As a society, we face a fundamental challenge. At a time when we have to distance ourselves physically from each other, now more than ever, we have to come together in our aims and actions. We have to join forces to overcome a challenge that, by ourselves, we cannot overcome.
In the last weeks, I took very tough decisions. They were decisions that go to the core of our society.
For the first time in decades, there are no tourists among us. Before my decisions, every week we could expect 45,000 tourists, generating €35 million for our economy. This weekly spend is enough to finance our annual budget to provide free childcare for all. Similarly, closing schools implied choosing between children’s education and our nation’s health.
In both cases, my decisions were led by scientific advice. The challenge we face will not be solved by populism. Rather than succumbing to the echo chamber of misinformed discourse, people should listen to our scientists.
We are lucky to be served by a world class medical profession. When others in past centuries were practising quackery, in Malta we had foremost medical facilities. Our long medical tradition underpins our current excellence.
This week, the World Health Organisation singled out Malta as the role model for other countries in the fight against COVID-19. I cannot describe the pride I feel when I experience the professionalism and dedication of our health care workers.
Like I trust our medical experts to address the medical challenge, I trust our nation’s economic experts to help me address our economic challenge. For the last seven years, we have seen our employment grow by six times the EU average, while our economy doubled in size.
This was not a coincidence, but reflected the policies that these experts helped government put in place.
We enter this challenge with the best public finances in our history. We halved the burden of national debt and built our war chest – the National Development and Social Fund.
We founded the Malta Development Bank. Our banks are awash with liquidity, with households depositing a record €13 billion and firms having deposits of over €3 billion. Combined, these deposits exceed last year’s GDP.
Rather than succumbing to the echo chamber of misinformed discourse, people should listen to our scientists
On Tuesday, backed by all social partners, I announced a new social pact for our nation. Instead of dividing us, this challenge has brought us together to defend our most treasured economic achievement: jobs.
For those firms at the frontline of the economic challenge, government is guaranteeing an €800 monthly wage. Employers agree to bolster this guarantee with another €400.
This means that for those on the minimum wage, we are guaranteeing 103% of their current income, while for those on the average wage, we are ensuring nearly 90%. This is a guarantee that will protect 60,000 workers.
For another 50,000 workers in sectors that up to now are not yet facing the full brunt of the economic challenge, we have already started assistance. Their employers will start to receive at least €160 for each worker, rising to €320 if they operate in Gozo and to €480 if they are self-employed who employ others.
In these times, help needs to focus on those who need it most. In the economic crisis of 2009, government had mustered an aid package of about €100 million.
While employment of managers and professionals had withstood the economic shock, one in 20 of our manual workers ended up jobless. It took us until 2017 to raise employment of manual workers above its 2008 level.
When we were designing the economic stimulus package, I set this as the benchmark to my economic experts. Help had to focus on employees and self-employed who are the most vulnerable, the ones with the least savings, the ones who will take more time to recover from this economic shock. This is why our income guarantee programme is a flat rate payment set at above the minimum wage.
Our income guarantees will cost €70 million monthly. To put this into perspective, our budget for social assistance for the whole of 2020 was €46 million, while our monthly spend on retirement pensions stands at €50 million. If the guarantees are paid until end 2020, this will cost us five per cent of GDP.
In relative terms, this economic stimulus package is about ten times larger than the response to the 2009 economic crisis. Our income guarantees are just one element. They are supported by other injections of liquidity for firms.
The first to be felt will be the postponement of all tax dues for affected firms. For many companies, this will mean liquidity cover for the entirety of their wage bill. This measure will cost us €700 million, or five per cent of GDP.
In collaboration with our banking sector, the cornerstone of our economic prosperity, we have added a third line of support. Banks are offering moratoria on existing loans. More importantly, our NDSF will be providing the funds so that the MDB can guarantee working capital loans offered by banks to affected firms. Our target is to guarantee at least another five per cent of GDP in soft loans to our firms.
Our three-pronged response to the economic challenge will provide a shield of 15% of GDP over the livelihood of our workers and employers.
At the current juncture, we believe this is an appropriate response, but rest assured that in consultation with the social partners, government stands ready to do what more it will take to safeguard employment.
The government stands ready to do what more it will take to safeguard employment.
Our past success and thriftiness mean we can now invest strongly to insure the continuation of our welfare.
The savings of our households, the retained profits of our firms, the liquidity of our banks and the war chest of our NDSF can be used to make sure that once the medical challenge is over and the economic turmoil overseas subsides, Malta will be there, ready to be once again Europe’s best economy, generating full employment for our nation.
Now it is the time that will define us. Acting together as one, we will overcome successfully the toughest economic challenge of our times and guarantee our continued prosperity.
Robert Abela, Prime Minister
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