Act before it is too late

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Nobody with a job will lose a cent, cried Emmanuel Macron earlier this week. A bombastic, presumptuous assertion – perhaps. After all, jobs are lost even during the best of economic times. Yet, it demonstrates a clear commitment by the French Government that it will do what it takes to safeguard a modicum of economic activity, employment and consequently, the quality of life. The German government is planning an economic aid package worth €822 billion to prevent companies from going under during the coronavirus pandemic. The UK is readying itself to cover up to 80% of affected workers’ salaries.

And it’s not just the big guns who have unleashed their financial fire power. Small economies such as Denmark and Sweden have also launched unprecedented budgets, with the former readying itself to cover a significant 75% of workers’ salaries. Danish PM Mette Frederiksen was slightly less pompous than his French counterpart, but still insisted: “If there’s a big drop in activity, and production is halted, we understand the need to send home employees. But we ask you: Don’t fire them.

From its end – not that countries seemed too concerned – the EU gave its green light so that the usually tight fiscal rules can be put aside in these extraordinary circumstances. The Commission, which (generally, unless it’s the French) guards with pride the Maastricht criteria requiring a Member state to limit its deficit to 3% and its debt levels to 60%, has put into place the general escape clause under the Stability and Growth Pact’s preventive and corrective arms, which it had the right to do in the event of a severe economic downturn in the EU area.

Commission President Von der Leyen twitted that “national governments can pump into the economy as much as they need,” she added. “We are relaxing the budgetary rules to enable them to do that”.

Where does that leave Malta?

Most of the business  people that approached us, are all hard-working individuals whose earnings are spread through monthly remuneration to their workers and re-investment in the offering. The businesses’ well-being is the employees and their families’ well-being and quality of life.

The real risk of this situation is the depression and anxiety in the mental well-being of small and medium enterprise entrepreneurs. The notion that every business community is greedy is unwarranted and unfair.

One particular businessperson said that “the current self-isolation I am undergoing is to hide my fears at a time when I need to inspire confidence in my team. Being ‘lonely at the top’ got a new meaning.

Government’s announced 1.8-billion-euro package has been met with criticism across the board. Although the figures sound pretty impressive, really and truly, in excess of 85% of such amount covers loan guarantees and tax deferrals. The latter, in particular, hardly provide any respite to those businesses, especially in hospitality, which came to an almost complete halt. It is here, along with other areas such as entertainment, transport, logistics and media which the biggest impact is being felt. The proposed measures on employment, covering two days of salaries at a maximum of 800 euro, will most likely not save any jobs.

The Opposition and constituted bodies have proposed about all sorts of incentives they wish to see through. We can’t have them all. Needless to say, big choices need to be made. Having them all will be unsustainable. But more, surely can be done. The total amount of support to employment, intended to cover no more two days a week, has been estimated at 175 million. Doubling that, would not break the bank, and would go a long way in safeguarding jobs. Let us keep in mind that Government has amassed in excess of 600 million euro in parked funds from the citizenship scheme. While we are not here to discuss the virtue of such scheme, that money is now there and if this isn’t a “time of need”, one doubt whether that will ever arrive.

A second realistic proposal includes the suspension – not deferral – of business rents and licences, together with a meaningful reduction in utility tariffs. There is no excuse to postpone the latter: Brent oil prices have already fallen to their lowest level for almost two decades and gas prices tend to follow soon after. The price of oil has gone down so much in the past days that Bloomberg has argued this week that it is not impossible that oil prices end up in negative territory such is the current glut in production.

The COVID-19 saga may linger for another couple of months, maybe three. The economy will shrink. But it will eventually rebound. To do so, it needs enterprises who have the vision, resources, and mechanisms in play to foster growth. Letting such businesses (and the jobs they provide) disappear, will condemn us to a much longer recovery. Government must act, decisively, now.

The Communications sector

We hail from the communications sector, and probably after tourism this will be one of the first to be hit with the current freeze. We are committed to provide a service. All media is committed to provide a service which comes at a cost. We chose to keep supporting our clients at this time. Most of the media owners are doing the same service to the readers, at a time when communications is essential and vital.

The fragility of our businesses is something we are used too, the butterfly effect arising from the slightest threat to our clients’ confidence has an immense impact on our survival. This is compounded by the fact that our only, invaluable, resource and indeed livelihood, is the time of hundreds of outstanding humans.

But this is different. We see this storm fast approaching, each month of ‘runway’ burns away faster and louder. In an Open Letter , 37 companies operating in the sector sent to the Prime Minister ours is an industry with players that will not be dented or crippled by this, but that will simply fade away into the night, here today gone tomorrow, without so much as a whimper. Our appeal to you is to deliver measures that will put a few more precious metres between us and this storm, that we may catch our breath and use our wits and resolve to give us a fighting chance to come out of this unusual ordeal with the least possible harm. It is reassuring to see that other countries have responded already by putting forward far- reaching measures. Our practical suggestions to reach some measure of burden sharing for what is really the whole service sector of our economy, include the following:

Direct assistance of at least 50% of the payroll incurred by the companies for the months of April and May 2020 following which a reassessment will be made for a possible automatic extension.

Government subsidy on bank interest for any business facility used to maintain ongoing business.

A direct subsidy to go against current rental expenses.

A temporary adjustment to employees’ tax rates.

Quarantine leave to be carried by Government.

A temporary six-month suspension or downward revision on VAT.

Confirmation that the recently announced deferral of fiscal payments and any subsequent measure in this regard will also include our sector or indeed all the service sector.

Deferral of any fiscal payments will not incur interest and/or penalties.

Jesmond Saliba

Managing Partner CiConsulta / Communications Professional

Founding Editor – Corporate Dispatch

Broadcaster (BeaconMedia) / Campus Fm

Photo – Anna Jastrzebska – www.maltaweddingphoto.com

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