The government has ramped up its strategy to fight COVID-19 by moving from a ‘let’s wait and see’ attitude to a shock and awe attack on the social and economic threats of this pandemic. This is what is needed to mitigate the risks of an economic meltdown.
Prime Minister Robert Abela defined the most recent fiscal package as “a historic pact with the social partners”. This is no exaggeration, as no previous administration since the war has had to deal with such a massive threat to the cohesion of Maltese society.
If left unaddressed, this pandemic crisis could impact at least 60,000 workers. Paying €44 million a month to ensure that these workers continue to be in employment and support their families is a cost that is more than justified in the present exceptional circumstances. The government has a “war chest” that has been built over the years to address national crises, and the coronavirus is indeed a serious threat to the well-being of society.
The social partners showed maturity when they agreed to share the burden of keeping employees in work until their businesses recover.
Indirect aid in the form of postponement of tax payments, government guarantees for commercial borrowing, together with direct government grants to reduce labour costs will be supplemented with the financing by employers of any shortfalls in employees’ income. It is also a positive measure to include self-employed persons in the support package.
The government debt-to-GDP ratio will increase from 43 per cent to 50 per cent as a result of these measures. The government will also need to borrow an extra €1 billion. This level of debt is still sustainable in the long term so long as the economy continues to grow.
No one has a crystal ball to predict how this pandemic will evolve from both the medical and economic perspectives. Malta is not spared this obstacle to planning surgically for the future. However, by acting speedily and decisively, we may be able to avoid immense and lasting damage to the economy.
Risks, of course, remain. Maltese businesses ultimately depend on the demand for their goods and services. The tourism industry, with the ancillary services that it promotes, will rely on foreigners’ desire to travel. Hopefully, other EU countries will adopt measures that boost people’s confidence in the future. The sooner that Europe and the rest of the world return to normality, the more effective will be our strategy to revive the economy.
Businesses would do well to take this opportunity to dust off their business plans with a view to improving their resilience. There is nothing as useful as a crisis to help business leaders examine how they can operate more efficiently by adding value for their customers while ratcheting up investment in technology and in their employees.
After weeks of inadequate response to the coronavirus crisis, EU leaders are beginning to react more convincingly to this threat. The social partners have done well to prod the government to ramp up its crisis management initiatives.
However, this phase is just the beginning of the war. There will undoubtedly be other battles that call for further measures to limit the damage, but the shock and awe response is indeed a good start.
The prime minister yesterday sought to project strong leadership and a sense of national effort – that we are all in this together and that businesses and employees are called on to make sacrifices in the collective interest. It was the right message to convey.