As the ECB still grap­ples with Eu­ro­zone woes, Draghi and Co found that there’s or­der in Malta

The Malta Business Weekly - - FRONT PAGE -

Mario Draghi and Euro­pean Cen­tral Bank pol­icy mak­ers chose the per­fect set­ting for their high­stakes dis­cus­sion on the euro area's mone­tary pol­icy last week: a Mal­tese re­sort that boasts one of the Mediter­ranean's big­gest casi­nos, Bloomberg re­ported last week af­ter the ECB Gov­ern­ing Coun­cil met in Malta..

Trad­ing grey Frank­furt for the balmy is­land cap­i­tal Val­letta, where it was 23 Cel­sius last Thurs­day, the ECB pres­i­dent and Gov­ern­ing Coun­cil met in the five-star Westin Drag­o­nara com­plex which boasts two pri­vate beaches as well as the 24-hour gam­bler's den.

As they fret­ted over the 19na­tion re­gion's bud­ding re­cov­ery, which is be­ing jeop­ar­dised by weaker trade and volatile mar­kets, the cen­tral bankers found that Malta of­fers a tan­ta­lis­ing glimpse of what they're strug­gling to achieve.

Across the coun­try of just un­der 430,000 peo­ple, the econ­omy is thriv­ing in a way that most of Malta's Eu­ro­zone part­ners can only dream of.

Gross do­mes­tic prod­uct grew four times as fast as the rest of the euro area in the past six years and the small is­land na­tion boasts the sec­ond-best job cre­ation in Europe.

"Eco­nomic growth reached new heights in 2015," Fi­nance Min­is­ter Ed­ward Sci­cluna said.

Dur­ing the sec­ond quar­ter of this year, GDP ac­cel­er­ated to 5.2pc in real terms. This was the strong­est eco­nomic growth by Malta since 2007.

In the same quar­ter, un­em­ploy- ment reached a record low of 5.4pc, less than half the euro area av­er­age.

Mr Sci­cluna at­tributes Malta's growth to in­creased dis­pos­able in­come, work in­cen­tives, sup­port for busi­nesses and be­ing open to in­vest­ment.

In a sce­nario sev­eral of Malta's part­ners may envy, he said in­come tax will be cut again next year, the pen­sion­able age won't be raised, and pen­sion­ers on low in­comes will get an in­crease.

Those who come to stay rank Malta the third best place in the world in which to live, ac­cord­ing the an­nual Ex­pat In­sider sur­vey pub­lished re­cently by the In­ter-- Na­tions global net­work.

The is­land, which lies just 330km north of Libya, has also largely dodged the mi­gra­tion cri­sis which is putting a strain on neigh­bours such as Italy and Greece.

While Italy has seen over 121,000 mi­grants ar­rive on its shores since last Jan­uary, over the same pe­riod, the Mal­tese Navy res­cued 93 mi­grants.

Mark Vella, in­vest­ment man­ager at lo­cal firm Cala­matta Cuschieri, said Malta's eco­nomic per­for­mance has "spear­headed it to the leader of the pack, with the large part of the Eu­ro­zone economies trail­ing Malta's stel­lar per­for­mance."

Mr Vella expects quan­ti­ta­tive eas­ing pur­chases by the ECB to help keep in­ter­est rates an­chored at low lev­els.

The is­land does have its prob­lems, which in­clude high gov­ern­ment spend­ing, as cen­tre-right op­po­si­tion leader Si­mon Busut­til told law­mak­ers last week.

Re­cur­rent spend­ing is ris­ing, cap­i­tal in­vest­ment is be­ing re­duced, and in­fla­tion is at 1.6pc, the high­est in Europe, due to high fuel and elec­tric­ity prices, he said. That's a prob­lem most euro-area na­tions wish they had, as the ECB strug­gles to keep the re­gion away from de­fla­tion.

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