Last week I participated in my first summit meeting of the party leaders of the European People’s Party which was held in Vienna.
When we have a glut of vacant properties is it
the right choice?
It was a good opportunity for me to introduce myself to other EPP party leaders, from German Chancellor Angela Merkel to the Irish Prime Minister Enda Kenny.
These leaders are in Government but some others, such as the French Jean-Francois Copé and the Dutch Van Haersma Buma are, like us in Malta, in Opposition. The President of the European Commission, José Manuel Barroso, with whom I have worked in the European Parliament over the past nine years, was also there. The EPP Summit adopted a declaration on “New Growth and Jobs for Europe” stressing the need to address the structural problems that increasingly threaten sustainable development in Europe.
Indeed, the economic situation in Europe remains worrying and the outlook is not promising. We all know that a number of EU countries continue to struggle, some with bailouts, most recently in the case of Cyprus.
All the while, Malta’s economy continues to show resilience.
Not only have we managed to escape the worst of the recession in the eurozone but we have also registered the highest rate of economic growth in the entire zone in the first three months of this year.
This did not happen by chance. It happened because, until now, our country had benefitted from a clear economic direction that delivered dividends.
It was therefore no surprise that last week news came out that Malta ranked in fifth place in the world in the Open Market Index recently published by the International Chamber of Commerce.
This means that Malta boasts of one of the most open market economies and we rank close to most advanced economies in the EU, such as the Netherlands, Belgium and Luxembourg, as well as other well-performing economies such Hong Kong and Singapore. This is certainly a feather in our cap because it means that we have the right fundamentals in place.
Last week it also emerged that Malta’s wealth has improved and now compares better with the EU average. Malta’s Gross Domestic Product jumped from less than 75 per cent of the EU average in 2004 to 86 per cent now.
This is an important leap ahead in less than 10 years of EU membership, although admittedly some of the improvement is also due to the relative weaknesses of other economies.
It means that Malta’s GDP ranking is now better than that of countries such as Portugal and Greece (which are bailout countries) and also better than most of the new member states that joined the EU with us in 2004.
However, we still remain below the EU average and there is still a long way to go. Suffice it to say that Luxembourg, the wealthiest country in the EU, has a GDP which, at 271 per cent, is more than two and a half times bigger than the EU average. We should not rest until we exceed the EU average.
Which begs the question: what is the new Government’s strategy to ensure that our economic growth does not stall but continues to leap forward? And which new direction will this Government take our economy?
We were given precious little insight into this new direction last Monday when a trio of ministers addressed a press conference to proclaim that in its first 100 days, the Government had worked for an “economic growth that benefits all”.
Mention was made of a string of big projects which, at this stage, are nothing but notions, but no details were given on the Government’s economic strategy, if one exists at all.
Except for one point, which relates to the contribution of the construction industry in our economy. A number of measures have certainly been taken by the Government which seek to stimulate the activity of this industry. These include the launching of a new scheme for foreigners to purchase property in Malta and more conspicuously, decisions relating to Mepa and the announcement of a number of mega-projects.
Yet, the IMF has already warned the Government that it needs to have a clear strategy of identifying new economic sectors to continue sustaining further growth and jobs while cautioning on the already heavy exposure of the banks to the property sector.
There is no doubt that the construction industry is an important player in our economy. But in a scenario where we have a glut of vacant properties on the market, is it the right choice to press the stimulus button of this sector rather than invest in new ones? Who will finance this activity and what happens if something goes terribly wrong as happened in some other European countries?
The Government would be wise to consider these points and not to put all its eggs in one basket.
Dr Simon Busuttil is the Leader of the Opposition.