Sunday, 22 August 2010

After All Has Been Said

The Malta Independent on Sunday   - 22 08 2010
What can be said about the late Guido Demarco that has not been said already`

Honour, tribute and homage have been poured upon his memory in doses which make it difficult to find anything new to say, if not personal experiences or weaknesses from which no human is spared but which are out of place in an obituary.

Guido always impressed me with his warmth whenever we met.   He was invariably happy to meet me and was always ready with unmerited eulogy on some piece I would have written.

He really had a knack for making whoever he met feel important.  One always parted him with a wish to meet again soon.

On assuming Presidency, which was roughly the same time I published a book on Malta’s future relations with the EU, we had exploratory discussions on possible ways how Labour could be less confrontational about EU membership and how his Presidency could become acceptable to Labour to enable him to operate as a unifying force in Maltese politics.

Regretfully no progress was registered on both issues but surely not for lack of trying from Guido Demarco’s side.

What can be said about the divorce issue that has not already been said?

The Curia’s Pro-Vicar Fr Anton Gouder did find something new when he stated categorically that voting for divorce would be a sin without entering into the merits of whether he was referring to a referendum vote, a parliamentary vote or to both.

He also expressed marvel that surveys show that 15% are still undecided about such an important issue and disappointed that 40% have expressed themselves in favour.

Fr Gouder can pontificate as much as he wants about divorce but as someone responsible for where the Church is going he should well ask what relevance the church will have in our daily lives a few years down the road if even today 55% are not outrightly against divorce; if a larger percentage in the under 55 years category are prepared to consider divorce positively if legislation carries safeguards to ensure that it is only accessible to those for whom marriage has broken down irretrievably, with due precautions to safeguard the children’s rights.

There is one thing Fr Gouder and I probably agree upon for different reasons.

We probably both agree that divorce should not be decided through a referendum.

Fr Gouder ought to be against a referendum to avoid having wholesale commission of mortal sins on the scale of the sixties.   Personally I am against a referendum because I consider divorce to be a right of the individual and such rights should not be agreed to or denied based on the will of the majority.

If we do a referendum about divorce we can just as well do a referendum on whether we should continue to pay unemployment benefits or social assistance.

If our political class cannot take responsibility for doing what 40% of us demand without any imposition on the remaining 60% than let the divorce issue mature on its own steam without a referendum which would give us the worst of both worlds; a large segment of the population committing mortal sin without resolving anything, simply postponing the problem to the next generation who will one day laugh disdainfully at our narrow mindedness.

And if the Fr Gouders of this world are screaming that divorce desired by the 40% would be imposed on the remaining 60% as they would be living in a divorce-minded society, even though personally they would not be obliged to make use of divorce facilities, I wonder what difference this would make to the 60% who are already living in a separation-minded society with a jungle law for unwedded family units.

On the contrary there is a lot to say about the proposal to raise retirement age for Judges from the present level of 65 years.

The suggestion made by retiring Mr Justice Carmel Agius is not without merits but also has negative connotations that cannot be ignored.

It is true that in many countries Judges retire at a more advanced stage and in the US, supreme court justices, court of appeals judges, and district court judges are appointed for a life term or until they voluntarily resign.

Such open ended appointments are risky in a local context.   Judiciary is the third branch of government.
Unlike the first two branches (the legislative and the executive) the Judiciary is not subject to constitutionally demanded periodic validation through democratic elections.

Without age limits the Judiciary will have an unchecked mandate which defies the essence of democracy.

One could argue in favour of a higher retirement age, but only if such a measure is accompanied by limits of minimum age to qualify for appointment.  To my mind ten years is the ideal time a person should spend in such important positions, be he a Prime Minister or a Chief Justice.

If a person does a good job for ten years in such position of high responsibility he ought to be exhausted and looking forward to retirement to let new blood creep in.  Beyond ten years in the same position , human nature being what it is, the decision making process of a rational person tends to become irrational, from objective its shifts to subjective, and from analytical it morphs into assertive.

Retirement age for Judges is the only control we have to ensure members of the judiciary do not grow too comfortable in such position of high responsibility.

If longevity means that Judges can continue performing effectively till age 70, them a 10 year maximum term ought to be imposed.

Retirement at 70 would be the maximum for a Judge appointed to the bench at age 60.

And the method for appointment of the judiciary has to be more challenging than the present system of a simple unilateral decision by the Executive.   Some parliamentary screening will surely add value and transparency to the appointment process.

Retirement does not mean all valuable experience will be lost.  Legal research and publications need not stop with retirement.   And there are other positions which retired judges could be considered for, like a former Chief Justice is doing as an Ombudsman.

There is yet much to say about this.

Sunday, 8 August 2010

Europeans are from Mars

The Malta Independent on Sunday   - 08 08 2010
Men are from Mars, Women are from Venus goes the saying originated by the 1992 book of John Gray arguing that men and women are as different as beings from different planets. The stark difference between the US and European approach to the painful and long drawn economic recovery from the greatest recession since the thirties, makes me draw parallels that Europeans are from Mars while Americans are from Venus.

Jean Claude Trichet surprised many when on July 23rd he called for worldwide tightening backing tax rises and spending cuts to address the large fiscal deficits built into most governments budgetary position by the financial crisis of 2007 – 2009 when tax revenues fell and social spending increased alongside additional spending by governments to cushion their economies from spiralling into a depression. He was not just laying out monetary plans for the Euro area for which the ECB is responsible directly or for the total EU area for which it is indirectly responsible given that the ultimate destination should be for all EU members to join the Euro.

He was recommending world-wide tightening, giving advice, if not instructions, to others beyond European shores and stopping just short of a straight admonition about their misguided lax monetary and fiscal policy.

This contrasts sharply with the general approach adopted by Trichet’s counter-part on the other side of the Atlantic who regularly expresses the caution against tightening up too quickly before the economic recovery gets firmly entrenched, warning that any such pre-mature tightening could trip the economy into a double dip recession.

Both the US Treasury and the US Federal Reserve Bank extol the virtue of fiscal prudence for the long term, but like St Augustine they pray for latent rather than instant virtuosity. While Trichet was writing that “we have to avoid an asymmetry between bold, if justified, loosening and unduly hesitant retrenchment..... and with the benefit of hindsight we see how unfortunate was the oversimplified message of fiscal stimulus given to all industrialised economies under the motto ‘stimulate, activate, spend’ “ Bernanke was advising the US Congress that he supported fiscal efforts to boost demand before the US embarked on a well controlled long term deficit reduction plan. He was telling Congress that the prospects for the US economy were ‘unusually uncertain’ and that the Fed believes that the US ‘should maintain a reasonable degree of fiscal support , stimulus for the economy’.

Never before have there been such monetary duels between the two major economic blocks of the industrialised world. Another example of how the great recession caused by the financial crisis of 2007-2009 is changing the rules and game and leading to different views from different vantage points.

Let me speculate about the reasons leading to such duels. The simple reason, too simple really, is that whilst the ECB is only tasked with a unitary objective to keep inflation in the Euro area below but close to 2% p.a., the US Fed not only has no specific inflation targets but has additional responsibility to keep economic growth and employment as close as possible to the potential of the US economy.

So strictly speaking the ECB in setting its policies gives much less attention to the impact they may have on economic growth and employment and instead is guided solely by the single inflation objective irrespective of other macro-economic considerations. Whilst this is undeniably so, it is too simple to assume that in reality the ECB does make any macro-economic consideration other than inflation. This would be unrealistic as economies are dynamic systems and if they do not grow they contract and could fall into a depression, denying the possibility of honouring the close to 2% inflation target. In a depression prices retrench and real interest rates rise, causing an increased debt burden to suffocate new investment which is also discouraged by diminishing demand.

There must be other reasons why the ECB seems more relaxed about the prospects of the EU economy than the Fed is about the US economy. Amongst these is the fact that the property crisis which originated in the US on a nation-wide basis, was only replicated in Europe in some peripheral countries like Ireland and Spain but was no problem in the core EU countries like Germany and France where property prices neither hiked speculatively nor crashed horrendously when the US bubble burst.

So whilst the financial crisis created by the property bubble in the US was quickly exported world-wide due to the mobility of capital that rendered many European banks exposed to US financial products related to US mortgages, the property crash per se remained a largely US affair. Now that the financial system has stabilised it is the US not Europe that has a stranglehold around its monetary policy by the large number of consumers who are still nursing negative equity mortgages as property prices in the US continue to bump along the bottom.

Still I feel there is a more potent, often unspoken, reason for the contrasting approach of the ECB and the Fed. Whilst in the US the Fed oversees a political federation and is responsible for the economy of the whole federation there is a clear tendency in the Frankfurt building of the ECB to measure the fortunes of the EU by those of the core northern European countries with Germany as the core of the core. Policies are not tailored for the needs of the periphery countries who are expected to drudge along and shape their economies on the German model with little respect to the environmental, cultural and skill differences. Whilst the overall EU economy is struggling to grow, the German export machine, aided by the fall in the Euro and the rise of the US dollar in the first half of this year, is humming along with impressive speed and consistency.

Trichet is showing undue optimism if he thinks that Spain, Portugal and Greece amongst others can benefit the same way as Germany from Chinese demand for imports of investment machinery and luxury products. The fortunes of the Euro are already reversing. The Cassandras on the US side which just two months ago were predicting dollar parity with the Euro by end of summer are now eating humble pie as the US gently engineers a fall in the dollar value which is key to reviving export demand to fill the gap in the subdued internal consumer demand as the US consumer has to save more to nurse his/her negative mortgage.

It would be wise for Trichet to keep options open rather than paint the ECB into a corner from which it could exit only with an egg on its face as it did when it raised rates in June 2008, just a quarter before the crisis hit. And again as it had to do very recently when it was forced by the Greek sovereign crisis to start buying sovereign bonds of its members after denying any plans to do so. It would also be wise for the ECB to fine tune its policies with less German-centricity. As Trichet’s term nears its end, the ECB would be served better if it chooses by Banca d’Italia Draghi to lead it rather Bundesbank’s (BUBA) Weber unless the ECB is to be labelled BUBA mark 2.

Rather than Mars perhaps the ECB can come down to Earth.