Since taking office as Prime Minister in 2004 – the same year that Malta joined the European Union – Dr Gonzi has been at the forefront of Malta’s integration into both the EU and the eurozone. Recounting the experience to Global, he also explains how this small island nation seeks to act as a bridge between different regions in an increasingly globalised world
Global: In the years since Malta’s accession to full EU membership in 2004 and to the eurozone in 2008, has the experience been broadly positive for Malta?
Dr Lawrence Gonzi: The answer is a categorical, definite, clear “yes”. It’s been to our advantage for a number of reasons. The European market has always been a natural market for Malta and therefore being part of that internal market was crucial for our economic success. So ease of access to Europe, for our exports and services to be able to penetrate a market of 500 million people, that was fundamental for us. Being part of the European Union was crucial. It meant we had to reform, we had to restructure, we had to achieve fiscal consolidation and membership meant we had a target date and we achieved it.
The euro proved to be the most strategically important decision after joining the EU. We had a stable currency but defending that currency in the midst of the financial crisis would have been a tough job and there would have been enormous risks. Fortunately for us, we joined the euro just in time and so approached the financial and economic crisis with one of the strongest currencies in the world. The membership of the euro removed the extra costs and risks. Investors coming in knew that they were dealing with the euro and it made Malta extremely attractive. Over the past six years we have had record foreign direct investment flows and it’s been an extremely positive effect. Yes, joining the EU means there are burdens, but being around the table and being part of the decisions and having a voice around that table, we punch beyond our weight, and that is a unique advantage for us.
How has the economy weathered the storm of the global financial crisis? Has your government been asked, or been able, to help companies get through the hard times?
The assessment today, even though the storm is still out there, is that we sailed through the worst, coming out unscathed compared to others. We have a GDP growth rate close to 4 percent and we have the fourth lowest rate of unemployment in the EU. Our banks have passed the stress test and have been amongst the most solid in the EU. We have had investment still flowing into the country over the past two years and our tourism numbers, although suffering in 2009, have reached record levels in 2010.
We were eventually hit by the economic impact, mostly in the manufacturing export sector and in tourism. Here we exploited the advantage of our size. We did come up with a stimulus package but instead of spreading it like jam on toast we said every single employer needs to come and sit with us and explain the problem and, if it’s a temporary glitch due to the economic crisis, we will intervene and support the company. We will pay to have workers trained in different skills rather than declared redundant to help the company come out of the temporary glitch. It worked miracles and helped save some crucial jobs in the manufacturing sector. If the company faced a structural problem rather than a temporary one we told them to fix their problems before coming to us.
We’ve weathered the storm so far, but I keep saying: “No complacency, the trouble is still there, all our major markets are having to implement some severe austerity. If they suffer we suffer and it’s important to remain nimble, fast and responsive to what is happening around us.”
What are the prospects in the coming year or two for Malta’s leading economic sectors?
One area where we’ve been doing extremely well has been financial services, which have continued to grow. The rate of growth slowed in 2009 but is picking up now. Information technology is an area where we are convinced we can continue to grow at a very fast rate. Our universities are producing what the industry requires. The manufacturing sector, including pharmaceuticals and semi-conductors, is growing also. Aircraft servicing and maintenance are opening up. We are confident these areas can continue to grow. I think we have the building blocks in place so that we can keep our competitive edge in financial services, high value-added manufacturing, tourism and service-oriented industries. I am quite optimistic but optimism should never mean complacency. We have to be nimble.
What is your government’s policy on immigration and how does it deal with migrants arriving on Malta’s shores, especially those claiming asylum or refugee status? Have recent measures agreed between Italy and Libya resulted in a lessening of the numbers turning up?
We are very sensitive to this issue. We are the innocent victims in the human tragedy because the vast majority of immigrants we’ve had in the last ten years do not really want to come to Malta. They end up on our shores because of chance or if their boat was on the verge of sinking. But because Malta has one of the highest population densities in the world, every single immigrant arriving here is much more of a problem for us than is the case in other countries and the perception is that we are being invaded by people who are not part of our community. My government’s view is that this is a human tragedy, these are people who are victims of terrible situations, or refugees, and they deserve as human beings our solidarity, our help and support and our efforts to integrate them as much as possible within our communities.
We’ve been knocking on Europe’s door and pointing out that it is not only Malta’s problem but it is Europe’s problem, and indeed a global problem, which needs to be addressed in a proper way. We are trying to push for an agreed European policy on how to handle immigration, on how to integrate immigrants who are given refugee status, and how to move forward in this line. We are slowly getting there. There have been some important developments in recent months. The agreement between Italy and Libya has meant that the numbers have gone down substantially. The numbers have been going down but the problem remains there and it has to be handled with a holistic strategy and not just with one-off solutions.
How does Malta envisage its role in the evolution of Europe’s relations with the North African region in general?
We think we have an important role to play, which we’ve had historically because our strategic location puts us in a position where we have built up very strong relationships with our neighbours on both shores. Maltese businessmen have been doing business with Libya, Egypt and Tunisia for hundreds of years and we have investments in Malta from that part of the African continent. We communicate with them. We know the language and we know the culture and are comfortable with it just as much as we are with European culture. We are Europeans and we consider ourselves Europeans. So we see ourselves as a voice around the table which bridges the two cultures and the two continents and we continue to contribute as much as we can.
Malta has taken some initiatives in this region since joining the EU. Next year we will be hosting a meeting of the ‘five plus five’[a summit of the heads of state of the countries in the western Mediterranean Basin]. We participated in the Union for the Mediterranean [a partnership of 43 countries from the EU and the Mediterranean Basin]. We look on the African continent as somewhere we find other areas of common ground. A lot of African countries are members of the Commonwealth. There’s plenty of synergy there. We intend to continue to be a voice to bring cultures together in a globalised world.
I have visited Libya twice in the last three or four months. The level of investment in infrastructure taking place there is dramatic. It’s important for us to continue to work together not just with Libya but with the whole of the Arab community and the African continent.
What is your government’s approach towards the harnessing of clean energy, especially wind and solar power generation? What plans are there for promoting these technologies?
There is a plan going forward although there are specific challenges. The space available for solar panels and wind farms is extremely limited. We are looking at wind farms on an offshore basis but, again, we have a sea that becomes very deep just a few metres off our coast, which makes offshore wind farms an expensive exercise. We are looking at encouraging and subsidising our families and factories to develop photovoltaic and alternative sources of energy on roofs and open spaces. We are investing now in an interconnector cable from here to Sicily to be able to buy into
Malta the energy we require but also to be able to sell into the European grid any excess energy we generate from alternative sources. This makes the whole investment more feasible.
