’s re-election prospects.

Dr Gonzi may have better credentials than his predecessor for general direction but he seems to lack Dr Fenech Adami’s daft skill for getting his timing right as evidenced by the timing of the referendum and general elections of 2003.

Timing is as important as the general direction. The difference between a fresh crisp salad and trash is timing.