Gimmicks Jokes and Tragedies

The Malta Independent on Sunday 

   

Defining a splinter organisation that has been set up to oppose the mainstream management of the Malta Labour Party as a gimmick or a joke seems panic dressed up with over-confidence.

In a country where the difference between government and opposition could be a mere handful of votes no political party can afford to treat with disdain any splinter organisation that can challenge the mainstream and that even if not successful in its own right, could be effective enough to distract votes that turn a majority into a minority.

As a genuine Labourite, I consider the creation of splinter organisations as a serious cause for concern. I personally have had my own differences within Labour with the Leader and with the Board of Discipline and Vigilance. My criticism in the summer of 2003 proved too much for them to stomach and they threatened me with disciplinary measures unless I tone it down. Owing nothing to anybody I decided that I could not stay inside an organisation that rather than face criticism, prefers to muzzle it.

However I still have Labour Party`s interest and basic principles very much to heart and would not act in any way that challenges Labour`s prospects for electoral success.` Once I cannot work within the present version of Labour I opted out of politics altogether.

The right of others who cannot find shelter within Labour to form their own grouping cannot however be denied.` Their being labelled as a gimmick or a joke does not help to keep open possibilities of re-integration in good time to ensure that Labour faces the next general election as a single united front.

I do not share the ideals of the new MLP grouping that seems to have been set principally to oppose the mainstream MLP approach to vote in favour of the EU Constitution even though international events seem to have rendered such Constitution as dead in the water. I concur with the mainstream Labour decision to vote in favour of the Constitution irrespective of its eventual fate, and this out of respect to the sovereign decision taken by the Maltese electorate in March/April of 2003.

Yet what I find, as genuine labourite, truly sickening is the way the leadership who used to describe EU membership in `allahares` (God forbid) terms before April 2003 now expect to preserve their own personal credibility whilst pedalling policies which they had vehemently opposed before the election. What I find as gimmicks is the way the party resources were abused between April 14th 2003 and May 1st 2003 to give a very unfair advantage to the incumbent leader to beat his actual and potential challengers in the leadership contest.

What I find as a sick joke is making the national executive decide in favour of instant election for party leader before a proper analysis of the reasons for the electoral defeat, on the basis of public declarations by the incumbent leader that he will not be seeking re-election, and for this to change without the national executive ever being given the opportunity to review its decision taken on the wrong premise through misrepresentation by the incumbent leader. What is even more sickening is that the eventual report of analysis of the electoral defeat which laid blame mostly on the leadership, so much so that it called for a mid-term reconsideration of the leadership positions, was instantly buried away without any access being given to party delegates, let alone the general public.

The present Labour leadership would do well if they stop calling dissenters names and instead make a critical analysis of what is causing so much internal dissent. My view is that the dissent is caused mostly because grass root labourites are having difficulty to understand how diametrically opposed policies could be digested when propelled by the same faces who used to vehemently oppose positions that now are being described as reasonable and acceptable.

Echoing the pains of all such labourites, why I ask, was it therefore necessary to lose an election on the principle of EU membership Why was it considered` so blasphemous before April 2003 to accept the people`s verdict about EU membership in a referendum and we kept insisting, in purely kamikaze terms, that only the verdict in a general election` would be conclusive in this respect`

If we find it easy to change policies after an election defeat why could we not change policies after a referendum defeat in order to give us a fair chance of winning the election`

The problem with the Labour Party today is one of credibility. It is obviously natural for a party to review its policies and change them, if necessary, following an election defeat, especially if such defeats come in monotonous succession.` But new policies can only be credible if promoted by new faces.` Hence why the statute of Party calls for leadership election after every general election and hence why it is necessary and logical to conduct such elections only after a proper analysis of the causes of the electoral defeat, especially if the incumbent leader is seeking confirmation.

What credibility can there be if the same leader who used to describe EU membership in allaharesqatt terms before April 2003, in spite of internal questioning of such policies by many including yours truly, now would have us subscribe to the EU constitution as if he were a new kid on the block`

My judgement is that the creation of various splinter groupings in the left wing of Malta`s political spectrum is the symptom not the cause of such division. The cause is that Labour has refreshed its policies without refreshing its leadership.` That makes it impossible for people like me to continue militating in the ranks of the Labour Party. Out of loyalty to the underlying principles of the Party I can stay out of politics completely but others who have politics in their blood stream are being forced to exert their political energies in groupings created in parallel to the Labour party.` In the process they are weakening the chances of the political left` to score when it matters.

I don`t condone their actions but I will not call them a gimmick or a joke.` May be a tragedy would be a more appropriate definition of the situation; a tragedy sourced by the inability of the people who matter to understand that people in politics should not regard themselves as a permanent fixture and new policies need new faces if they are to be accepted willingly and convincingly without causing cracks and friction. A tragedy that, if goodwill and good sense prevails, can still be avoided.

Is the Euro Forever?

The Malta Independent

 

  Let me put it this way. Our joining the Exchange Rate Mechanism (ERM II) of the Euro on May 2nd, 2005 has not brought any luck to the common currency. The month of May and the first week of June have proved very turbulent not only for the foreign exchange value of the Euro, but particularly for concerns being raised about the sustainability of the single currency project.

A subject which was hitherto taboo and which no one was allowed to discuss not even informally, is now being deeply analysed all over the financial and political media around the world.

It culminated this week with suggestions coming from an Italian Minister that Italy should consider holding a referendum on the issue of restoring the Lira as the national currency, in order to get off the grip of the Stability and Growth Pact underpinning the single currency, which demands painful adjustment that Italian politicians seem incapable of delivering.

Just as we set to join the Euro others are openly discussing leaving it, whereas economists are openly expressing serious concern on its sustainability even if no country would dare to exit the system.` The question whether the euro is forever is a hot topic of debate in the economic press.

This is hardly surprising given the events we had these last couple of weeks. Monetary union depends for its success on a commitment for a political union. History shows that monetary unions that were not under-pinned by a political union proved short-lived.` The Latin Monetary Union involving Italy, France, Belgium, Switzerland and Greece collapsed in 1920 after 60 years because of lack of fiscal discipline amongst its members. A Scandinavian monetary union in 1873 proved short-lived as political circumstances pulled countries apart rather than closer together.

The` German Central Bank used to argue in the 1980`s that monetary union was to be the end result of a political union.` Eventually this view changed and the Germans accepted that monetary union could be a catalyst to bring about a political union. The official view is that monetary union can survive and function well without a political union if three conditions prevail: fiscal discipline, central bank independence and a high degree of product and labour market flexibility.

Two of these three basic conditions are currently unobtainable and the one which seems to prevail, at least nominally, i.e. the independence of the central banks, has been undermined by dilution at the political level of the Stability and Growth Pact following German and French inability to abide by its old version. Furthermore the independence of central banks can only be effective if set in context of a shared identity embedded in common political institutions.

The rejection of the Constitution Treaty in France and Netherlands signifies that this shared identity is missing and that` individual members countries seem more obsessed with defensive protection of their past gains rather than in sharing the EU-wide objective of seeking structural adjustments to make the Euro economy more competitive in terms of the Lisbon agenda.

Fiscal discipline seems to be becoming the exception rather than the rule and seven out of twelve euro countries are likely to breach he Maastricht fiscal criteria during fiscal year 2005. Product and market flexibility is being rolled back rather than pushed forward as the service directive continues to be resisted even though services account a large and ever increasing part of the Euro economies.

So doubts on the sustainability of the Euro project in its present form have solid foundations in history as well as in economics. But contrary to what many may think it is not the weak countries that may decide to leave the Union. It would be far too painful and expensive for Italy to actually exit the system given its high level of debt and the high interest premium they would have to pay international investors to maintain their appetite for non-euro Italian sovereign debt.

Italy would never leave the Euro by way of a free decision. But unless they reform they could be forced out by circumstances. Between 1999 and 2004 Italian labour costs rose 1.3% per annum more than the EU average. Their loss of competitiveness is evident and aggravating. The past option of restoring competitiveness through rate of exchange adjustments is not available anymore and yet the country`s employers and trade unions behave as if nothing has changed.

Unless they reform urgently Italy could be forced out of the Euro by a deep crisis as stronger members threaten to leave the Union as they become increasingly unwilling to expose their economies to Italian style inflation. The pressure to leave will come from the strong members not from the weak members.

These events are a timely eye-opener for us as to how dangerous it is to attempt to join a monetary union at an uncompetitive rate and without first conducting the structural adjustment necessary to render our economy globally competitive before locking into a single currency with other stronger countries. This lesson can only go unheeded at our own peril.  

The Bicycle Theory

The Malta Independent



  The bicycle theory states that one cannot stand still.` Unless one moves forward the bicycle will lose its equilibrium and the rider will fall of it.

Does this theory apply to the EU now that two founder countries have rejected through national referenda the Constitutional Treaty which was proposed to give the legal framework for taking the EU forward to make success of the recent enlargement and prepare itself for future challenges` Challenges that are daunting. Challenges to restore American type economic growth to European economies by adopting the Lisbon agenda as much as challenges to extend the confines of the EU to include such countries as Turkey, Croatia, Serbia and may be Ukraine amongst others.

The magnitude of the significance of the No vote by the French and the Dutch should not be under-estimated.` The EU has consistently said that no plan B exists and once plan A has met with what presently appears to be an insurmountable barrier, the situation cannot but raise doubts about the future viability of the EU.` It is universally agreed that the present legal framework through the Nice Treaty, which will have to continue to operate until replaced, is totally unsuitable for the efficient functioning of an enlarged EU of 25 soon to become 27.

So if the present is unworkable and we cannot seem to agree on a proper replacement the default position could be death by attrition.

I am not that pessimistic. Quite the contrary, I would argue that the French and Dutch vote was a needed reprimand to the EU elite to come up with the leadership qualities to carry the people with them forward to the EU integration project rather than continue to seek integration through bureaucracy.

If the French and the Dutch have not delivered a yes vote it is just as much because the people in these states are unhappy with the way they are being governed domestically which in turn is forcing them to take an unrealistically protectionist view of the need and logic to integrate neighboring countries into the EU even if this causes transitory adjustment pain to existing members.

The process of ratification should continue to move ahead, and hopefully the Maltese parliament will do so quite soon with an overwhelming majority if not total agreement. The EU must as of now prepare a plan B for a situation where by the end of the ratification process four or five members would have failed whilst the other twenty odd would have ratified giving the four fifths needed to keep the Constitution project alive.

And the plan B has to focus on the economy with special emphasis on the employment situation.` It is illogical to assume that people will vote for a treaty that they perceive to be a threat to their existent jobs.`

So it is absolutely essential that if the French, the Dutch and other dissenters will eventually have to be re-approached with a fresh referendum to keep the Constitution project on track, there must be some doses of flexibility added to the Treaty but above all there has to be a substantial improvement in the economic scenario of the EU countries.` The measure of dissent against the domestic government would hopefully by that time have been overcome through fresh elections.

Whilst at political level the EU leaders should start discussing what measures of flexibility ought to` be included in the Treaty to justify a re-run of referenda where necessary ( may be a different kind of membership should be considered for members joining post 2007 ` thus keeping these countries EU aspirations alive without causing undue adjustment pain to existent members) it is on the economic front where immediate measures are necessary.

Some measures are market driven and indeed the same negative vote has forced the market to give the EU economies what they badly need, a more competitively priced Euro on the foreign exchange markets. Since the French Sunday no vote the value of the Euro has fallen by 4% against the USD and it is now just a whisker above its launch value in 1999. On this score the French refusal was a blessing in disguise.

But more needs to be done.` In particular the European Central Bank (ECB) needs to revise its objectives and economic policies. We cannot have such a powerful institution in charge of coordinating a single monetary policy for the whole Euro area almost completely unconcerned by the` unemployment situation and focusing solely on inflation and stability. Stability at high levels of unemployment is hardly a desirable objective.

The ECB needs to mature and develop by accepting a greater role in economic management as the Federal Reserve does for the USA. The ECB needs to accept that with the Euro now well and truly accepted as a reserve currency and many countries eager to diversify the over ` exposure of their reserves versus the USD by adding more Euros, they must take counter measures to keep the value of the Euro competitive. This is particularly important for Euro countries that depend mostly on exports for growth and job creation.

So the 3% budget deficit limit, desirable as it may be as a long term objective, needs to by widened to permit but job creation initiatives by domestic governments through infrastructure investments, as well as weakening of the Euro exchange value as market operators get deterred by such increasing deficits and risks of higher inflation. This is a luxury that reserve countries can afford as the recent US experience has shown. It is now the responsibility of the EU to grow its deficits and economies to give time for the US economy to consolidate its growth without risking disequilibria of a magnitude that threaten global economic stability.

The EU bicycle has to continue moving forward as we pedal, admittedly more slowly, towards ratification by remaining countries, flexible revision of the Treaty and more aggressive economic policies to promote job creation based on export competitiveness which will eventually bolster domestic consumption. This is the tripod that can keep the EU constitution project on track.

Alfred Mifsud