Source: George M. Mangion¸ PKF Malta
As published in the Malta Independent on the 7th October 2012
With the opening of parliament after the long summer break¸ we find that our elected members are debating the famous fiscal pact that is the latest in a group of measures taken by Brussels to try to resolve the deep financial troubles since the start of the euro crisis. Our politicians seem to agree in principle that this pact helps us instil better governance and is the start of many attempts to invoke improved probity¸ particularly in the formulation of annual budgets.
Another novel idea in the eurozone is to recapitalise weak banks and¸ through better regulation¸ try to create a banking union to act as a buttress against any future shocks.
The EU is planning to have a Eurozone-wide regulatory system¸ the Single Supervisory Mechanism (SSM)¸ which it hopes will begin its work by the beginning of next year. This would allow the European Central Bank to assume full supervisory responsibility over any credit institution¸ particularly those that have received or requested public funding¸ with all banks covered by the SSM by the start of 2014.
It is true that many economists question whether banks should continue to indulge in high-risk investment strategies. But can we place all the blame for the weakness of the euro on rogue banks that fuelled the credit crunch? Some blame them squarely for the social suffering caused by the introduction of austerity measures by those countries that have joined the dreaded ‘bailout’ club.
It is widely acknowledged that sick economies cannot sustain prolonged austerity diets¸ as this in turn creates a counter-productive attitude of state protectionism¸ and shrinks (as opposed to enhances) growth prospects. Many blame the malady on greedy bankers who have grown fat since they divested their humble retail credo to embrace the rich rewards of ‘casino style’ investment banking. But more on this subject later on.
Essentially¸ one observes a global recession with the demand side of the economic cycle thwarted and a double dip effect (as has hit the UK) which creeps in unannounced. The primary indicator is chronic high unemployment and signs of social unrest.
It is sad to reflect that dole queues in the eurozone hit a new high of 18.2 million in August¸ with over three million in France alone. According to Eurastat¸ the highest unemployment rate was recorded in Spain¸ where 25.1 per cent of the workforce has no job¸ and the lowest of 4.5 per cent in Austria. (Malta hits 6.5 % but then our rate of worker participation is among the lowest in EU). The jobless phenomenon is most painful among young people and it is a shame¸ as much as a social emergency¸ that so many first time job-seekers are faced with such early disappointment in their lives. To take an example¸ some would say that sleaze and institutionalised corruption over past decades in Gre