Monday, 12 August 2013

The bridge that Gozo needs and other matters

This article was published in The Malta Independent on Sunday - 11th August 2013

Gozo needs a bridge of steel or concrete as much as anyone needs a hole in the head. Those who dream that any such fixed connection between the two main islands could be economically and financially feasible are probably presuming that the country will have ample resources to spare through discovery of limitless reserves of oil and gas and that like Qatar, we will have problems devising ways in which to spend it all. On that assumption we can just as well start preparations for hosting the 2026 World Cup.

Even if such a connection were to be financially and economically feasible, I doubt whether it would address the basic problem that is making Gozo’s economy unsustainable. Would young people who cannot find work in Gozo continue to live there because they can commute quicker and easier with a fixed connection than with the ferry service? I doubt that very much, and the lure of relocating closer to where they work will remain; with a bridge as much as without it.

And if Gozo becomes as accessible as Mellieha, causing occasional visitors to lose the experience of the ferry crossing, would Gozo retain its attraction for day visitors and home tourism?

Gozo needs a bridge but not one made of concrete and steel. It does not need an underwater tunnel, which would have to start its descent from Burmarrad and hopefully re-emerge before the land runs out at l-Ghasri. Gozo needs economic bridges.

It needs an economy that can sustain a much bigger population so that increased job opportunities in Gozo would make relocating to Malta a real option not an economic necessity. With a population density slightly more than one - third that of Malta, there is ample scope for a 50% increase in the Gozo population, from 31000 to say 47000 and still have a population density half that of Malta. With sensible planning, Gozo can absorb this population increase and retain the greenery and scenery nature endowed it with.

Rather than spend crazy amounts of money to make it easier for residents to commute, an economic bridge would make it possible for residents to avoid being forced to commute. The economic bridge will consist of whatever it takes to convince 16000 additional persons to become bona fide residents of Gozo with a large portion of this being in a category of retired persons who are not economically active but who prefer to enjoy their retirement in a prettier and more peaceful location, especially if they can enjoy some fiscal incentives for doing so.

A permanent increase in Gozo’s population within the limits indicated will boost economic activity and give the Island the necessary economies of scale to sustain job and entertainment opportunities as well as health and education services comparable to those in Malta, thus increasing the attraction of Gozo as a retirement place for locals and foreigners alike. A larger pool of employment resources will persuade investors to locate their back-office-type projects in Gozo in the knowledge that their investment in training Gozitan employees will be rewarded by stable and loyal performance of those who pursue their career in Gozo rather than stay on permanent lookout to relocate to Malta as quickly as they can escape their parents’ grip.

Any investment in unthinkable millions to build a fixed link will egoistically benefit the current Gozo commuters but prejudice the attractions of Gozo itself as much belittle opportunities for those who aspire for Gozo to reach economic sustainability by building on its attractions and uniqueness rather than becoming just another place in the Maltese islands.
German Chancellor Merkel‘Other matters’ relate to the unreal complacency that has befallen the Euro monetary system as it is being kept – artificially – together until the German elections, due on 22 September, become history. Three separate economic reports I read this week all discuss the tempest that may hit after this false summer lull.

Under the title “Germany dozes on a volcano” Der Spiegel wrote:

Angela Merkel's government is forcing Southern Europe to undertake profound reforms while at the same time denying its own responsibility for the consequences of its crisis policies. Germany is risking a historic failure with its shortsighted wrangling...

Germany is playing with fire, pretending that democracy in Euro Countries in distress can co-exist with a never-ending recession and with permanent double-digit unemployment, which reaches atrocious levels among young people.

An economic study by a large European Bank this week argues that in spite of all the harsh austerity that Greece has been subjected to Greece’s debt burden clearly remains unsustainable (in spite of the debt forgiveness suffered by private Greek Bondholders in 2011 through wicked supposedly voluntary schemes) and significant debt reduction is still needed

Greek debt is now mainly to other EU countries that bailed it out, including Malta, and one would need a high dose of optimism to assume that we will ever manage to recover our loans without suffering substantial haircuts of capital and/or subsidy on the interest below what it costs us to borrow.

The report proceeds to state that Portugal’s debt is only sustainable “as long as continued funding support is provided (by the troika – EU, ECB and IMF) but there is a significant risk of unsustainable debt dynamics in the medium term.”

Finally, this week’s Economist leads with an article titled ‘What Angela isn’t saying’. It again argues that for all the austerity that Germany has imposed on Greece, Portugal and Ireland, the first three countries that requested bailout in 2010-2011, all three countries are still burdened by unsustainable debt levels – 175% of GDP for Greece, 125% of GDP for Ireland and 127% of GDP for Portugal. And all three countries are still grappling with a never-ending recession and horrendous unemployment levels. The Economist argues that this unsustainable truth is under wraps in “an orchestrated hush as Angela Merkel campaigns for a third term... Discord will re-appear after the poll, as it becomes clear that Europe’s bailout programmes won’t be unwound harmoniously and that more big bills are on their way.”

Germany today finds itself in the dangerous situation it was in between the founding of the German empire in 1871 until the Second World War, when in the words of a famous historian, Germany was "too weak to dominate the Continent but too strong to bring itself into line." After the election, Germany has to choose between solving the Euro problems through a Versailles model solution or a Marshall Plan solution. History should indicate where a wise choice lies.

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