Nationalising the National

National Bank saga

These are both sides of the argument whether the former shareholders of the National Bank Group are entitled to compensation as they claim being robbed off their property through Mintoffian duress.

Arguments for compensation	Arguments against compensation
The Bank was profitable before the depositors run on the Bank began	So what?  Even Northern Rock was profitable before the depositors’ run on the Bank began in 2008.
The Bank had a strong Balance Sheet before the depositors run on the Bank began and had liquidity buffers above the legal minimum ratios	When the bank lost the confidence of its depositors it lost its most important asset.   Even the Titanic was strong and valuable as it left the port of Southampton on its maiden journey.  After it hit the iceberg it was more than worthless. It was a liability.  Loss of depositors’ confidence was the National Bank’s iceberg
The run on the bank was engineered with malicious intentions	Where is the evidence?   Government threatened to withdraw  public sector deposits only after the run on the bank was in full force and public view.
The Central Bank had a duty to restore liquidity to the National Bank under its obligations to act as a lender of last resort.	Only if the Central Bank made a technical judgement that the problems at the National Bank were problems of illiquidity not of insolvency.   The denial of lender of last resort support shows that the Central Bank made a judgement that the problem at the National Bank was insolvency.   Insolvency requires additional capital not temporary liquidity.   Nobody has provided any evidence that in so deciding the Central Bank had any ulterior motives other than the execution of their role as provided in the law.
The Mintoff government took over the role of the Central Bank and forced the National Bank shareholders to sign over their investments for no consideration under unfair duress	The moment the Central Bank decided not to offer lender of last resort support, judging the National Bank as insolvent not just illiquid, government had to move in to provide the additional capital that the shareholders were unwilling to provide.   Government had a duty to ensure that the taxpayer gets fair reward for the risks they were being forced to take and not to pay any compensation for an asset which at that point was for all intents and practical purposes, worthless.
To justify not paying anything to National Bank shareholders Mintoff government eventually presented audited accounts which increased the provision for bad debts to a level which wiped away all equity cushion.	The accounts were audited by a reputable firm of auditors and the provisions took into consideration a more conservative and realistic view of the value of the security held against non-performing loans.   Prudent banks  value such security on the basis of forced sale whereas the National Bank valued it at optimistic market values.
Subsequent events proved that most of the debts provided for were recovered and Bank of Valletta took back into profits losses incurred by the National Bank to engineer its takeover without compensation	In the years subsequent to 1973 the sharp increase in oil prices delivered several years of high inflation.  Inflation work wonders to ease the burden of debt and to improve the value of security.    But these subsequent events could not have been known at the time of the crisis in 1973 and the decisions made in 1973 have to be judged by the circumstances prevailing at the time.
But still the National Bank shareholders deserve fair compensation for the property taken off them through threats and duress.	Only if there is concrete proof that the value of the assets they surrendered was anything higher than zero based on the facts and circumstances as prevailing at the time.   As to threats and duress these are a sideshow to the core issue that the National Bank was considered insolvent by the Central Bank and failure by government to put in fresh capital would have brought losses on the depositors as had happened two years earlier in case of BICAL.   It would have created an undesirable Barclays monopoly. That Mintoff was always rough at the edges is a well-known fact.   But reality is that he did not need to threaten as he could have achieved the takeover through legislative means.
Once depositors were made whole and suffered no losses, shareholders should have been made whole too as some of them were also depositors	There is a very different legal position between the rights of depositors and the rights of shareholders.   Shareholders have to lose everything before any depositor loses a penny. Any government would go out of its way to protect depositors to maintain systemic financial stability.   In the years following 1973 the concept of Depositors Protection Scheme was introduced for this purpose. It was not in force in 1973. Government however has no obligation to bail out shareholders.    In the financial crisis of 2008 shareholders of banks in crisis were practically wiped out in most financial institutions requiring state support.
We have a right to challenge government for compensation through Courts	Of course you do
The court is taking too long to decide so we deserve an out of court amicable settlement	An out of court amicable settlement will be unjust to either  ex shareholders or the taxpayers as it will leave a sense of justice undone.   This is so especially if pressure is brought on an outgoing government in election mode seeking re-election.
We are fed up of waiting.  We need compensation during our lifetime	So make pressure on government to arrange the court system.  Imagine if government starts offering out of court settlements to all long outstanding court cases.

Having understood these arguments why does it take three and a half decades for the Courts to decide?

Taxpayer beware!

No one is more abused in the vote sensitive pre-election period than the poor taxpayer.

Any special interest Group that can muster a sizable voter base can push their case on a vote-sensitive government eager to hang on to power whatever it takes.   The bill for such pre-election concessions will ultimately have to be paid by the Maltese taxpayers and their successors in the form of higher taxes, higher debts or both.

One of the special interest group that has become very vociferous in this vote-sensitive pre-election period are the former shareholders of the National Bank Group (NBG) who have pending claims for compensation in long standing court cases for what they consider forced and unfair takeover of their investment in the NBG by Government in 1973 when the NBG was experiencing life threatening loss of depositors' confidence.    We have witnessed a media campaign meant to force government to agree to an out of court settlement which was reportedly promised to them by prominent members of the Nationalist Party in similar vote sensitive periods related to past elections.

I have already expressed views on this matter on this blog - see following link:

http://alfred-mifsud.blogspot.com/2012/05/republic-built-on-injustice.html

Since then I have participated in a vibrant debate on the Times of Malta web-site with persons who have a vested interest in securing compensation, the fatter the better.

In a normal society these issues are decided through the Courts.  Unfortunately our courts are failing society by the sheer length of time they take to decide.   Any court case that takes three and a half decades and is still pending, is a shame on the rights of the parties involved, both those who pretend compensation and the government who on behalf of the taxpayer is arguing that no such compensation is due.

So whilst I sympathise with the frustration and aggravation that parties feel about court delay, the solution cannot be fair on the taxpayer if government is forced to negotiate an out of court settlement in this pre-election vote sensitive period.

Equally unfair is the reported plea of prescription apparently raised by government in 2010.   It's too late for that.    A settlement either through abortion on the grounds of prescription or by amicable out of court settlement will be a big mockery to the 35 years spent in court and will leave a sour taste of justice undone.

This case must be settled by a decision of the Courts and this cannot come soon enough, considering that whoever loses the case will probably claim the right to appeal.

In subsequent contributions I will be exposing the arguments involved in this case.  Keep in touch.

Superstate or separate

That is the main message of the leading article in this week's ECONOMIST.

And it is right.    Europe has arrived at a fork in the road ahead.   It must either choose the Superstate road leading to further integration beyond the monetary stage achieved so far and upgrading it to a fiscal, banking, economic and finally to a political dimension where the citizen is more intensely involved in the election of EU leaders and not just national leaders or ineffective parliaments, or it must roll back the progress achieved so far and follow the road to Separatism.

The real choice is not really whether to have a Euro with Greece or without Greece but whether to have a Euro backed with fiscal and banking integration or not to have a Euro at all.

There is no doubt in my mind that the choice of a Superstate is much much preferable to the choice of Separatism.    We have had ample evidence in the last century that the separatist road leads to conflagration and human tragedy whilst the co-operative internationalist devotion lead to peace, stability, eradication of poverty and economic growth.

But it is absolutely necessary to define what a Superstate means.     If it means that we all become German and the Mediterranean would become a German model with better weather,  than that it is just not on.

Just see this link of Der Spiegel to see how for all their economic success the Germans simply can't learn how to enjoy life.

Spiegel - study-finds-germans-incapable-of-enjoying-life-

Superstate must allow for diversity and for making the best of economic models based on German style seriousness and efficiency and Mediterranean way of enjoying life.

To solve the current Euro crisis there are temporary measures that have to be taken to put out the fire but there are also important structural changes to be made to the Euro house structure once the fire has been put out; structural changes needed to ensure that the house is equipped with precautionary and safety measures so it does not catch fire again.

When a house is on fire you don't need a fire consultant telling you what fire safety precautions are needed.  You need a fire engine with an abundance of water and a big hose pipe.

In the current Euro crisis there is only one institution that can provide the fire engine with abundant water and a big hose pipe.   That institution is the European Central Bank (ECB).   

The ECB has to be ready to do three things to avoid the Euro house being completely gutted by fire irrespective of whether Greece stays or goes.

• Huge, may be unlimited, liquidity injection initiatives to ensure that banks in all Euro countries  have all the necessary liquidity to meet and nip in the bud any loss of confidence by depositors  because of events in Greece.    This has to be on the same lines of the recent LTRO may be renamed LerTRO meaning Longer Term Refinance Operation as the term gets increased from three to five years and the collateral requirement relaxed even further. 

• Display of readiness to intervene directly in the bond markets through its Securities Market Programme (SMP)  to keep within serviceable limits yields on bonds of countries undergoing and adhering to austerity programmes. No country can stay on course with austerity and restructuring if the savings made through austerity have to be paid out in higher borrowing costs.

• Launch of a huge fund (sourced by government contributions from fiscally strong countries  and through monetisation by the ECB) whereby the EIB or the ESM will supply fresh capital to EU banks that are judged insolvent not merely illiquid. This especially applies to Cyprus, given its exposure to Greece, and to Spain given the bad assets still lying on its banks’ books.

These measures are so unconventional that they will most certainly meet resistance from the German Central Bank (BuBa).     The latter remain locked in a anti-inflation mind-set with scant realisation that the price stability threat is more from the downside rather than the upside, more from deflation rather than inflation, and that there is an existential threat to the Euro project, indeed to the whole European integration and peace with stability project.

Something has to give.   BuBa will have to break out of their mind-set and consider what the economic consequences for Germany would be if the Euro breaks up and Germany would have to revert to the Deutsche Mark.

BuBa strict monetarist approach that monetisation will lead to inflation is a fallacy out of tune with current realities.    The monetisation incurred through these non-conventional measures will not lead to increased spending in the economy where the velocity of circulation of money has dropped dramatically and the normal banking system is not creating money through the normal lending process.  Banks in distress are no longer in the business of lending money.

Furthermore all these measures are reversible.   Just as in the US the TARP measures were reversed with little or no cost to the taxpayer and with clear positive impact on the recovery, the non-conventional measures explained above can be reversed when we get to post-crisis mode.   The SMP and LTRO programmes can be reversed.   The recapitalisation fund can be wound down when circumstances permit banks to repay their extraordinary funding ( through redemption of Preference Shares) or through privatisation ( through sale of ordinary capital).

Once the fire has been put out through these measures than we have to install better security systems so it does not recur.   These security measures must deliver balanced growth through the whole EU and Euro area.   We must not have the north and south divide.    We must not have surplus and deficit countries.   We must not have countries like Germany capable of borrowing at zero interest rates and other countries either shut out of the borrowing markets or having to pay atrocious interest rates.

What sense does it make for Italy and Spain to pursue painful austerity if the economic gains achieved through such austerity have to be paid out in higher interest rates rather than re-invested for growth in their economy?

To achieve such balanced growth Germany has to become a bit more like Mediterranean countries and start enjoying life not just economic benefits.    At the same time Mediterranean countries have to become a bit more like Germany in rendering their economy more flexible and efficient.

Just as Ireland, Spain, Portugal, Ireland and Cyprus are undergoing a prolonged internal devaluation process, cutting wages and benefits to become internationally competitive again,  Germany should immediately undertake an internal revaluation process.

Germany should tolerate domestically a higher level of inflation, encourage private sector wage settlement at a higher level to compensate for the wage freeze suffered during the prolonged integration of the East to the West,  and consequently encourage a shift of demand from domestic brands to imported brands and shift of production to relocate to other Euro area countries with comparative cost advantages.

Such moves are totally within Germany's own jurisdiction, need little parliamentary intervention, are perfectly in line with the German Constitution and are far more effective for promoting growth than Euro bonds or Fiscal Union.   They may even be politically popular for Mrs Merkel's re-election ambitions.

Euro bonds and Fiscal Union may come later.

Just unfair!!

This feature in the FT Alphaville blog (link below) shows that Malta is carrying the highest load as a proportion to its GDP of its exposure to Greece, direct and indirect.   

Malta's Eurzone sorrow

Utterly unfair.   This load should have been carried by those who let Greece in the Euro in the first place when clearly they were not prepared for it,  and by those who looked the other way while Greece was cooking its books.  After all with their fiscal largesse the Greeks bought Mercs and BMW's not Maltese honey.  Those who like us joined in 2004 and later should not have been made to carry the Greece risk.

GEREXIT

Back to the future?

Notwithstanding all official denials it is unimaginable that the ECB and Euro member countries are not making contingency plans for a possible Greece exit from the Euro.

The scenario most likely to evolve is that an inconclusive Greek election on 17th June 2012 will spark a run on Greek banks.    This will make the burden on the ECB and its constituent Central Banks too heavy to carry.  In order to avoid replacing depositors on the liabilities side of Greek Banks' balance sheet, the ECB will have to stem the funding to Greek banks.  

This will lead to implosion of the Greek banking system and a forced reversion of Greece to their own currency.    Banks will be closed for an indeterminate period until Drachma notes will be available and laws are passed to redenominate all accounting, bank deposits and contracts under Greek law from Euro to Drachma.   Greece will unavoidably default on liabilities which cannot be converted to Drachma due to their being drawn under a foreign jurisdiction.     That much is pretty certain.

What is less certain is whether the contingency plans ostensibly being made ( in spite of denials)  would be robust enough to ensure that the fire is ring-fenced around Greece and that contagion does not spread to other jurisdictions, particular Cyprus, Spain, Portugal, Ireland and Italy.

Hopefully the measures I proposed in my previous post will be taken in time to ensure that Greece remains an isolated event and that other countries watching the turmoil in Greece would double their resolve to speed up their structural adjustment programmes.

If all moves as planned would it mean that a GREXIT without contagion would in effect restore enduring stability to the Euro system?

Absolutely not, is the resounding answer to such question.

Greece is not the only country causing instability to the Euro.    Germany is causing similar instability but from the virtuous side.   But make no mistake about it.   Chronic deficits are destabilising, no doubt.   But chronic surpluses are equally destabilising.    

So having undertaken GREXIT to remove destabilisation from the vicious side would GEREXIT also be required to remove destabilisation from the virtuous side?  

In theory this would be perfect solution for restoration of growth to the remaining 15 Euro countries with Germany losing its present competitiveness as it reverts to an appreciating DM whilst the Euro minus Germany falls to below parity with the US$.  

In practice however this is institutionally unfeasible and optically damaging for the Euro which could become perceived as a common currency for weaker countries and would prejudice its ambition for reserve currency status.

However Germany must still do something to ease off the instability it is generating to the system from the virtuous side.  Just as Ireland, Spain, Portugal, Ireland and Cyprus are undergoing a prolonged internal devaluation process, cutting wages and benefits to become internationally competitive again,  Germany should immediately undertake an internal revaluation process.

Germany should tolerate domestically a higher level of inflation, encourage private sector wage settlement at a higher level to compensate for the wage freeze suffered during the prolonged integration of the East to the West,  and consequently encourage a shift of demand from domestic brands to imported brands and shift of production to relocate to other Euro area countries with comparative cost advantages.

Such moves are totally within Germany's own jurisdiction, need little parliamentary intervention, are perfectly in line with the German Constitution and are far more effective for promoting growth than Euro bonds or Fiscal Union.   They may even be poltically popular for Mrs Merkel's re-election ambitions.

Euro bonds and Fiscal Union may come later.

Can this slow motion Euro train wreck be avoided?

More than ever the Euro seems like a slow motion train wreck.    If Greece leaves or gets ejected the permanency of the Euro gets questioned and investors start asking whose next.   If Greece stays the instability we have been living with will persist till the next showdown so the crash could be postponed but not avoided.

What can be done to avoid this slow motion train wreck which will cause great instability in financial markets and could lead to a long recession, if not a depression with possible challenges to the normal functioning of democracies in distressed countries?

Everybody now seems to be agreeing that the Euro cannot survive as a monetary union in isolation unless it is backed by fiscal transfers mechanism and a Euro-wide bank regulation and deposit insurance protection.    Essentially this means the creation of a fiscal union with migration of sovereignty over fiscal matters from the individual countries to a centralised organisation and offering scope for the issue of mutualised debts in the form of Eurobonds on the collective responsibility of all Euro members.

These are political decisions that cannot be taken overnight.    Apart from requiring parliamentary ratification of 17 member state parliaments, in some cases they would require national referendum and possibly changes to the national Constitution.   Putting all this to fit the electoral calendar and sensitivities of many countries one can understand that the objective of a fiscal union and Euro bonds is necessarily at best a medium term objective.

So the question is how can time be gained to avoid the train wreck?   How can time be given to Europe's political leaders  to deliver a fiscal union and a central debt agency capable of issuing Euro bonds on collective responsibility so that individual Euro area member countries will no longer borrow their funding needs directly?

These are the questions that must be answered if the slow motion train wreck is to be avoided.

There is only one institution that has the autonomy and resources to take initiatives to postpone the train wreck to allow time for Europe's politicians to do what can no longer be avoided.   Essentially to take the European integration project to the next level from monetary union to fiscal union and eventually to a political union as the United States of Europe!   

That institution is the European Central Bank (ECB).    The ECB has to be ready to do three things to avoid the train wreck irrespective of whether Greece stays or goes.

• Huge, may be unlimited, liquidity injection initiatives to ensure that banks in all Euro countries  have all the necessary liquidity to meet and nip in the bud any loss of confidence by depositors  because of events in Greece.    This has to be on the same lines of the recent LTRO may be renamed LerTRO meaning Longer Term Refinance Operation as the term gets increased from three to five years and the collateral requirement relaxed even further. 

• Display of readiness to intervene directly in the bond markets through its Securities Market Programme (SMP)  to keep within serviceable limits yields on bonds of countries undergoing and adhering to austerity programmes. No country can stay on course with austerity and restructuring if the savings made through austerity have to be paid out in higher borrowing costs.

• Launch of a huge fund (sourced by government contributions from fiscally strong countries  and through monetisation by the ECB) whereby the EIB or the ESM will supply fresh capital to EU banks that are judged insolvent not merely illiquid. This especially applies to Cyprus, given its exposure to Greece, and to Spain given the bad assets still lying on its banks’ books.

These measures are so unconventional that they will most certainly meet resistance from the German Central Bank (BuBa).     The latter remain locked in a anti-inflation mind-set with scant realisation that the price stability threat is more from the downside rather than the upside, more from deflation rather than inflation, and that there is an existential threat to the Euro project, indeed to the whole European integration and peace with stability project.

Something has to give.   BuBa will have to break out of their mind-set and consider what the economic consequences for Germany would be if the Euro breaks up and Germany would have to revert to the Deutsche Mark.

BuBa strict monetarist approach that monetisation will lead to inflation is a fallacy out of tune with current realities.    The monetisation incurred through these non-conventional measures will not lead to increased spending in the economy where the velocity of circulation of money has dropped dramatically and the normal banking system is not creating money through the normal lending process.  Banks in distress are no longer in the business of lending money.

Furthermore all these measures are reversible.   Just as in the US the TARP measures were reversed with little or no cost to the taxpayer and with clear positive impact on the recovery, the non-conventional measures explained above can be reversed when we get to post-crisis mode.   The SMP and LTRO programmes can be reversed.   The recapitalisation fund can be wound down when circumstances permit banks to repay their extraordinary funding ( through redemption of Preference Shares) or through privatisation ( through sale of ordinary capital).

Will the euro survive?

This article was published in The Malta Independent on Sunday - 20 May 2012 This is the question everyone is asking at the moment. I had asked it in a piece I had written on The Malta Independent of 13 February 2009 – ‘Friday Wisdom’. It is worth a re-read and an update. This is what I had written: “I suppose this is a question which should not be asked, and if it is asked those who are in charge of protecting the integrity of the euro can only answer in the most absolute way that the euro will most definitely survive and even prosper. “But such absolute assurances should not bar thinkers and realists from asking the question. The very act of posing such a question implies the existence of doubt about the euro’s long-term staying power. “The euro has just celebrated its first very successful decade and doubters could easily be dubbed as spoilers. But 10 years is a very short time to prove the longevity of a monetary union. History is riddled with similar monetary unions between separate sovereign states, which blew up after several decades of initial success. In fact, if one looks around, it is clear that the major currencies of the world, apart from the euro, are the currencies underpinned by individual sovereign states. “In 1998, when the euro was launched, Milton Friedman famously warned that the euro would be truly tested by the first major global economic recession. He issued this warning in the belief that, lacking labour and product market flexibility, Europe was not an optimum currency area in the way the US economy is. “We are now at the point that the late Milton Friedman had perceived. The euro is being tested by a fierce global recession, and developments going on within the individual component states of the monetary system do not suggest much optimism that the system has the necessary resilience to come out of this challenge unscathed. “We are seeing the euro area economy being dragged into a deep recession at an astonishing speed. In this context, we are bearing witness not only to external measures of protectionism but we are also seeing measures of protectionism even between members of the EU and the euro area. “The euro and single market rule book has been shelved. Faced with the primary responsibility to the electorate of the sovereign state that elected them, governments have to put taxpayers’ money at risk to try to stabilise the financial system and to cushion their sovereign economy from the possibility that the recession will deteriorate into a depression. And it is obvious that once taxpayers’ money is put at risk, governments have to take narrow sovereign circumscribed measures to ensure that the benefits of such extraordinary fiscal measures will be enjoyed by the sovereign taxpayers and not by the general members of the Union. The we-are-all-in-this-together syndrome rarely goes beyond lip service. “So we are seeing France bailing out its car industry but making conditions to ensure that jobs are kept in France and if redundancies are needed these are squeezed out of plants in other EU states. We are seeing Ireland nationalising its banking industry, guaranteeing all bank deposits, and making conditions on its now state-owned banks to give preference to local borrowers in their normal operations across the whole EU. “It is evident that under the stress of an acute recession, potentially a depression, a monetary system that does not have the benefit of a federal government that can draw up a federal budget to support monetary measures with fiscal measures, is unlikely to withstand within its boundary the tremendous pressures that are building up inside it. “So what could happen if the internal stress of the euro monetary system becomes too much for the system too bear? “The first thing that will happen is that further expansion of the monetary union will be frozen till the financial markets get back to a state of normality. One could argue the fact that countries like Denmark, Hungary and Iceland are clamouring to join the monetary union (even though Iceland is not yet an EU member and would have to become one before being accepted in the monetary union) is a sign of strength resulting from the attractiveness of the Union. I doubt it! A system which has de facto suspended its rules cannot bring in new members before it re-establishes discipline. And, frankly, bringing in members motivated by their economic weakness rather than their economic strength is not conducive to stabilising what is an already fragile structure. “The next thing which could happen is that some of the existent members could find the conditions, legal or de facto, of the monetary union tough going in order to protect their sovereign national interest or indeed to protect the popularity of their own government with the national electorate. It is tempting to think that I am referring here to the weakest links in the system, countries like Italy, Greece, Ireland and Spain either because of their huge national debts (Italy and Greece) or because they are suffering more than others in the recession from exposure to a burst national property bubble (Spain and Ireland). Wrong! These countries would be hurt most if they leave the system and would suffer a substantial downgrade of their national debt and consequently an explosive increase in the cost of servicing it. “I am referring to the strong countries that can leave without suffering such consequences. It is countries like Germany, France, Netherlands and Austria, among others, who can afford to leave the system with little damage. If the recession worsens to an extent that weak link countries could risk default on their sovereign debt or would need support from the stronger members, we will have to see whether the fraternity bonds are strong enough for the healthy to bear the cost of bailing out the weak. “In practical political terms, it is inconceivable that taxpayers of the strong countries would accept to carry such hardship. So the only way it could be done outside the fiscal structures is by adopting more liberal (more reckless if you wish) monetary policy leading to a downward floatation of the euro against other major currencies in order to give on a supranational basis what individual euro countries can no longer do on a national level. “Is it not strange that I am arguing that only reckless monetary policy can save the current composition of the monetary union?” ************* Just three years and three months after I wrote the above, the euro is hanging by a thread. The ECB did indeed adopt reckless monetary policy through its LTRO programmes, which flooded the banking market with liquidity to keep afloat the banking system in distressed countries, particularly in Greece, Ireland, Spain, Portugal and Italy. However, liquidity is no cure for structural problems. Liquidity buys time without offering true solutions. These must come from painful restructuring decisions to render the economy flexible and competitive and thus capable of resuming growth through exports rather than domestic consumption. But much time and resources have been wasted in these 39 months. What I had considered inconceivable (that taxpayers from strong countries would bail out countries in distress) proved not only conceivable but also unavoidable. What concerns us most is the exposure that Malta has been unfairly induced to build up on Greece through its direct and indirect participation in bailout programmes. Our direct loans to Greece and our actual and contingent contribution to the EFSF and ESM will involve us in huge losses due to irrecoverability, irrespective of whether Greece stays or leaves the euro. If it leaves, the loss will be instantaneous. If it stays, the loss will accrue gradually as it becomes evident that Greece will need further solidarity through debt forgiveness to survive. But if Greece leaves the euro, as it will probably have to if a government mandated to abandon the austerity programme linked with the bailout conditions is elected, the losses will be even greater. The ECB will incur huge losses on the exposure it has built towards Greek banks to keep them afloat and the ECB will have to be recapitalised by calling on its members to cough up more money to restore its capital from the huge Greek hit it will take. Worrying and unfair as such losses may be, there is an even bigger risk. It is the risk of contagion that the fallout from a Greek euro exit will lead to a loss of confidence in the banking systems of other countries already in distress; this will be too big for anyone to handle and will lead to a fast disintegration of the whole euro project. This scenario is too horrible to contemplate but it does not mean that it is irrelevant or unthinkable. Unfortunately, it is not only thinkable but also quite possible, if as yet improbable. But it can only remain improbable if the EU prepares itself for the shock from a dirty exit by Greece from the euro. As a minimum, these preparatory measures have to include the following: Huge, may be unlimited, ECB liquidity injection initiatives to ensure that banks in all EU countries other than Greece have all the necessary liquidity to meet and nip in the bud any loss of confidence by depositors in EU countries outside Greece. Display of readiness by the ECB to intervene directly in the bond markets to keep within serviceable limits yields on bonds of countries undergoing and adhering to austerity programmes. Launch of a huge fund (sourced by government contribution and monetisation by the ECB) whereby the EIB or the ESM will supply fresh capital to EU banks that are judged insolvent not merely illiquid. This especially applies to Cyprus, given its exposure to Greece, and to Spain given the bad assets still lying on its banks’ books. Whether the euro survives or not, depends on these measures, and we will know soon enough.

The EU must prepare for the unavoidable

The mixed signals coming from Europe are not doing Greece any good.  On the contrary they are adding to the false credibility of the new poltical forces in Greece who have built their policy on the illusion that they can have the cake and they can eat it too.

Tspras - playing
poker Greece future

The only signal that the EU should send to Greece is that whether they stay or leave the Euro is a decision that only Greeks can take, but that staying in the Euro would mean respecting and honouring all agreements signed with the Troika, irrespective of other new inititaives on growth pacts that may agreed by the EU to run in parallel to the fiscal pact or as an enhancement thereto.

Repeating and stressing that the EU will do its utmost to keep Greece within the Euro gives the impression that EU is terrified by the nuclear fallout of any member leaving the Euro.   It strenghtens the hand of Alexis Tsipras of SYRIZA in claiming that the EU can be bullied to backtrack on its austerity demands and that it can be forced let Greece in the Euro.  This is just as well as saying that the EU would agree to continue subsidizing indefintely Greeks living beyond their means without the need for structural adjustments.

It would be much fairer and equitable if the language of EU leaders becomes consistent,  clear and unambiguous.   Much better for the EU to tell Greeks that the next elections are more like a referendum on whether they want to stay in or leave the Euro and any democratic mandate to any party to renegotiate the austerity package would be taken as a decision to leave the Euro.

In the meantime the EU must be seen to be making clear and credible preparations to build a firewall around Greece to contain the damage from their Euro exit.  This must at least contain:

1. Huge, may be unlimited, ECB liquidity injection initiatives to ensure that Banks in all EU countries other than Greece have all the necessary liquidity to meet and nip in the bud any loss of confidence by depositors in EU countries outside Greece.
2. Display of readiness by the ECB to intervene directly in the bond markets to keep within serviceable limits yields on bonds of countries undergoing and adhereing to austerity programmes.
3. Launch of a huge fund whereby the EIB will supply fresh capital to EU banks that are judged insolvent not merely illiquid.  This especially applies to Cyprus given their exposure to Greece, and to Spain given the bad assets still lying on their banks books.

Time is running out.  I am not sure if we have the luxury to wait till after the June 17th elections in Greece, as if the flow of withdrawal of Euro deposits from Greek banks swells to unsustianable limits,  the Greek plane flying with no engines will crash before the 17th June.   The EU has a duty to ensure that it crashes in an open field not in a city centre.

GREXIT

A new financial word has been coined: GREXIT.

It is short for Greece exit from the Euro.   This has now become unavoidable and politicians in Greece unable to form a new government are playing a mad game of chicken thinking that they can have they cake and eat it.  They are crazy to think that the EU can be held at ransom and continue to throw funds into a Hellenic bottomless pit to avoid financial contagion on other EU countries who are working hard to address their financial crisis.

The point of no return was passed through the last election in Greece.   Going for any early election when a technical government could have been formed with a life time much longer than the technical government in Italy, was sheer madness, crass stupidity and concentrated arrogance on the part of the New Democracy leader Samaras who must have thought he had high chances of winning an outright majority.   As usual, politicians put their interest before those of the country.

Oh how wrong he was!  And what confusion he has thrown his country into!!

Nobody knows exactly what the electorate voted for.     Probably they voted their anger against the two main political parties who between them have rendered Greece bankrupt, corrupt, a repellent for new investment and now ungovernable.   The electorate knew what they did not want but clearly they did not, and probably still do not, know what they want.

The electorate voted to end the austerity programmes and renege on the bail out agreements signed with the EU and the IMF, which involved a debt write-off of some Euro one hundred billion by private creditors, but at the same time they voted to stay within the Euro.    This is a contradiction in terms.   A typical case of fairy tale demagogue politics that convinced Greeks that they can have the cake and eat it too.

It does not make sense any more for Greece to stay in the Euro.    This is a pity as the ones who will gain most by Greece's exit are the oligarchs who corrupted Greek politicians, evaded taxes, exported their capital and are warming their hands for when a crisis government after GREXIT will be forced to sell state assets under severe price stress and they can buy them with their hidden Euros which will be converted to pay the price in highly devalued New Drachma.

Yes, things now are beyond repair.    Europe can no longer support Greece that does not want to support itself.   Europe's resources should now be diverted to protect the other countries who are performing serious restructuring programmes, to protect them from the crisis of confidence fallout following GREXIT.    If Europe were to support Greece and roll back the restructuring programmes on which such support is conditional, they will weaken the democratic support for the governments in Italy, Spain, Portugal and Ireland.   If Greece can get away with it why cannot the others too?

There is only one way how GREXIT can be avoided.   Fresh Greece election must be held and these are to be a referendum on whether Greece want to stay in the Euro and embrace the bail out conditions or they want to renege on the bailout and consequently, GREXIT.   It should be Yes or No and nothing in between. Yes if and No but just won't do.   This is just what George Papandreou wanted and was forced to resign for even suggesting about it.  Merkel must be discovering a bit too late just how right Papandreou was and how much better it would have been if the austerity package had been submitted to a national referendum about whether the country wanted it or preferred GREXIT.

And let there be no doubt that a GREXIT would be a bone shaking experience for middle class and poor Greeks.   If they are exasperated with the austerity programmes they should know that compared to the pain of GREXIT the present austerity would be like a picnic.    Whether democratic institutions in Greece can survive the social upheaval caused by GREXIT I have great doubts.

But like an aeroplane that lost all engines we must now all prepare for a crash called GREXIT.

A Republic built on injustice?

This is the title of an article, the first in a series, published in Malta Today (13th May 2012 page 10) authored by Raphael Vassallo (RV).

RV normally comes up with very readable and interesting opinions but this one seems completely untypical of him and it is clear he has chosen, or made to choose, a subject for which he is completely unprepared.  The result is a very subjective opinion piece which treats very superficially the delicate intricacies of the case on which he is basing the title question.   It is whether Prime Minister Mintoff in 1973 had engineered a forced takeover of the National Bank of Malta Group (NBM) without any compensation and morphed it into what is Bank of Valletta today.
I lived through those days and can therefore speak with better authority than RV and many others who think they know more than they do.  Although I was not directly involved in it, as an upcoming bank executive, I was working closely with people who were directly involved in it like the late Denis Degorgio, the late Louis Galea and the still amongst us Anthony Curmi and Francis Flynn amongst others.

In his sh**ty opinion piece RV makes these unproven assertions:

1. That the NBM was not insolvent at the time of the 1973 crisis because the loans which at the time were considered doubtful of recovery where in their majority fully recovered in subsequent years so no recovery provisions were required at the time.

2. Failure of the Central Bank to provide lender of last facilities to overcome the temporary illiquidity problems, forced the then shareholders to sign away their shares without compensation  leading to a great injustice on which the Republic was built the following year in 1974.

My answer to these unproven assertions is that RV knows not what he is talking about.

The fact that loans which were considered doubtful of repayment during the crisis of 1973 were subsequently recovered does not in any way disprove the fact that they were indeed doubtful of recovery in 1973.   Perhaps RV does not recall that in the years following 1973 there was the first oil crisis which brought about high levels of inflation and that inflation works wonders in lowering the real burden of debt and renders capable of recovery what would have remained irrecoverable without the onset of high inflation.

Whether NBM was simply illiquid or insolvent at the time will always remain a subjective judgement but this judgement had to be made by the authorities tasked to do so i.e. The Central Bank of Malta.   And I have no doubt in my mind that at the time all professional opinions and studies upon which the Central Bank of Malta based its judgement that NBM was insolvent and not simply illiquid, and therefore did not merit salvation through lender of last resort arrangements, all converged to show that NBM was very unprofessionally run, where credit decisions were mainly a one man show based on personal contact rather than professional evaluation and that lending files at NBM carried pretty little analysis of the loan exposures and simply reflected one man decisions of who deserved credit lines and who did not.

Banking is a risky business as we are still seeing till this very day.  Goverments  in Ireland, Spain, UK and other countries have been forced to take-over and partly or fully nationalise banks that would have failed without public sector involvement.

A bank's main asset is its credibility.   This week the US largest bank J P Morgan had to announce with an egg on its face that it lost USD 2 billion in speculative trading that went bad.    J P Morgan can easily absorb USD 2 billion of losses but what hurts more is the damage to its reputation and credibility which had been enhanced by its so far successful navigation through the financial crisis since 2008.  

Without credibility a Bank has nothing.   In 1973 NBM Group had lost its credibility and people had strated queueing up to withdraw their deposits.   Without government intervention the bank was finished and the value of the bank's shareholding was zilch, just as the value of the Titanic after it struck the iceberg.

Once the judgement was made that the bank was insolvent and not just illiquid, the government had a duty to demand a fair reward for the risks taken by tax payers to save the Bank.   This is what the UK government did to save Lloyds and RBS, it is what the Irish government did to save all its banks and it is what the Icelandic government did too when its banking system imploded.

Or do the shareholders of NBM expect to eat the fruit of their investments when the going was good, but the taxpayer has an obligation to come to their rescue when they hit trouble?  Do they expect to live in a society where profits are privatised but losses gets socialised.

RV should know better.

The result of last elections in Greece is all Greek!

The choice in front of the electorate ought to have been clear.  Fish or foul? 

Do Greeks want to stay in the Euro and adopt the tough austerity programme which unavoidably comes along a financial rescue package involving debt forgiveness of more than one hundred billion Euros or do they prefer to exit the Euro and go their way and solve the problem without external support?

Last Sunday Greeks chose neither fish nor foul.  They chose beef.  The problem is that beef was not on the menu.   They chose to stay in the Euro but they also voted against the austerity programmes without which they cannot stay in the Euro.    They chose to have the benefits without making the necessary sacrifices to redeem themselves as if the rest of Europe owes them a living.

Greece is crumbling like its Pantheon

I should think that being so much in pain, both physically through the austerity measures and morally seeing how their country has been bankrupted by the two major parties who re-presented themselves for re-election in favour of austerity and staying inside the Euro, the Greeks wanted to punish the two major parties and in their pain and rage have not properly considered the long term consequences of their decision.

The major fault for this lies with the leader of the New Democracy Party who insisted on fresh elections when the proper decision would have been continued support to the technical Prime Minister who could administer the tough medicine that politicians find so hard to prescribe.

What's done cannot be undone but the grave risk is that Greece will be forced to go for fresh elections as early as this June and there is no reason to think that the electorate could recover their sobriety so quickly rather than give a double kick in the pants of politicians who bankrupted them, whatever the consequences.

The prospect of Greece having to leave the Euro if such decision of the first election is re-confirmed by the second one sends shock waves to other European countries who are themselves on life support.  Not that Portugal, Ireland, Spain or Italy have problems as bad as those of Greece.  Far from it!   None of these countries has needed to ask its creditors for debt forgiveness.  Quite the contrary Spain and Ireland saw their government take responsibility for debts which truly belonged to their privately owned banking sector which had to be nationalised in the process.   But a Greece dirty exit out of the Euro could create a contagious crisis of lack of confidence and without confidence the European credit markets will freeze.

Someone should explain to the Greek electorate that the only ones that will benefit from a Greek exit of the Euro are the Greek oligarchs who corrupted their politicians, evaded their taxes, exported their capital out of the country and cannot wait for Greece to go back to the Drachma so that they can buy state assets which will have to sold under the hammer at rock bottom prices.

Greeks would do well to think beyond their current pain and anger and elect a  national government who can work their way back to national salvation while staying in the Euro.    Once Greece proves its credibility ( which is presently  a long shot, a very long shot) they will have the right credentials to ask for dilution of their austerity programmes.  But their credibility has to be rebuilt first, just as Portugal and Ireland are desperately trying to do.

Modern Titanics (6) - Rigidity of the labour markets

This is a typical case of unintended consequences.

In the boom period following the end of the WW II but before globalisation, trade unions had substantial power in negotiations with public and private sector employers.   Obviously they used this power to clinch substantial job protection for their members.

In some countries in Europe this protection is so embedded that it is almost impossible for employers to fire anyone except for grave disciplinary reasons, and where it is possible to fire employees it is in any case very expensive due to compensation payments compulsorily due by law.

What works in a closed economy does not necessarily work in a globalised economy.    Countries like Spain, Greece, Italy and France with large public sectors and very rigid labour laws, started losing their international competitiveness as employers could not adjust their workforce to reflect the economic cycle.

The result is that in countries where labour laws are very rigid, employers became very cautious of taking on new employees and all sort of strange devices where used to engage labour outside the normal employer/employee relationship.   These range from illegal undeclared employment, contract fixed term contracts, consultancy contracts, service provider contracts, part-time employment and similar unsatisfactory arrangements.

The result is that the employment situation is worse in those countries with the most rigid labour market.   What was meant to defend people in employment has evolved into a barrier to keep people out of employment.    In fact there has developed a generational conflict.   The older generation already in employment continues to enjoy their long held protection while the younger generation with better skills and education remains blocked out of the labour market.   In all European countries unemployment among the younger generation is much higher than the average national unemployment rates.  Often it is twice the average.

This is a modern Titanic which unless addressed will lead to generational conflicts and lost generations.  It leads to tremendous waste of resources as the state provides expensive education to younger generations who then cannot use their skills in the labour market to sustain economic development.

So what's the solution?   Should Europe adopt US style flexible hire and fire labour codes to render their economies competitive and capable of creating job opportunities for the younger generation?

The experience of Scandinavian countries and of Germany shows that there are other models apart from the law of the jungle as in the US that can deliver the bacon without throwing away all social conquests made by unions and employees.   What is needed is a re balancing.

Employers have to have the flexibility to temporarily or permanently reduce their workforce to remain competitive at all stages of the economic cycle.   The maintenance of international competitiveness is a must if a country is to provide fair employment opportunities to its youth.    But this does not have to mean that redundant employees  be thrown on the dole with all its social consequences.

What it means is that the state has to take responsibility for providing its work force with life long learning opportunities so that employees can protect their employability through multi-skilling.     There must not be involuntary unemployment.   Any involuntary unemployed must be attached to a training programme to render the employee employable through acquisition of skills that are in demand in the labour market.

Education, even life long education, is the best investment that countries can make in their economic development and often it is self financing through economic growth and saving on social unemployment benefits.

Turkeys don't vote for Christmas

The two main political parties in Greece, Pasok and New Democarcy, have discovered that turkeys never vote for Christmas.    How stupid of them to think otherwise and press for fresh elections rather than supporting a technical government to do their dirty work as in Italy.

They deserve all the beating they got for their arrogance and stupidity.

After the Third Way

This article was  published on 06 May 2012 in The Malta Independent on Sunday _________________________________________ Françoise Hollande will probably be elected President of the French Republic for the next five years. There are two ways in which such a result can be interpreted. The most obvious one is that this is a continuation of the trend where the electorate takes it out on whoever happens to be in government during the economic crisis that has been ongoing since 2008. This would mean that a Hollande victory is mainly by default, with Sarkozy suffering the same fate as Gordon Brown in the UK, Brian Cowen in Ireland, Silvio Berlusconi in Italy, Jose Socrates in Portugal, Jose Zapatero in Spain and George Papandreou in Greece, among others. According to this theory, the electorate takes it out on whoever happens to be in government no matter their colour or political creed. In the case of Greece and Italy, it was not even the electorate through formal elections that bought down governments. It was more pressure from the international community and support of public opinion to install temporary technical governments to clean up the problems that the politicians left behind or could not address. The other interpretation is more profound. It is that after toppling socialist governments in UK, Spain, Portugal and Greece, Hollande’s victory represents a new dawn for the political left as electorates abandon the indiscriminate austerity programmes advocated by Chancellor Merkel and her submissive colleagues on the right of the European political spectrum, and are prepared to trust the left wing to recreate a post Third Way political strategy based on restructuring with growth. More out of wishful thinking rather than conviction, I am prepared to subscribe to the latter interpretation for Hollande’s election. At present, centre-right parties or coalitions govern all the large and many of the small EU countries. Angela Merkel is their undisputed queen. They have badly misdiagnosed the problems that caused the financial crisis by thinking that every country is like Greece and that the solution is austerity and cold-blooded restructuring. If the medicine does not work, they increase the dose even though the patient became feebler as a result of the first austerity dose. If the second dose does not work, increase it further without giving much thought to whether the medicine could kill rather than cure the patient. The result is a Europe out of work. The work situation is so bad that in Germany, by far the best of the lot, there is ‘only’ an unemployment rate of 5.6 per cent overall and 7.9 per cent among young people. Obviously, this looks good compared to Spain’s 24 per cent overall and nearly 50 per cent among youth. For how long will 25-year-olds stay at home watching TV, seeing life passing them by as their dreams get shattered? Unless we do something bold and soon, we are about to lose a whole generation who will then seek justice through anarchy or other violent demonstrations against the rule of law, democratic institutions and social injustice. Merkel and Co misdiagnosed the problem and consequently came up with irrelevant solutions that could kill the patient. Outside Greece, which represents only two per cent of the eurozone, fiscal profligacy is not the root cause of the problem that led to the crisis. Spain and Ireland had stood out for their low ratios of debt to GDP five years ago, with levels well below Germany’s. Italy had a high debt ratio but a favourable deficit position. Many of these countries are now in trouble because the financial crisis underway since 2008 has damaged their private sector owned financial systems and led to collapse in growth. High deficits are more a symptom rather than a cause of their problems. Treating symptoms rather than causes often makes the patient worse. The results are there to see. Hollande’s election today is hopefully a breath of fresh air, forcing the European conservatives to realise that their austerity-focused cure is not working. Hollande could be a catalyst for consensus building to adopt a more balanced solution where growth rather than austerity becomes the inspiration for restructuring. Obviously, Hollande should not start his presidency with an existential fight with Merkel. But even before he is elected, Hollande has already forced a re-appreciation on the futility of the current ‘austerity and more’ policies. The Netherlands, traditionally a fiscally conservative country, is already showing signs in its political structures that austerity alone is not working. Mario Monti, well respected beyond the shores of Italy, has been emphatically repeating that more austerity will be simply counter-productive. Spain’s Prime Minster Rajoy signed the fiscal compact at gunpoint and before the ink was dry went on record stating that Spain cannot really meet its austerity-induced fiscal targets. Even Mario Draghi, President of the ECB, has been clear that their policy of flooding the banking system with liquidity can only be expected to buy time for politicians to do what needs to be done to devise a permanent solution to the problem. He has actively proposed a ‘growth pact’ to run in parallel with the now derided ‘fiscal pact’. So where would the centre left of the European politics be going, following the expected re-conquest of the Elsyée this evening? They cannot go back to their traditional far left policies which simply cannot work in the context of a globalised economy. Much less can they go back to the Third Way of Mitterand, Tony Blair/Gordon Brown, Felipe Gonzales/Jose Zapatero. The Third Way was a political philosophy based on the marriage of economic efficiency with social justice, presided over by a benign self-limiting State. However well-intentioned, its simultaneous embrace of freewheeling financial markets and extensive social provision did not, when the real crisis came, amount to an economic policy. As John Kay, of the London School of Economics recently said: “The centre-left offered no diagnosis, no new ideas and gained no political advantage. The political parties that had waited a century for capitalism to collapse under its own weight, congratulated themselves that the collapse had been staved off by the injection of simply incredible amounts of taxpayers’ funds into the banking system.” To which I would add that the centre left’s Third Way embraced the doctrine of the market knows best for economic efficiency too liberally. Gordon Brown’s light touch financial regulation generated substantial tax revenues from the City until the financial crisis forced taxpayers to put back the money they had already consumed to save the banks from collapse. Spain and Ireland’s free-wheeling in construction and over development generated substantial fiscal revenues from property sales until the property bubble burst and the taxpayer is now saddled with substantial burden for saving their banking system from total collapse under the weight of their bad loans to real estate developers. Hollande’s occupying a seat at the duo driving the EU alongside Merkel should be a new dawn for a post-Third Way era for socialist parties in Europe, including our own Labour Party. The blind belief that less government is good for the economy and that more government is a sure way to economic stagnation has been totally disproved by the financial crisis, which is still dragging on since it erupted four years in 2008. In the post-Third Way era, left of centre parties have to embrace market mechanism for operational economic matters but must not abdicate the government’s responsibility for better and stricter regulation, for better and fairer competition and for maximum value for taxpayers’ funds. More government does not have to mean more government spending. It should mean better government policies that protect the taxpayers from too-big-to-fail policies and from unbalanced economic development, which is unsustainable notwithstanding its short-term benefits. Welcome on board the post Third Way era, Monsieur Hollande!

Credit to whom it is properly due

The Prime Minister yesterday said:

"it is acknowledged and documented that Malta negotiated the best EU accession package out of the 10 member states who joined in 2004.   And Richard Cachia Caruana was the head of our accession negotiating team"

I beg to differ from the notion that credit for the negotiation EU accession package should go to the negotiating team in general and RCC as its leader in particular.

The main credit should go to Alfred Sant.  As leader of the opposition at the time, his strong campaign against EU membership was a formidable tool in the hands of the negotiating team to secure the best possible package.  The fear that because of Alfred Sant's objection the accession referendum could fail, was the best lever to secure better terms than those secured by countries where the outcome of the referendum was not in doubt.

Credit should go to whom it is properly due, even if it was basically unintended consequences.

Another heresy was repeated yesterday.  The PM is reported to have said:

"Being in the eurozone allowed us to withstand the economic tsunami that engulfed the globe"

We were not engulfed not because we were in the Eurzone but because our public and private sector borrowing was mostly sourced locally and we were not dependent on international credit lines that dried up during the crisis.   If Euro membership was the reason for our financial stability why has it not worked for Greece, Portgual, Spain, Ireland and Italy - all Eurozone members?  And by contra why did Poland and Czech Republic out of the Euro remain stable?

I still think that joining the Euro was correct and the right thing to do following EU membership but we must not give the Euro credit which is not due.  That credit belongs to the thrift culture of Maltese society.

Not too soon to call

According to Kurt Sansone's  (KS) piece in the Times today general elections remain too soon to call.
                                                                                                                                                                                           See this link for the full article.

http://www.timesofmalta.com/articles/view/20120504/local/It-s-still-too-soon-to-call.418214

For the PN it is too soon to call because according to KS:

"Dr Gatt  ( Minister Austin Gatt) said internal party research confirmed the results of recent polls showing the PN trailing well behind Labour.

With PN sources insisting that an October election is the most likely of options, Dr Gonzi will use the parliamentary summer recess to reach out to the electorate and try to regain lost ground."

For the PL it is not yet time to call elections because ( according to KS):

"it also gives the Labour Party a chance to oil its electoral machine to perfection"

For Franco Debono the vote of no confidence in Minister Carmelo Mifsud Bonnici will give him the chance to humiliate the Minister without bringing down the government as he would do if he votes against in a money bill.   So for Debono it is not time for general elections because he needs to enjoy ballerina status in parliament for a few more months.  

For Minister Mifsud Bonnici it is not yet time as he needs time to recover from the humiliation that Franco Debono will probably inflict on him in parliament.

Strange thing is that KS failed to ask whether it is time for the country as a whole, for taxpayers and for  the general electorate to proceed to general elections.

KS's contribution is a perfect exmaple of the forma mentis which rules the higher echolons of society i.e. that polticians are elected to serve their political parties, their personal ambitions and their sectorial narrow interest who benefit from their tenure.   No one seems to think that they are elected to serve the country and citizens in general.

As a citizen I have no doubt it is more than time to call general elections.   The economy has just jammed and practically no one is making any investment decisions that can wait till a new government is elected later this year or early next.

Let me repeat what I have already said: the national interest demands that we get on with it.  It is time to put the people in charge again rather seek to squeeze some advantage here and there by holding on while the general interest is prejudiced.  

I rely on the goodwill of PN MP's who unlike Franco Debono are prepared to use their vote for the true national interest rather than for personal objectives.