Sunday, 30 December 2012

The lull before the storm

This articles was published in The Malta Independent on Sunday -  30 12 2012

The political armistice for the festive season is proving as fake as I thought it would be.   At Christmas parties and family re-unions, after the pleasantry talk about the out of season fine spring weather, the discussion inevitably falls on the coming elections.

I still can’t fathom why Prime Minister Gonzi chose March 9th as the election date when it could easily have been February 9th and could have shortened the misery of suffocating indecision by a whole month.   Since 1992 we had election campaigns of 33 days.    This time there was all the more reason why the national interest demanded the shortest possible election campaign after having wasted four weeks in this fake lull.   The country is without a budget and with a caretaker government.   Furthermore crucial EU summit discussions about budgetary allocation for the 2014 – 2020 cycle will accentuate in the first quarter probably in March so there was every sense to get the election over and done with,  in the shortest time possible.
The Italians have an approved Budget for 2013 and Monti has resigned and is carrying on simply as care-taker Prime Minister.  The Italian parliament was dissolved just before Christmas and elections will be held on 24th and 25th February.   In Malta without an approved Budget and without  the Prime Minister’s resignation even though he has been defeated in a crucial money bill in parliament, we will vote two whole weeks after the Italians when the national interest would have demanded that we vote at least 2 weeks before them.   Why we are waiting for 7th January to dissolve parliament and why we have then to endure 61 days of hard and vicious electoral campaigning beggars any decent explanation.  
The Prime Minister could only offer a half baked excuse that it would cost the country one million euro more to have separate elections for parliament and for local elections.    Apart from the fact that he was forced to admit that local elections could have been brought forward to save such an expense, even if this were not possible we are saving nothing.    A 9 week long electoral campaign will cost political parties at least one million euro more than a 5 week election campaign.   Hard campaigning does not come cheap.   Without decent legislation to control political party financing, political parties will be forced to seek donations from benefactors that are unlikely to come without strings attached given their size and timing.   I would much rather prefer that taxpayers fund one million euro more ( even though this would not have been necessary if local elections were also moved forward to February) rather than the said one million euro be spent by political parties  through strings attached funding which in the long run could cost taxpayers much more.
All this could have been avoided if government had accepted the evident reality that it had no parliamentary majority to pass the Budget and accordingly should have gone for elections in Autumn.  The Budget preparation and its presentation in parliament before the crucial vote of December 10th were an awful waste of time.
If any proof were needed we got it this week when the NSO published the government financial situation for the 11 months to November 2012.   The deficit as at end November 2012, practically just as Minister Tonio Fenech was reading his budget speech in parliament on 28th November, was EUR 64 million worse than the relative figure for 2011.   It is evident that the Minister had no proper idea of the government financial position even as he was reading the budget.    Otherwise how could he estimate that the full results of 2012 will show a budget position EUR 40 million better than 2011 when the figures up to November were EUR 64 million worse?  To hit such an end of year Budget target, during the month of December 2012 compared to December 2011 the budgetary performance would have to improve by EUR 104 million.  
December is always a cash positive month for government.  In 2010 it was cash positive by EUR 29 million.  In 2011, December was cash positive EUR 60 million.   But to hit the target included in the budget speech just a month ago, December 2012 would have to prove cash positive by EUR 164 million.    Come on Minister, be realistic and admit that you were too busy running the failed election campaign for Deputy Leadership of the PN  and had to resort to inventing figures out of thin air.    If you cannot project forward one month from end November to end December how can we rely on your figures for three year rolling forward budget till 2015?
Have we not been here before?   Was it not the same Minister when reading his first Budget for 2009 that projected that we should be in surplus by 2011 and start reducing debt?   Absolutely off target!!
Labour used the period of this fake lull productively.    The replacement of Dr. Anglu Farrugia as Deputy Leader by Louis Grech was a rare master-stroke in local politics.   Following his botched performance in the Xarabank debate   it became clear that the PN had found Labour’s weak spot and were ready to build their campaign around it.
The moment Simon was elected Deputy Leader the media cells of the power network in which the PN occupies the political nexus, instantly switched from GonziPN to SimonPN.   It was no longer a contest between Gonzi and Muscat.  It became a contest between Simon and Anglu.

Anglu Farrugia is as good a local and district politician as anyone.  He is someone any party would love to have in its delegate and parliamentary line-up.   But he does not command the necessary leadership and managerial competences to perform at national level and having him as Deputy Leader of PL was not an ideal situation.   For as long as his counter on the PN side was Dr Tonio Borg, himself not ideal for the post, the risk from his unsuitability was containable.   But the moment the PN decided to attack Labour where it was weak and switched on to SimonPN, the risk became untenable and seriously threatening to erode the lead that Labour had for long enjoyed.  
If Anglu Farrugia had become a risk that could jeopardise the Party's chances for winning the next elections Muscat's had to do what was in the interest of the Party to do no matter how painful and even unfair it may be to the individual.   

I am a firm believer that loyalty should be to the organisation not to the individual.   I was the most loyal servant Alfred Sant ever had for as long as I was convinced that he was being loyal to the Party.   When he decided to re-contest leadership after two consecutive electoral defeats then I perceived he was putting his personal ambitions above the Party's interest and my loyalty to the Party meant I could no longer remain loyal to a disloyal leader.  I quit
Thanks to the exceptional leadership skills exhibited by Muscat’s master-stroke in having Louis Grech as his first deputy,  Labour  can start the electoral campaign with full confidence that they have sent the PN to redesign their election strategy and that at whatever level, leadership or deputy leadership, they can meet fire with fire.

What remains to be seen is whether Labour will have the financial resources to match the PN in a 9 week long election campaign.   But if Labour focuses on the three main points of their campaign then quality will make up for quantity:

·                     A credible and sustainable energy policy which involves reduction in utility tariff at least to the average level of the EU
·                     Promise of a fair, inclusive and corrupt free system of government
·                     A government for the people not the other was round.

Labour turned the disaster of the Xarabank deputy leaders debate into an opportunity which changed the talk in the Christmas party circuit from giggles about Anglu to how much more electable Labour has become with Louis Grech next to Joseph Muscat.
And soon the lull will be over and the storm begins.  Elections by their own nature are divisive.  Long election campaigns are divisive for a longer period and with greater intensity.  My prayer and wishes for 2013 is that as from March 10th the country re-unites behind the people’s verdict and we can move forward as one nation.

Sunday, 23 December 2012

Saved by the bell and by Louis

Winning elections is all about having better credibility than your opponent.  

For as long as Joseph Muscat could be the face of the Labour Party he consistently scored higher ratings than Gonzi and the PL was always ahead of the PN.    This in spite of the local economy continuing to perform relatively well and the 'it's the economy, stupid' syndrome was not working to Labour's advantage.


The PN knew this.  They cared little about the national interest need to solve the political instability caused by defections from their backbench.  Instead they limped along hoping to find a way how to re-jig the political pieces and destroy the strong perception that they had become unelectable due to their arrogance, gaffes and strong suspicions of corruption.

Suddenly the pieces changed.   The resignation of John Dalli as EU Commissioner was in all probability engineered from Malta by PN strategists to create a vacant post so as to kick upstairs Dr Tonio Borg PN Deputy Leader and make way for a younger face on the PN electoral ticket.

The contest between Simon Busuttil and Tonio Fenech was as fake as the non-election campaign we have during this holiday period.  Simon was the anointed one, the one chosen to offer hope for change within the party to those PN supporters who were disillusioned and prepared to switch their vote.  In contesting, Tonio Fenech showed the same naivety he exposes when preparing his long term budgets.   Cabinet colleagues with an eye on the Party leadership after the election defeat pushed Tonio Fenech to contest knowing that he would be burnt as a potential leadership contender as much as Simon would be when he fails to deliver.

The moment Simon was elected Deputy Leader the media cells of the power network in which the PN occupies the political nexus, instantly switched from GonziPN to SimonPN.   It was no longer a contest between Gonzi and Muscat.  It became a contest between Simon and Anglu.

Anglu Farrugia is as good a village politician as anyone.  He is someone any party would love to have in its delegate and parliamentary line-up.   But he does not have leadership and managerial competences and having him as Deputy Leader of PL was not an ideal situation.   For as long as his counter on the PN side was Dr Tonio Borg, himself not ideal for the post, the risk from his unsuitability was containable.   But the moment the PN decided to attack Labour where it was weak and switched on to SimonPN, the risk became untenable and seriously threatening to erode the lead that Labour had for long enjoyed. 

Joseph Muscat, as all recent Labour leaders, suffers from a serious fault in Labour's statute where the election for Deputies is held only one week after the Leader's election.   The gap is so short that the elected Leader would have no time to influence the choice of his deputy.   The contestants for US Presidential election hand-pick their deputy and put him or her on the electoral ticket.   In any other country the Leader would have a say, even informal, on the choice of his deputy but in the PL this is not possible.     There is just not the time to do so.  

So it often happens that a Labour leader gets as deputies persons he would rather not choose.   A good football coach on the bench has to change his team tactics and replace some key players if opponents make changes which create new circumstances.   So when GonziPN became SimonPN, as a good coach with emerging leadership qualities, Muscat had to do something.    His oath of loyalty is to the Party and the people it represents, not to individuals.

If Anglu Farrugia had become a risk that could jeopardise the Party's chances for winning the next elections Muscat's had to do what was in the interest of the Party to do no matter how painful and even unfair it may be to the individual.  

I am a firm believer that loyalty should be to the organisation not to the individual.   I was the most loyal servant Alfred Sant ever had for as long as I was convinced that he was being loyal to the Party.   When he decided to re-contest leadership after two consecutive electoral defeats then I perceived he was putting his personal ambitions above the Party's interest and my loyalty to the Party meant I could no longer remain loyal to a disloyal leader.  I quit.

When Muscat was contesting leadership against George Abela I was of the firm opinion that Abela was a better choice for the Party's interest and chances for re-election.   Now I was and still am much closer to Muscat than to Abela but again my loyalty was to the Party and not to the individual and I told as much to Muscat.

With hindsight I was probably wrong although it is difficult to prove the counter-factual.   Muscat has grown immensely into his leadership position and with the latest move he showed top leadership qualities which sent a clear signal to people of goodwill who really expect that we start exercising a different type of politics.    Abela on the other hand accepted the appointment to President of the Republic even though he knew that the party needed his talents.   He placed his personal interest ahead of the Party and gave Gonzi an excuse to say that he included Labourites in his appointments.  He reserved for Labourites the single post of the highest slot in the constitutional hierarchy, one largely ceremonial with no executive power except in very special circumstances.   Wherever there was any position with executive power, GonziPN strictly reserved it for the Blues and the Reds had to continue to live as strangers in their own country.

Labour has been saved by the bell thanks to  PBS ( Peppi Broadcasting Services as per Dr Franco Debono).  And in the choice of Louis Grech Labour has selected a person who is far more mature and capable than Simon Busuttil who has never had any executive position in the business sector and who clearly has less than amateurish grasp of economic matters.   Louis can have Simon for breakfast,lunch or dinner any time.

Now Labour can start the electoral campaign with full confidence that they have sent the PN to redesign their election strategy and that at whatever level, leadership or deputy leadership they can meet fire with fire.

What remains to be seen is whether Labour will have the financial resources to match the PN in a 9 week long election campaign.   But if Labour focuses on the three main points of their campaign then quality will be better than quantity:
  • A credible and sustainable energy policy which involves reduction in utility tariff at least to the average level of the EU
  • Promise of a fair, inclusive and corrupt free system of government
  • A government for the people not the other was round.

Tuesday, 18 December 2012

What a good (too late) idea!

See this link regarding the appointment by government Guardian for Future Generations and Sustainable Development Network.

What a good idea!

Question is why now?  In the bad socialist days under Mintoff he had on the same lines set up a Posterity Fund.

The first thing the incoming PN administration of 1987 did was to dismantle this Fund and transfer all assets to normal government mainstream accounting.

Now as they are about to terminate their 25 years tenure of power they are imposing discipline rules for good housekeeping on their successors.   And this time not simply related to financial matters but extended to all matters of quality of life sustainability.

A real case of do as I say and but don't copy what I did.    Too little too late!!

Click on the document on the left to open.

Monday, 17 December 2012

Playing hide and seek

Political parties should have stopped political activities for the Christmas period to re-start with a full 9 week election campaign on the 7th January 2012.

So I am a bit confused watching the news that Minister Pullicino today held a press conference to launch a national energy policy and Minister Fenech went to inaugurate the new Air Malta offices and take credit for the progress being registered in the restructuring process of Air Malta.

This is playing political hide and seek - 'noli' in pure Maltese language.   If the PN will keep political activities going in the form of Ministerial interventions they cannot expect the PL to keep receiving without hitting back.

A national energy policy now after 25 years in government which kept us the only EU country solely dependant on fossil fuels for energy generation??  Now when parliament is for intents and purposes practically dissolved??

Minister Pullicino had better explain the criticism raised against his Ministry in the Auditor General Report for 2011 just published.  Launching a national energy policy at this stage made me shout the only two text abbreviation lingo I learned OMG  LOL !!!

Sunday, 16 December 2012

All branches of democracy need review

In Parliament, we witnessed a rare event when a back bencher broke his whip’s discipline, voted against the government in a crucial money bill and explained his vote in very clear terms of no confidence in the government. This, according to the Constitution, leads either to the resignation of the Prime Minister and the appointment of another MP to form a fresh majority, or to the dissolution of Parliament.

I felt it unfair that, given the historical significance of the event, the Speaker did not allow the MP concerned reasonable time to explain his conduct before the House. But what I find particularly strange is that the loss of a crucial money bill, and a strong declaration in parliament that a contrary vote was a vote of no confidence in government, did not trigger either the resignation of the Prime Minister or the immediate dissolution of Parliament. The decision to dissolve Parliament at a future date does not have precedent and goes against the immediacy demanded by article 76 (5) of the Constitution, which gives the Prime Minister three days in which to resign or request the President to dissolve Parliament.

The Constitution is not chewing gum. It has to be strictly adhered to in all circumstances, even if the governing party conveniently makes Christmas an excuse to delay the inevitable.

A further example of how our leaders manifestly lead by bad example and continue to put their own interests before those of the nation is the choice of the election date. Since at least 1992, we have always had the shortest possible 33-day election campaign. In the present circumstances, where the government has been forced to resign and is navigating into a new year without an approved budget, the need to go for the shortest possible election campaign is greater than ever.

Even if one were to accept that, for the sake of Christmas, parliament is dissolved and the election writ is issued on 7 January, there is no reason on earth why the election should not be held within 33 days – on 9 February. The excuse that only the 9 March date allows general and local elections to be held concurrently was just that, an excuse, and one that left the Prime Minister with egg on his face when it was pointed out that the law allowed local elections to be brought forward as well.

The country has been experiencing political instability for more than a year, since it was evident that the government had a shaky majority in parliament. We have seen a crescendo during which the government lost various non-crucial votes until the climax was reached when the budget vote failed on 10 December. Having established in unequivocal terms that the government has no majority in parliament, the national interest demands that we resolve the issue as quickly as possible by going for the shortest 33-day campaign as has been done in other, less-demanding situations. The decision to go for a 61-day formal campaign, following four weeks of political limbo over Christmas, clearly places the narrow interests of the PN ahead of the national interest.

Election campaigns cost money. A 61-day campaign costs twice as much as a 33 day one. Without a law for the funding of political parties in place, in spite of criticism from EU organs, the chronic democratic deficit, by which choices and policies continue to be influenced by “charitable’ donors, becomes more accentuated. A long political campaign gives the PN a better chance to recover their poll disadvantage through better funding and more expensive and extensive communications strategy. There is no doubt that the PN has better access to funding than Labour. The fact that no serious initiatives have been taken during their 25-year tenure to correct such democratic deficit is sufficient evidence that the status quo works in their favour. Through a longer political campaign they are now attempting to leverage this democratic deficit to their advantage.

Even the third branch of democracy was shaken this week. Yet again, we could hardly believe our eyes on seeing a senior member of the judiciary in the dock facing criminal charges sufficiently serious for the person to be kept under arrest. Coming so soon after similar events of some years back, also involving two senior members of the judiciary who were later found guilty and sentenced to prison terms, it reinforces the impression that something is seriously wrong and that, rather than these being isolated events, our judiciary system suffers from a recurrent and chronic weakness.

It would be too simplistic to argue that the weakness stems from the fact that the judiciary does not command a remuneration package that reflects its status and responsibility. Nobody forces anyone to become a magistrate or a judge and if anyone feels underpaid, the logical way out is to resign and seek new pastures elsewhere.

Frankly, I think the system is defective from the selection process to the monitoring of operations as much as to the loss of experience of members of the judiciary who are obliged to resign on reaching a certain age.
The selection criteria of very limited practising years of experience is an invitation for trouble. Those sitting on the bench have to be very mature, have to have had long practical experience and should have reached the stage in life where they are already economically comfortable and agree to sit on the bench more for the experience and prestige than for the remuneration. So I always find it inappropriate for lawyers still in their thirties to be given access to the judiciary with the prospect of spending 30 years or more as judges or magistrates. I would exclude the consideration of anyone under 50. Fifteen years is the maximum anybody can keep doing the same job and remain effective.

Secondly, there is scant, or at least non-evident, monitoring of the performance of judiciary members. Such performance evaluation should be built into the system in a continuous manner by having committees of retired judges vetting the sentences given by magistrates and judges for consistency, logic and legal appropriateness. Such committees should also pay special attention to excessive delays in sentencing and should have the authority to directly question the judge or magistrate involved about any such excessive delays and what needs to be done for each specific case to arrive at sentencing with the least possible further delay.

Thirdly, judges and magistrates should continue to retire at the age of 65 but their experience should not be wasted. By sitting on review committees as above explained, and continuing to be paid their full package for as long as they agree to do so, their experience can still be channelled towards making court procedures more efficient, streamlined, accountable and credible.

And what about the modern fourth branch of democracy? Central banks and financial regulators are gradually becoming the fourth branch of democracy as they enjoy independence from the executive in the implementation of monetary policy and, to a lesser degree, in the regulation of the financial industry.

The EU has just decided that regulation of systematically important euro-area banks, including a minimum of three banks from each euro-area country, is to be directly regulated by the European Central Bank (ECB).
This step buries the main reason why bank regulation was originally extracted from central banks and given to different authorities, in our case the MFSA. The main argument for such extraction was that bank regulation could conflict with the independence of monetary policy. The crisis of 2008 showed that, when push came to shove, central banks with the power to create money were the only institution capable of handling the crisis and that such handling creates bigger conflicts with monetary policy independence than if regulation had stayed with the central bank and possibly the crisis would have been spotted earlier and maybe avoided altogether.

What is now going to happen with our internal regulatory system? Are we still going to have the ECB regulating our large banks and the MFSA regulating the rest of the financial services sector, with the Central Bank of Malta acting as a go-between? This sounds very unwieldy. I was never in favour of migration of the regulatory function away from the Central Bank and I believe it is time to reconsider. The MFSA should continue doing whatever it is doing but the authorisation, monitoring and regulatory function should move back to the Central Bank.

Even the fourth branch needs a full review.

Saturday, 15 December 2012

Labour right and wrong about XARABANK

Labour should not have accepted in the first place to participate in yesterday's Deputy Leader debate on Xarabank.

Now that for all intents and purpose we are already in a fully fledged election campaign such debates should form part of the Broadcasting Authority schedule of election campaign political programmes..

Xarabank and TVM yesterday showed that they are not acting in the interests of professional journalism in hosting such a debate but they are serving the interest of the PN.

Any professional journalist would agree that the man of the week was rebel MP Franco Debono.   He is the person who brought down the government by voting against his own party in parliament leading to failure of  government's Budget 2013 proposals.

Journalists should have been chasing Franco not the other way round.   But clearly the interest of the PN is to brand Franco Debono irrelevant.   Xarabank rather than pursue the principles of professional journalism opted to pursue the interest of the PN.

The debate between the Deputy Leaders ought to come in its due time as part of the Broadcasting Authority schedule during the election campaign.   But this week it was Franco's week.   Next week Franco may be history but this week he should be a hot topic for true journalists to try to get to the bottom of how it came to be that a person stands for his principles even if in the process he has to burn away all political ambitions.

Yet once Labour decided to participate it did not serve their image and their election prospects by doing the charade as they did yesterday.     Once they agreed to participate they should have gone through with it and surely  Dr. Anglu Farrugia would have been able to point out to the Xarabank presenter that his choice of topics for debate is meant to serve the PN not good journalism.

It is heartening that PL have now agreed to participate in the second attempt for the Deputy Leader debate on Xarabank.

Xarabank and Peppi Azzopardi should be ashamed of themselves for hosting such a debate rather than offering the limelight to Franco Debono whose decision in parliament this week has made political history which could change the way politics is done in this nation.

Wednesday, 12 December 2012

It is more than a bit rich

It is more than a bit rich for the Prime Minister to muse where Labour are getting funds for their billboards.

It does not look as if the PN have any billboard disadvantage.  So the Prime Minister may be wondering why Labour are punching as much as the PN, at least in so far as billboards go.

It is even richer for the Prime Minister to promise to pass legislation about the funding of political parties when for the last two decades they only paid lip service to the need to bring under control the jungle which exists in this field which is well and truly a democratic deficit, where the rich gain access to the quarters of power which are denied to the poor.

What the Prime Minister should explain  is why he chose to go for an election campaign of 61 days rather than the 33 days that we have grown used to since 1992.   Without a budget for 2013 and with government forced to resign against its wishes, there was every reason to go for the shortest possible election campaign allowed by the Constitution.   This is more so considering that the start of the election campaign has to be postponed till after the Christmas festivities,  thus spending another 4 weeks in limbo.

Campaigns of 61 days and 28 days of limbo cost more than twice than straight electoral campaigns of  the minimum 33 days.

So by all logic to avoid further complication to the funding of political parties,  the Prime Minister should have gone for the shortest campaign possible.

But the PN's interest are served better by a long campaign.   They need as much time as possible to try to change their fortunes at the polls.   And they stand a better chance of succeeding if they asphyxiate the Opposition out of funds in the latter part of an extended campaign.   The PN have never had any problems of funding and the least of their problems if finding generous donors who get selected for contracts from yellow pages to fund an extended election campaign.

Yet again the Prime Minister, in choosing the date for the general elections, has put the interest of the PN before the interest of the nation.

Tuesday, 11 December 2012

Parliament dissolution at a future date is unconstitutional

I am not a lawyer but I can read Maltese and English.

The Constitution provides in article 76(5) regarding dissolution of parliament that when the government loses a motion of no confidence in parliament the Prime Minister has within three days either to resign or to ask the President to dissolve parliament.

The President then has to make a choice.  He can either accept the Prime Minister's recommendation to dissolve parliament and to call general elections within three months.   Or if the President thinks that there is some other member of parliament who can put together a parliamentary majority so as to continue the work of parliament, then the President may refuse to dissolve parliament and appoint another person to seek to form a fresh majority in parliament.

There is no provision however that parliament may be dissolved at a future date.   The President has either to dissolve parliament straight away or to force the Prime Minister to resign and investigate whether there is any other person who can continue parliamentary work till the end of its term, i.e. till next May 2013, by forming a new majority.   If the President chooses to explore that route he obviously has to consult the Leader of the Opposition,   Hon Franco Debono and independent MP Jeffrey Pullicino Orlando and this without further delay.

But it would be wrong and unconstitutional for the President to agree to dissolve parliament at a future date and allow a Prime Minister who has suffered a vote of confidence in parliament to stay in his post without parliament being dissolved.

The Constitution is there to be followed and no Christmas convenience can change its interpretation.

Monday, 10 December 2012

Unfair to Cyprus

In his replica to the Budget criticism of the Leader of the Opposition, the Prime Minister made big fuss because two years ago the Leader of the Opposition had criticised the government for performing worse than Cyprus.

Cyprus is now seeking an EU bailout so according to the Prime Minister time has shown that the PN has managed Malta's economy better than the government of Cyprus.   So according to the Prime Minister the Leader of the Opposition always chooses the wrong model for Malta.

This is very unfair and unkind to Cyprus and its people.   Cyprus had been running a better economy than Malta and the criticism of the Leader of the Opposition two years ago was fair and appropriate.

Cyprus suffered the misfortune of someone who lives next to a house that has been gutted by fire.   Their house has been damaged by the fire from their neighbour's house.  It is a misfortune beyond their control and it is unchristian for anyone to boast of the misfortune of others.

Cyprus has traditional strong economic and cultural ties with Greece.    Cyprus' economy has been badly hurt by the problems of Greece.   Their banks have suffered huge losses due to the exposure they had towards the Greek economy and the government had to intervene to save its banks.   In the process its budget has been put under severe stress.

If Maltese banks have suffered no such misfortune that is no merit of the government.   It is the merit of the people who have cultivated the strong culture of savings and who maintain their strong home bias in placing their savings.   This has kept our banks liquid and solvent and it is thanks to the people that our banks have not put government finances under stress.

We have done well in spite of the government not because of the government.

A political Christmas

Whether the election campaign starts before or after the holidays, it does not change the fact that politics will be on our mind this Christmas.

Government has capriciously avoided earlier elections which were clearly in the national interest, and as a consequences we are spending Christmas under a care-taker government, without an approved budget, and with political instability that will force people to keep their purse closed this Christmas.  In the face of uncertainty consumers defer whatever expenditure that can be deferred.

The commercial sector should condemn the government for putting its own narrow Party interest before the good of the nation.

And how dare the government expect the opposition to vote for the Budget?    There is no opposition in any proper parliamentary democracy on earth that would vote for Government's budget.   

How cheeky for government to try to blame the Opposition for its inability to muster a majority for its budget.

Would it not have saved so much time, effort and energy if government would have gone for general elections before presenting the budget, when it had clear warning that the budget would never make it through parliament.

Why wait till 9th March (2)

Even if one were to accept that the election campaign starts on 7th January 2013, then we should adhere to the practice of having the shortest possible election campaign, 33 days, so that the election can be held on 9th February.

Problem is that date evokes memories of the mortal sin election of 1962.

Sunday, 9 December 2012

Why wait till March 9th?

As government looks set to lose the crucial vote on the Budget for 2013 in parliament tomorrow, a date will have to be set for elections within the following 3 months.

According to today's papers the most likely date is March 9th 2013 to co-incide with local elections.

Excuse me but I totally disagree with such a date.  It is a case of the tail wagging the dog.

Given that crucial budget measures like the cost of living allowances cannot be given in the absence of an approved budget the election date should be the nearest possible.    If government is defeated tomorrow and the Prime Minister asks the President to dissolve parliament immediately after the vote, the earliest election Saturday would according to my calculations be 12th January 2013.

So why not hold the elections on January 12th to end this chronic instability we have been living with for more than a year?

Obviously the puritans would argue that we cannot have an election campaign during Christmas festivities.   First of all if we were to have an election campaign during the festivities it would be government's fault for dragging on so much rather than do what the national interest demanded and go for elections earlier.   But then we can still have elections on January 12th without having an election campaign during the festivities.

If formal campaigning starts on 2nd January that will give 9 full days of election campaigning.   Is that not enough?  Don't we already know the issues involved?   Have we not been in an informal election campaign for more than a year now, ever since Franco Debono started taking distance from the PN and voting in parliament accordingly?

Those who will be too willing to blame Labour for their inability to pass the Budget through parliament had better explain why they are not holding the elections on the first constitutionally possible date i.e. January 12th.

Friday, 7 December 2012

"Because of" vs. "In spite of"

In Maltese that would read: minhabba vs minkejja.

That basically symbolises the main argument between the two main political parties contesting the next elections.   All their billboards, all their meetings, all their TV ads,  all their brochures and fliers can be condensed in a such a simple statement.   The because of the PN against the in spite of the PL.

The PN will argue that we have better economic growth than the average in the EU because of government's competent handling of the economy.   The PL will argue that the little economic growth we have results in spite of the government as its incompetence, corruption and creation of layers over layers of bureaucracy is really slowing down the private sector's drive for economic growth.

Nobody has a monopoly over the truth.

But it is a bit rich for the PN to argue the 'because of' line when one considers that:

  • Our level of government debt is far higher than government's own estimates at the start of this legislature as explained in the Budget Speech for 2009.   In fact our debt level is as bad as that of Spain and not much better than that of Portugal and Ireland.   What we have better than other EU countries in distress  is the ease with which such debt can be financed internally at low rates without recourse to foreign banks or external investors.   The merit for that belongs to the private sector who has always maintained high level of savings and shows valuable home-bias in investment choices.

  • Government has shown gross incompetence in carrying out relatively simple projects like re-organisation of the public transport and the energy policy including the extension of Delimara power station.   If government cannot handle such relatively straight forward projects how can it claim credit for competent handling of a complex macro-economy?

  • The World Bank has classified us as the most bureaucratic European country.   Rather than use the advantage of our small size to make the necessary bureaucracy lean and effective we have gone to the other extreme.   Bureaucracy, certainly the excess of it, breeds corruption and one finds difficulty to find credible other reasons for keeping in place excessive layers of bureaucracy which add no value whatsoever.

  • In the last Budget speech the Minister sung himself praises for projecting real economic growth of 1.6%  in 2013.    Our economy has potential for real growth in the order of 4% and we should be happy with nothing less.   We have always thrived amidst adversity.    During the first oil price shock in the seventies we had the biggest inflow of foreign direct investment from German manufacturing. Even in 2012 we had good year in the external sector of the economy as our exports increased and tourism reached record levels.   The problems in other tourist destinations render us more attractive and competitive.   The low growth being experienced is more related to domestic demand and domestic consumption as government instability has forced people to postpone investment and consumption decisions till after the elections.

For me we should be proud we are better than others in spite of the government,  and we are not where we should be and have the potential to be because government is burdened with the heavy  baggage that long tenure in power inevitably brings.    Even for that reason alone I side for the 'in spite of' side of the equation.

Sunday, 2 December 2012

A budget for the others

This article was published in The Malta Independent on Sunday - 02 December 2012

The last budget before an election always requires interpretation with an added dose of caution. Politicians’ objectives rarely go beyond the next election and when the election gets so close, the temptation to front-load sweeteners for the short term, at the expense of long term sustainability, becomes irresistible.

A double dose of caution is required whenever governments are forced to put together the last election budget in the context of adverse opinion polls. We all remember how Labour spent unsustainably in the run-up to the 1987 election in an attempt to turn public opinion about Labour’s bid for a fourth consecutive term. And we equally all remember how the PN hid the true precarious state of a huge hole for 1996, when VAT revenue was not coming in anywhere near the budgeted levels, before losing the election of October 1996.

The budget before the last election for 2008 was read in the House on 15 October 2007. It planned a deficit of €68 million for 2008. That was before the election.
When, after the election, Minister Tonio Fenech read his first ever Budget, that for 2009, the actual deficit was declared at €200 million.
An election between two budgets makes a difference of €132 million adverse variation between the budget target and the actual out turn.
One can be a bit sympathetic as in between there was also the great financial crisis of September 2008 which derailed projections, though to be realistic the effect ought to result with a time lag in 2009 rather 2008 itself.
But consider what the Minister projected in his first Budget for 2009, read in parliament on 3 November 2008 and therefore with full knowledge of the financial crisis. He gave a three-year budgetary framework which for 2011 expected a budget surplus of €65 million equivalent to one per cent of GDP and debts of €3.68 billion equivalent to 56.30 per cent of GDP.
The actual for 2011 was a deficit of €219 million, equivalent to -2.7 per cent of GDP. Debt level was €4.60 billion, equivalent to 71 per cent of GDP.
I quote 2011 figures purposely. Firstly because that was as far a preview as was contained in the 2009 Budget speech. And secondly because 2011 is history and the figures are crystallised beyond scope for revision.
The budget actual out-turn for 2011 was an adverse variance €284 million from what was projected in 2009 and a debt level €1 billion higher. One billion has nine zeroes after the integer, so the difference is much more than just changing an ‘m' to a ‘b'.
The Minister can hardly claim credentials for reliable budgetary targeting.
So it is not without reason that I find two major cases of figure-fudging in the budget presented.
Firstly, someone has to explain how the government is going to find a cash bonanza by the end of this year.
In 2011, the government had a deficit of €188 million in the first nine months to September and by December, the deficit had grown to €219 million. So in the last quarter of 2011 the government deficit grew by €31 million. Taking the same figures for 2010, it results that in the last quarter of 2010 the government deficit fell by €3 million.
Let’s repeat that. In the last quarter of 2010 the government deficit was reduced by €3 million and in the last quarter of 2011 it grew by €31 million.
What is being projected for 2012? The published deficit for the first nine months of 2012 is €282 million but, according to the figures given in parliament, by the end of December this deficit will be reduced to €180 million. So the Minister is planning that the last quarter of 2012 will prove cash positive to the tune of €102 million compared to cash negative €31 million last year and cash positive €3 million in 2010.
Don’t look for any explanations in the budget speech as there are none, even though the minister found all the time to explain much less relevant items. What I can say is that the actual figure for the deficit of 2012 will only be announced late in March and by that time we could be in the post-election period.
The other question is how the Minister is planning to increase revenue from income tax in 2013 by 10 per cent, i.e. by €83 million from €840 million in 2012 to the €923 million projected for 2013.
All things being equal, tax revenue should increase at the same rate as the growth of the nominal economy. So normally, tax revenue should increase by some four per cent in 2013 – being 1.6 per cent real growth plus 2.4 per cent inflation.
But all things are not equal. Government is reducing the marginal rate of tax for earners between €19,500 and €60,000 from 35 per cent to 32 per cent. The revenue government forfeits from this measure has not been estimated but it does not come cheap.
So how come that, in spite of this concession, government is still expecting tax revenue to increase by more than twice the rate of nominal economic growth?
During a TV debate, the Minister – in a side remark – said this was due to economic growth. The Minister must be a firm believer in supply side economics beyond what empirical studies show if he believes that economic growth of four per cent nominal will generate increased tax revenues of 10 per cent, even though tax rates are reduced. 
And if the Minister believes so much in government finance inflows buoyancy from economic growth, it is a bit rich for him to deride similar claims by Labour about sources for financing the promised cuts in utility rates.
The budget for 2013 is a horror movie we have seen before, further complicated by its regressive stand and by the increase in the share of taxation revenue compared to GDP.
It has been put together by a Minister who expects neither that it will pass through the parliamentary approval process nor that he will be responsible for its execution. Fudged figures permit dishonest post-event criticism when the projections prove false and unachievable under another administration.

Saturday, 1 December 2012

Simon was never in doubt

I hate to say I told you so but I did.  In my TMIS article of 18th November 2012 ( click on the link below) I said :

Mr Fenech ought to know he does not stand a chance in front of the nomination of Dr Simon Busuttil and this for two reasons. Fenech does not offer the refreshed face credentials that Busuttil offers. Secondly the PN is not ready to break with its tradition to elect members from the legal profession to its leadership. Ask John Dalli!
This was when many others where tipping that Mr Fenech with the backing of most of the Cabinet would pip Dr Busuttil in a tight race.

What's the rest of the plan?   It is easy to read:

a.  Busuttil will try to convince Franco Debono to at least abstain from the Budget vote so that the nation can spend the Christmas holidays with a budget in place.

b.  Come what may, whether the budget is approved or not the election will be set for March 2013 together with local elections.

c. The PN will counter the PL's refreshed image by anointing Simon Busuttil as the leader who will take over from Dr Gonzi early in the next legislature if the PN is re-elected.

Nothing however changes the fact that the PN is split internally with the Leader, Deputy Leader and the chief strategists on one side and the rest of the Cabinet on the other side.