With all the media hype sending warning signals of a summer of horrors, many tourism operators, tourism service providers and tourist product manufacturers prepared themselves for a worst case scenario prior to the start of the peak season.
While the independent media stood accused (by a government that was, at the time, in utter denial) of talking ourselves into a recession, many business leaders could see what was coming and braced themselves for a difficult road ahead.
Uncharacteristically, very few tourism operators were upbeat prior to the start of summer. Expectations were low, operational costs were trimmed, pricing was in many cases adjusted to reflect a lower demand and marketing became more studied, if not more aggressive. Local businesses did what they had to do, set themselves new targets and many of them are now positive about having reached their aims – even if this meant that little or no profit was made due to prevailing circumstances.
It is this level of preparedness that government needs to face the 2010 budget dilemma. Whatever is decided upon by the finance minister, Malta’s economy will not recover overnight. The ship of election euphoria has sailed, and government realised that it can now openly admit to having a problem with the state of our finances and prospects for our economy. We cannot expect miracles to be made at this stage, but it is simply – for want of a better word – a matter of making the best out of it.
This time around, the finance minister must make it a point to first listen to what social partners have to say and then make a thorough analysis of the implications their recommendations may have on a macro level before deciding. For instance, the social partners’ recommendation urging government to make student stipends financially sustainable is fully legitimate, but questions need to be asked before rocking the boat too much during these times of economic uncertainty.
As much as it can be acknowledged that investment in stipends will have to be rationalised at some point, one must also evaluate the possible after-effects of denying students of their disposable income. Most students live on a shoe-string budget, and even most of those coming from well-off families, will not spend their entire stipends on alcohol and debauchery, as it is often perceived. But without entering into the merits of whether stipend money is well-spent or otherwise, the fact of the matter is that if this free-for-all income comes to a halt, students will still need money to get by.
While some will start looking for more part-time employment, others will resort to their families. In a situation where families are already struggling to settle their utility bills on time, what impact would such a decision as removing stipends have on the disposable income of families? In a context where employment is down, and with many companies mulling over trimming more staff, how easy will it be for students to land part-time jobs? And should students opt out of their courses so they can match their expectation for a more comfortable lifestyle, will they be able to find good enough jobs to build themselves a solid future?
There may not be a simple answer to these questions, but it is essential that they are asked. The finance minister is not only faced by the need to make amends or reforms to government expenditure that is unsustainable or wasteful. He must also evaluate the timing of his decisions to ensure that they will not take us from the frying pan into the fire.