'The longest recession since world war 2'

The prime minister excluded, there is a general agreement about the economic crisis facing this country. The representatives of business complain about the stagnant economy and accuse the government of having neither an economic strategy nor a proper post EU accession strategy. The experts are saying that Malta has never faced such an economic recession since the second world war. In this interview with the Malta Financial and Business Times, economics professor Edward Scicluna - former chairman of the Malta Council for Economic and Social Development - states that the prime minister " is badly advised on the economic front" and that "the Central Bank’s decision to peg the Malta Lira to the Euro at a fixed rate upon entry into ERMII, was wrong and should be reversed". Scicluna spoke to Kurt Sansone:

On joining ERMII the Central Bank decided to peg the Malta Lira to a particular fixed rate giving up the option to allow the currency to fluctuate within a 15 per cent band allowed by the ERM mechanism itself. What do you think of this decision? Economic historians, 10 to 20 years from now will consider this as the worst economic advice Government could have had.

Let me draw a comparison. The ERM is a test period for our exchange rate, just like the new jumbo Airbus is undertaking test flights before going into full production.
During the first test flight of the new aircraft, the pilots were offered a parachute. The pilots had full confidence in Airbus but they accepted the parachute. The monetary authorities were going for a two year test flight with ERM. They were offered by the European Central Bank a parachute in the form of a 15 per cent band, plus or minus around the peg and a standby arrangement from the ECB to support the peg if needed. We told them 'thank you very much but we'll do without the parachute'. This means that any shock coming from outside will directly have an impact on our economy. Shocks are coming all the time such as the unstable oil prices, fluctuating exports, money flowing in and out. The 15 per cent band could have acted as a shock absorber, a parachute. But we decided to drive the car without shock absorbers.

Understanding Growth - Former director general of the Malta Chamber of Commerce, JG Vassallo, writes that "one year after Malta’s EU accession, we are experiencing difficulties in coping with the huge amount of work originating from the EU institutions, clearly indicative of the need for enhanced understanding of the role we have to play and the opportunities that may arise therefrom – there is a gap to be filled at both the public and private sector levels".