Sunday, 21 September 2014

Celebrating Independence

This articles was published in The Malta Independent on Sunday - 21 09.2014

In preparing to celebrate 50 years of independence, I looked back to the views I had expressed 25 years ago.

In a speech I had made at a public conference held on the subject of “Malta’s political freedom – economic implications”, I had ended my address as follows:

“When in 1964 Malta became politically independent that was the first step stone for the modern political and constitutional history leading to the post-independence economic progress. Should we celebrate that first step stone or should we continue to protest that with more care and greater respect to national interest, by greater awareness of our true values and competences, with less regard to superficialities and more stress on the substance, we could have acquired through independence not just the first step stone but a whole building structure…

“In my opinion, just as a young man celebrates his birthday whatever the circumstances in which he was born, Malta should celebrate with deserving dignity every anniversary of its political birth. This should not exclude criticism for whoever got too impressed with superficialities and gave us political birth on a bed of thorns when we could have achieved birth on straw manger if not on a cottoned bed.”

That was 1989, coming quite soon after a period when, under a Labour administration from 1971 to 1987, Independence Day was not even celebrated and 21st September was considered a non-event, or worse, an event of betrayal. It was probably the first voice from Labour’s stables arguing that independence should be celebrated irrespective of the conditions under which it was obtained.

While there must be a point in time when independence was obtained, in celebrating and commemorating that point in time we would in fact be commemorating the journey leading to it, and the achievements after it that would not have been possible without independence.

Thankfully, in the second quarter century after independence we have come a long way and today we are celebrating the 50th anniversary as a truly national event without partisan divisions. Homage is due to ex Labour leader Alfred Sant who started this process, and present Prime Minister Joseph Muscat who sealed the issue in spite of objections from those preferring to stick to yesterday’s illusions.

My wish is that in the third quarter century after independence, the political maturity process will continue to evolve, permitting celebration of a unique national day which would include symbolically not just the point in time event but the whole process represented by all current five national days as well as the current status of the EU and euro area members.

As we celebrate the 50th anniversary of independence, it is perhaps opportune to scan the horizon for threats that may challenge our sovereignty. Will the rise and spread of Islamic fundamentalism become a challenge to our sovereignty, especially if it reaches North African nations? Will these new realities offer challenges which cannot be properly served by Malta’s constitutional neutrality? Will our cosmopolitan mentality cause irreversible dilution to our national character, especially to the use of our language?

I don’t know the answers to the questions which certainly deserve further thought and inputs from our best thinkers and strategists in diplomacy, in government, in business and in politics. But I can certainly add something to the economic threat which the instability of the euro area could cause to our economic sovereignty and economic fortunes.

While the euro monetary union rules make stringent conditions about fiscal deficits and debt levels, it makes no provisions about Balance of Payments imbalances. This is wrong! Outside a monetary union balance of payment, imbalances are self-correcting through the rate of exchange mechanism. But in a monetary union, the rate of exchange mechanism does not work for one particular country but for the union as a whole. Within a monetary union, countries having a balance of payments surplus are having a free ride on the back of countries with payments deficits.

If Germany still had its Deutsche Mark, its exchange value would have shot up as part of the self-adjusting mechanism to restore equilibrium. But because of the euro, Germany can continue to enjoy its export competitiveness at the expense of deficit countries like France, Spain and Italy as the euro exchange rate, supported as it is by Germany’ surplus, does not fall enough to offer self-adjusting mechanisms to address their deficits.

In the absence of such balance of payments conditionality to restore equilibrium as rigidly as applicable for fiscal deficits, the euro monetary union remains at risk. So far, countries have accepted adjustment through austerity and high unemployment by choosing the lesser of two evils. Germany imposed government changes in Italy and Greece when their leaders were unwilling to go along with the prescribed austerity recipes.

Just imagine what would happen when, sooner or later, in a big country like France, Italy or Spain, the electorate, weary of never ending recession cum austerity poison chalice, democratically elect demagogues from the extreme right or left who make euro abandonment or re-design as their main policy platform.

What would be the consequences if Marie Le Pen is the next President of France with a mandate for France to either exit the euro or to stay in the euro only if it is developed into a fiscal union harmonising taxes and providing for fiscal transfers from surplus to deficit countries?

Would the euro survive the exit of a big member like France? Would the euro survive Le Pen’s Presidency? Can Germany treat Le Pen as it treated Berlusconi and Papandreou? Or if for survival the euro rules evolve to acknowledge that it must be underpinned by a formal fiscal union, which would remove the tax flexibility we currently enjoy, would that be a mortal blow to our sovereignty?

This is the time to celebrate the past and reflect on the future.

No comments:

Post a Comment