As the ECB still grapples with Eurozone woes, Draghi and co found that there's order in Malta
Published 26/10/2015 | 02:30
Mario Draghi and European Central Bank policy makers chose the perfect setting for their high-stakes discussion on the euro area's monetary policy last week: a Maltese resort that boasts one of the Mediterranean's biggest casinos.
Trading grey Frankfurt for the balmy island capital Valletta, where it was 23 Celsius last Thursday, the ECB president and Governing Council met in the five-star Westin Dragonara complex which boasts two private beaches as well as the 24-hour gambler's den.
As they fretted over the 19-nation region's budding recovery, which is being jeopardised by weaker trade and volatile markets, the central bankers found that Malta offers a tantalising glimpse of what they're struggling to achieve.
Across the country of just under 430,000 people, the economy is thriving in a way that most of Malta's Eurozone partners can only dream of.
Gross domestic product grew four times as fast as the rest of the euro area in the past six years and the small island nation boasts the second-best job creation in Europe.
"Economic growth reached new heights in 2015," Finance Minister Edward Scicluna said.
During the second quarter of this year, GDP accelerated to 5.2pc in real terms. This was the strongest economic growth by Malta since 2007.
In the same quarter, unemployment reached a record low of 5.4pc, less than half the euro area average.
Mr Scicluna attributes Malta's growth to increased disposable income, work incentives, support for businesses and being open to investment.
In a scenario several of Malta's partners may envy, he said income tax will be cut again next year, the pensionable age won't be raised, and pensioners on low incomes will get an increase.
Those who come to stay rank Malta the third best place in the world in which to live, according the annual Expat Insider survey published recently by the InterNations global network.
The island, which lies just 330km north of Libya, has also largely dodged the migration crisis which is putting a strain on neighbours such as Italy and Greece.
While Italy has seen over 121,000 migrants arrive on its shores since last January, over the same period, the Maltese Navy rescued 93 migrants.
Mark Vella, investment manager at local firm Calamatta Cuschieri, said Malta's economic performance has "spearheaded it to the leader of the pack, with the large part of the Eurozone economies trailing Malta's stellar performance."
Mr Vella expects quantitative easing purchases by the ECB to help keep interest rates anchored at low levels.
The island does have its problems, which include high government spending, as centre-right opposition leader Simon Busuttil told lawmakers last week.
Recurrent spending is rising, capital investment is being reduced, and inflation is at 1.6pc, the highest in Europe, due to high fuel and electricity prices, he said. That's a problem most euro-area nations wish they had, as the ECB struggles to keep the region away from deflation. (Bloomberg)