Another perfect storm brewing?

We are not completely confident the outcome will not be disruptive. Even if it is not, the British will be poorer at the end of it. That is in the logic of things, the way the negotiations were handled.

“The International Financial Crisis of 2008 was a perfect storm where millions lost their jobs, lost their homes and lost their savings – it was a catastrophic international crisis. There are many dark clouds ahead today which may lead to economic downturns in some parts of the globe, but it would be farfetched to expect that they will all come together and form another perfect storm in the years ahead.”

(Minister Scicluna at the Atlantic Dialogues held in Marrakesh, Morocco. See pg 6.)

Other impartial observers will disagree. The year that is dawning in a few days’ time looks like repeating 2008 with some pluses and some minuses.

What concerns us most these days is the outcome of Brexit, not just for the UK but also for Malta.

It is clear that, however it will end up, Brexit will hit Britain badly, with companies relocating, trade impacted and maybe (we hope not) severe disruption in the normal orderly transactions of people, goods and services.

We are not completely confident the outcome will not be disruptive. Even if it is not, the British will be poorer at the end of it. That is in the logic of things, the way the negotiations were handled.

We are not so confident that we in Malta will not be impacted by the resulting fall-out. Apart from travel disruption, and the possible introduction of a fee for visas for the British to visit Europe, there may be even worse disruption of the trade links.

Eventually, we are sure, things will even out, but until then there can only be disruption and pain.

Next, Europe. There is a slowdown going on, reflected in IFO predictions (pg 3) and Markit ones concerning manufacturing concerns.

The general feeling is that the euro came out well from the 2008 crisis but did not reform itself enough so as to be strong in the case of a next crisis. It is stronger but not stronger enough.

The countries in the EU, and even worse in the Eurozone, are now at odds and ends, disagreeing about policies and politics in a way that has never hitherto happened. The unity of Europe, which has kept this continent war-free for so many years, is now fractured.

There are conflicts regarding the fiscal rules, especially now that France has breached the deficit criteria under the attacks of the yellow jackets, and Italy has been coerced to return to the rules where its new government previously boasted it would not.

Even so, as stated earlier, it is the powerhouse of Europe, Germany, which has been slowing down and will thus bring the rest of the continent to a halt.

However the Eurozone is constructed, Germany is the biggest contributing factor to Europe’s growth, pulling many countries in its wake. Maybe, it’s true, Germany as a country derived some of its greatness from its smaller neighbours, but they, in turn, benefited from the nearness and protection of the big neighbor.

And then, the rest of the world, with a not-so-extinct trade war between a fiercely protectionist president and a Communist China. So far, we have been spared exaggerations such as taxing imported cars etc, nor any Chinese retaliations but we are not out of the woods yet, at least until Donald Trump is still in the White House.

And lastly, the rest of the world, where millions live in poverty, famine, war and want and where millions aim to somehow make it to havens such as Europe and the US, adding to the plight of millions of migrants creeping under every conceivable sort of barrier and adding to the problems of so many host countries.

Maybe, so we hope, there will not be this ‘perfect storm’ in the coming year. That is the best we can wish for as we wait for the tinsel and champaign of New Year’s Eve.