Don't hold your breath, Lawrence

Much of what the Prime Minister had to say in his budget speech was true. It made me think of what Fr Peter Serracino Inglott used to teach us at university: even the most determined liar is obliged to tell the truth to tell his lies.

Once more the reaction to the speech is between anger and pity, anger because there was a determined attempt to sound vainglorious regardless of the facts that emerged of themselves and pity because the poor fellow has very little choice but to make the most of a very bad situation.

Until the summer of 2003 it had been Labour alone selling economic disaster as if it made a great profit from the sale. Nationalists had continued to pooh-pooh the whole thing giving the country the notion they knew something that common mortals did not.

It was easy to make sympathisers believe what they wanted to believe: that the return of the feel-good-factor was just around the corner. Labour was just exaggerating as usual and making things worse to boot.

Nationalist confessions about their bluff with finanzi fis-sod (solid finances) dropped the whole country on its backside. Labour doing its worst could never depress the economy so effectively.

We were securely on the path to EU membership and there was no further need for pretence. Or, to put it another way, it was no longer possible or wise to keep up the pretence.

The five-year election campaign from 1998 started with almost immediate allegations from Labour that the PN government produced by the early election would not last its full term. It did. So did the campaign, reaching its final frenzy in the EU referendum campaign with the general election that followed reduced to a repeat referendum, a repeat trouncing for Labour.

While we were all having so much fun, other countries were preparing for the challenges of life in the EU, preparing themselves for a tough environment, higher risks and greater rewards. Slovenia, perhaps the best of the applicant states with which Malta could have attempted comparison, was experiencing an annual economic growth of three per cent per annum. We were having our usual fun: ever ready for Eddie or Freddie.

In the years since 2000, Slovenia's economy grew steadily by three per cent per annum, a modest rate by eastern European standards. By 2005 its GDP had grown by 24 per cent over its 2000 GDP. Malta has managed with just over a tenth, at 2.7 per cent, in the same five years. The projected growth of 1.1 per cent for 2006 announced as the government's target is dismal by any standard. The Prime Minister does not need an "enemy of the nation" to depress us all, he has done a superb job of it himself. Confusing the unemployment figures of Slovenia with those of Slovakia on Bondì + did nobody any good either.

According to figures published by the NSO our economy grew by 1.5 per cent in the first nine months of 2005, markedly short of the government's modest target of two per cent, announced in the previous budget.

The whole of this growth and more is attributable to "inventories", a somewhat mysterious item which grew unexpectedly over the period in question. It seems that had it not been for factories stockpiling something or other, our economy would have shrunk by over three per cent instead.

Sooner or later someone will find the time to let us all know what the burgeoning inventories mean. For those of us without the benefit of the mysterious inventories tucked away in our contribution to GDP, a three per cent shrinkage sounds like what it feels like.

True to type, the Prime Minister looked to the building industry to save the economy. It seems to get the biggest tax break in 2006. In one swoop he delighted hundreds of property heirs by giving them an unlooked for tax reprieve and loosened the bonds in a property market famously overstocked and overpriced to stagnation.

If he is hoping to see prices stop climbing or even falter or fall, the Prime Minister would be well advised not to hold his breath while he waits for it to happen.

The 12 per cent withholding tax on the sale price for developers and speculators could be much bigger a blow than 35 per cent tax on capital gains. If profit margins are at 12 per cent, the tax would have vaulted from 35 per cent to 100 per cent on capital gains.

It could send prices up another couple of notches while the market goes blue in the face from holding its breath too long.

Nowhere in the budget was there any hint of any fiscal or financial measure aimed at addressing the much hoped for transition of thousands of properties from controlled rent to the same condition as all other properties. Time and again the Prime Minister and his ministers have made it clear that the social aspect of any such transition must be addressed. It means money: It is not enough to admit that landlords have been crucified bearing the burden of the cost of social housing for six decades. That admission on Bondì +, the closest thing to a thank you that landlords have ever received, is cheap, too cheap; it is nothing that can be put in the bank to make up for the awful void caused by a lifetime of exploitation by the Republic of Malta and its laws.

It appears that the Prime Minister has not begun to understand the width and the depth of the reform proposed by the Greens. Helping out the landlords is just the small start from where it all begins. Setting all properties in the same condition is a target for a purpose.

It is the only way to create free competition between all properties in a functioning property market, making a complete offer and engaging a realistic rental option in competition with the present coerced purchase at exorbitant terms. With appropriate fiscal measures creating a sufficient revenue stream to support the small number of tenants who will not be able to afford rents even in a glutted market, the government could remove all the spanners from a property market stagnating as it reaches a pinnacle of unreality. In this year's budget there is absolutely not a whisper of all this.

It is all delayed, pushed closer to the next election and the never never. If we continue to push them, the government marshmallows will produce more waffle and then more waffle until nothing can be done at all. It is an extravagant political game, a petty-minded concern with a loss of votes. The wider vision perceiving the impact of the cost of property on every aspect of our economy is simply missing.

How can we ever achieve competitiveness if entrants to the labour market are also taking the burden of a 40-year house loan? How can our salaries not impact our competitiveness if we have a workforce struggling under enormous financial burdens, earning a decent salary and living in dire straits? Innovation, creativity, productivity or simply stress?

Every service put on the domestic or international market by the services sector is impacted by property prices: every cappuccino, every plate of pasta offered to tourists, every repair and maintenance service to industry, even software exports. In the land, labour, capital mix of every economic enterprise, land is inevitably present and here it is present with a vengeance, a haemorrhage through hoarding. The Prime Minister still does not see it.

He hopes, indeed he is sure that some day everybody else will see what he sees: the miracle of golf. It is a complete obsession - golf in the budget speech? Will it turn around the 7.8 per cent drop in exports? Pump up economic growth above the imperceptible 1.1 per cent? Will it be the Lm20 million from the sale of land mentioned in the budget which from a one-off becomes an item of recurrent revenue tailored to cover all the deficit reduction aimed at for 2006? Could it possibly be why the Prime Minister is so keen on golf? It would be economic cosmetics and ecological crime combined. If he expects me ever to congratulate him on his coup, he had better not hold his breath waiting for it.

Dr Vassallo is chairman of Alternattiva Demokratika - The Green Party.

hcvassallo@kemmunet.net.mt