In a speech I delivered last year, I had shown how Malta’s competitiveness lags behind that of EU member States, mainly because of restrictive practices and other labour market inflexibilities; the maintenance of monopolistic situations in economically strategic areas such as transportation and inland freight; and insufficiencies in our educational system and innovation efforts. These conclusions have been supported by a number of studies since then and remain valid today. Problematic as it is, however, the budget deficit is by no means the only determinant of macroeconomic imbalances. Certain systems and practices which create demand without generating output have equally harmful consequences. A typical example is the welfare system. It has become so entrenched that its benefits are mistakenly considered to be immutable rights; but, as the rapidly growing welfare gap shows, it is a system which carries the seeds of its own destruction. For while the welfare state was born from the noble premise that care for the weak and the needy is the responsibility of society as a whole, in Malta the terms “weak” and “need” are defined very liberally. In so doing, we overlook the fact that generous welfare depends on two details of demography and politics: that there are enough people of working age to fund the claims of those defined as being weak and in need; and that working people are indeed willing to pay the necessary taxes. If these conditions are not met, there can be no other solution but to redesign the welfare system according to the funds available.
There haven’t been significant amendments to the Monetary Law Act in that period and our objectives still remain the same; the control of inflation, the promotion of financial stability and banking sector and financial system stability and the thrust for a broader economic development of the whole country, that in a nutshell is what our objectives are, which is very clear, its unambiguous and it has kept us on the straight and narrow path through some fairly challenging periods. I think there are very few central banks in the world that have gone through the sort of events that we have been through, most notably the bomb blast which you know affected us, the physical lives of several of our colleagues and their families and such like over the years. And that was related obviously to the civil strives that this country went through for almost thirty years. Nevertheless I think the central bank has maintained financial stability, we have kept inflation reasonably under control, and the economic development of the country has done reasonably well despite those challenges, which is in no small measure due to the efforts of successive generations of central bankers who have stuck to their principles by and large and kept the momentum of the country moving forward. So it is appropriate for us to take a moment and just accept a little bit of self-congratulation at this point of time.