Going for the essentials

 Lawrence Zammit's article on The Times of Malta

The European Commission this week published its recommendation on Malta’s 2014 National Reform Programme and its opinion on the 2014 Stability Programme. Maybe it has become too much to expect a serious debate on the European Commission’s report and its implications, away from media sound bites and blog posts.

In brief the report asks Malta to address the structural deficit in a more sustainable manner; to hasten the pension reform by increasing the statutory retirement age; to improve the attainment level of basic skills to assist job seekers to integrate better in the labour market; to diversify the energy mix in the economy by increasing the share of energy produced from renewable sources; and to increase the efficiency of the public procurement process.

I am quite sure that there are many who have their own solutions on how to implement each of these recommendations. I am equally sure that it is very easy to get bogged down into the detail of the European Commission’s recommendations and miss the wood for the trees. At the end what counts is the essentials – the outcome.

By that I mean that at the end of the process, the Maltese economy needs to achieve a balance between the key economic objectives of achieving economic growth, having sustainable public finances, reducing unemployment, maintaining a healthy position on its account of international economic and financial transactions, maintain stable prices and achieve an equitable distribution of income. We also need to ensure that in achieving these objectives, we continue to have a national health system and an education system that supports the general public to live in dignity, while we protect the environment for future generations.

Thus if I were to be cynical, I could say that there are tasks listed by the European Commission which are more like tools than objectives. Let us take as an example the raising of the retirement age, a measure which is meant to make the pension system more sustainable.

The real essential objective in this regard is not whether we have a statutory retirement age that is higher or lower than sixty-five years. We need a pension system that enables retired persons to live in dignity, that is not just above or around the poverty line, and that can be sustained in the future.

It is downright unethical if we maintain a pensions system that may seem comfortable for today’s retirees but will leave nothing for those retiring in thirty or forty years time, who would be forced to work until they drop dead. The raising of the retirement age in a gradual manner to sixty-five years was made possible because of a longer life expectancy and because of the fact that many persons reaching the previously statutory retirement age of sixty-one years continued working after that. At the time that decision was taken, it was a very good and equitable decision.

We can make the pensions system sustainable through other measures, not only by raising the statutory retirement age. We can take the bull by the horns and really reform our pensions system. We have been talking of introducing the so called second and third Pillar, which were contemplated in the pensions reform, for years. Maybe it is now time to introduce them.

Maybe it is worth assessing whether the payment or otherwise of national insurance by persons who reach the statutory retirement age is to be reviewed. Let’s face it, we still have a pensions system that was designed in the late 1970’s and since then we have only tinkered with it. The serious objective debate that is required is what type of sustainable and equitable pensions system should we have and not necessarily whether to raise the statutory retirement age or not.

The same line of reasoning needs to be adopted for the other tasks mentioned by the European Commission. The Commission issues such recommendations to all member states at this time of the year. It acts very much like the teacher who has to make an assessment of one’s students, and it is its job to do so. Like the teacher, it also recommends what actions may be taken.

However it is really up to us as a country to take the final decision as long as we stick to the commitments that we have given and the agreements that bind the EU member states. Those decisions need to address the essentials of social and macro economic policies.

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