With expectations rising faster than the ability of governments to meet them out of available resources, however, the norms of prudent financial management were put aside and growing resort was made to deficit financing. Understandably, politicians are wary of asking citizens to give up any of the rights they have acquired in the process, especially on the eve of elections. The problem is that there comes a time – and that time is now in Malta as in some older EU members – when the financial burden of an extensive welfare system (itself compounded by the effects of an aging population) and of a large, and relatively inefficient public sector becomes too heavy to bear. It also deprives the economy of both the resources and the flexibility necessary to respond successfully to the competitiveness challenge coming from low-cost or more efficient producers. This is a challenge which cannot be ignored. The people need to be told that certain attitudes and practices are unsustainable, and that the only effective response to the relentless march of globalization, to EU membership and other sources of competitive pressures is nothing less than a culture change, a complete break with the past. I believe it is possible to build an alternative, more efficient system for managing the economy and which nevertheless reconciles the objectives of social cohesion and financial sustainability. It is in this broader context that I have often called for a wider application of means testing.
If anything, the importance of the Bank’s independence, which is already enshrined in Maltese law and has been duly respected by successive governments, will be even greater once the Bank becomes a member of the Eurosystem. First of all, the autonomy of national central banks is mandated by the Maastricht Treaty. Reflecting this requirement, the Central Bank of Malta Act now fully guarantees the institutional, functional, financial and personal independence of the Bank and of the members of its decision-making bodies. As for the ECB, it has adopted low inflation as its overriding objective, and its independence helps to guarantee its ability to deliver on this commitment. As I said earlier, the governors who sit on the Governing Council of the ECB do so in a personal capacity and must be guided only by euro-area wide considerations. As members of this Council, therefore, governors of national central banks must not only be persons of recognized professional competence and personal integrity, but they must also be prepared to defend their own bank’s as well as the ECB’s ability to act independently of political and other pressures. 4  BIS Review 59/2007