From running the state employment agency to leading the prime minister’s office, and now as Finance Minister, Clyde Caruana has a lot to say. He sat down with Ivan Martin to discuss how he plans to run the government purse.
Malta’s new Finance Minister Clyde Caruana is very confident Malta will not be put on the money laundering black list as a final review of the country’s regulatory regime is expected in 2021.
In an interview with Times of Malta, the prime minister’s right-hand man turned government purse string, says he is set to meet global anti-money laundering body, the FATF, in the coming weeks and believes the country will not be put on its ‘grey list’ of non-compliant jurisdictions.
Caruana, who previously ran state employment agency Jobsplus, is known for having authored the Muscat administration’s policy of importing thousands of foreign workers. However, he now concedes it is time for a rethink.
Insisting the ‘bigger is better’ approach to the workforce over the past seven years had helped the country manage the COVID-19 pandemic, Caruana says a different policy should be ready in second half of 2021.
In the 10-months he ran Prime Minister Robert Abela’s office, Caruana led talks between the government and Steward Healthcare, the US firm that took over the controversial concession to run three state hospitals.
The US giant and Malta have been at loggerheads over the concession with the firm arguing it needs new timelines and assistance to deliver the revamped hospitals. Caruana said negotiations are advanced and expects a “new deal” that is acceptable for both sides within the coming weeks.
The minister also said tough decisions would soon have to be taken at the ailing Air Malta. Caruana said he had already held preliminary talks with the pilots’ union and told them that while he still believes in the airline, “things cannot go on like this”.
While he was reluctant to give any insight into his plans for the carrier, he said his final decision will be based on “business considerations”.
Interview:
Your predecessor said he was handing over the reins to a safe pair of hands. What’s your first priority going in?
As you know, the ministry addresses both finance and employment. I’m going to give the same platform to employment as finance. In other words, while it is very important to keep fiscal discipline – the targets that we have for next year, in terms of the deficit and debt to GDP ratio, it’s also important to save jobs.
If there’s something that I’m really proud of it’s the government’s efforts [to save jobs] in recent months. They were fruitful.
One of the main pushes throughout this pandemic to try save jobs was the introduction of a wage supplement, but it’s quite costly. Is there a plan for how much longer we can keep on rolling that out?
As announced in the Budget, we’re going to keep with the same momentum till March. And that’s for sure. However, around February, we’ll have another stocktake of the situation and of economic activity, what’s happening abroad, and so on. And from that, we will decide whether we will continue at the same pace for another couple of months, or whether it would be a time to start tapering off the benefits over the coming months.
What’s sure, is that what we’re paying now, we will continue on till March. It is likely that from then onwards, it will start to taper off.
Government expenditure has increased significantly on things like healthcare, social services, the elderly and so on…
As it should be.
Is there a financing plan for this?
We’ve moved into a deficit, as was expected, because of the cyclical nature of the economy. I mean, before that the economy was growing by around seven per cent a year.
So of course, when the economy was doing well, that reflects itself in the country’s finances.
Now, that the economy has contracted in the second quarter by about 15% and in the third quarter by 10%, it’s quite obvious that the economy and finance would go into a deficit.
Right now, the most important thing is that we preserve the productive capacity of the economy and keep businesses afloat. Money will come later.
There’s another major threat to the country’s economy as well, that’s the issue of our reputation. The government has to walk a fine line between handling issues like the Moneyval and FATF scrutiny of the country, and at the same time protecting our financial services and gaming markets. What’s the recipe there?
The two go together. Unless we make sure that our reputation is it should be, the financial sector and the gaming industry will suffer as a consequence.
Throughout the past 11 months, the government did its utmost to turn the page on this issue. Now it’s up to us to make sure we keep this momentum.
Have there been any discussions between the government, yourself perhaps, and [the global anti-money laundering body] Financial Action Task Force? I know they will be visiting the island in the coming weeks.
Not so far. But I look forward to discussing with them.
Are you still confident? A few months ago you said you were confident we won’t be grey listed.
Yes, yes, yes. It’s a bold yes.
The name Clyde Caruana is synonymous with labour force policy, that was your brainchild when you were back at the employment agency Jobs Plus – importing of foreign labour. Then a pandemic hits and the question is obvious, do we still need these workers here?
It was thanks to the increase in the labour force that it was possible for the Maltese economy to grow by around seven per cent throughout the past seven years.
If it was different then perhaps we would not have been able to afford the wage supplement for instance.
Thanks to the surpluses that we registered as a result of this economic growth, it was possible for the government to lower the debt-to-GDP ratio from about 70 per cent in 2013, to 43 per cent at the beginning of this year. That meant that the government could afford a substantial leverage in terms of [public] spending.
Where do we go from here?
Something that I intend to do in the coming months, and we’re going to start working on this, as of January, is to start on a new employment policy.
It is going to take us about nine months or so to finalise that.
The current policy, which was drawn up by myself way back in 2014, has been exhausted.
Now, it’s high time for an evaluation of what has happened.
What form do you see that taking?
You will have more details about that once it is ready. I mean, I already have some ideas in mind. But we need to have quite a lengthy discussion with all the social partners first.
We’ll have to make sure that everyone gets a fair deal.
But where are you on the question of more or less when it comes to the size of the labour force?
It depends on economic growth. I believe that the time has come to make sure that we improve – improve the productivity of our labour force. And that has to come through the enrichment of skills. We have talked about skills quite a lot. But I think it’s not enough to just talk about skills, we need to invest in them.
Given that employment and finance are together as a [ministerial] portfolio now, I’m going to make sure that the resources are there in order to really beef up the skills of our workforce.
The most important thing is that we preserve the productive capacity of the economy and keep businesses afloat. Money will come later
You’re not just the Minister for Finance, but you are the Minister for Financial Services as well. The Malta Financial Services Authority was in the headlines recently, and we saw the resignation of the chief executive. What’s your take on what happened?
Well, I think that at the end of the day, we have to preserve our financial integrity.
If this country is to continue to enjoy its competitive edge in the financial sector, we have to make sure that we take the right decisions.
The European Central Bank was constantly kept abreast by the steps that we were taking, ultimately, common sense prevailed. And I think that now we should move forward and make sure that any changes that need to be made are taken on board.
Do you have a person in mind for the MFSA post?
For the time being the acting CEO will continue to occupy the post. We’re looking at the institution itself and any changes that need to take place.
Once the time comes, I’ll take the necessary decisions.
We keep hearing rumours about a new direction for Air Malta…
It depends what you are hearing.
I suspect that you might be able to tell me.
Well, regarding Air Malta I’m not going to mince my words. There needs to be some tough decisions with respect to the airline.
Unfortunately, it is something that needs to be addressed very urgently. And it’s perhaps our last chance to save the airline.
The impact of COVID-19 on the airline has been severe.
The airline basically is cash strapped. I mean, the amount of revenue that it lost and the costs that is still incurring are quite substantial.
And it cannot go on like this, which means that whatever the decision is taken on the way forward, it has to be taken purely on business considerations.
When I first met with the pilots, I told them: “Listen, I still believe in the airline.”
It is very crucial for the island to have its own airline. I experienced this, especially when I was head of secretariat.
I mean, it was thanks to Air Malta that we were able to repatriate people during the pandemic, to make sure that we get the necessary medical supplies, to fly people around to get the necessary medical treatment abroad and so on.
But of course, things cannot go on like this. It cannot be business as usual. Because the business-as-usual mentality was leading the airline to lose millions of euros.
What’s the plan?
Right now we’re going through every cent that the airline spends, we’re looking at new opportunities. I will be able to comment more about this when the time is right. I have to make sure that first we do our homework in a very thorough way.
Once I’m sure of the next steps, you’ll know about them.
And what of Malta MedAir?
It was created to buy the slots from Malta at airports.
And I mean, I’m going to be very blunt, we already have issues maintaining one airline, let alone two.
Aside from Air Malta, there’s another issue that’s been hanging over the government’s head for the past few years – it’s the issue with Steward Health Care. Potentially the government could have to pay out a large sum of money.
That won’t be the case. I’ve been working on this since I was head of secretariat at the office of the prime minister.
So, I’m quite aware of what we were doing throughout the past months and what we are doing now.
I believe we will have a new deal about the entire issue. So I would say that in the next couple of weeks, by-and-large, we will have something that is new, something that would really fit what we need.
So an agreement with Steward [over the contract to privatise three hospitals]?
Yes.
Moving from something that could potentially cost us money to something that so far has been generating lots of money but might soon be no more. I’m talking about the Individual Investor Programme [cash for passports]. The Commission has taken quite a strong position. It’s been a big money maker for us. But it’s come with a reputational cost. What’s the future for the programme in your opinion?
We’re going to present the European Commission our views, because, of course, we beg to differ from the Commission’s opinion. It’s not fair to link our scheme with the one that the Cypriots have.
What I’m aware of is that in the coming weeks, my colleagues will be presenting their arguments in order to persuade the Commission that what they are saying is not the entire truth.
Let’s go to the worst case scenario, we lose the IIP scheme. Is the government planning for that eventuality? Is there a replacement cash cow?
What I can tell you is; put your mind at rest that it won’t have any serious repercussions on the fiscal position of the government if we were to lose the programme entirely.
A lot of the government’s defence of the programme has been that without it we wouldn’t have been able to finance things.
I mean, I don’t want to minimise the help that the scheme has given us in terms of achieving certain goals.
But I mean, if it had to cease to exist it’s not the end of the day, either.