Now that we know Peter Magyar won by a landslide, the answer is clear. You can attempt to manipulate democracy, but the electorate draws the line at alliances that run counter to their values. Let’s not forget Hungary’s history. After World War 2, Hungary became a Soviet‑aligned communist state, which unsettled many. The Hungarian Revolution of 1956 was a nationwide uprising against Soviet control and the communist government. It remains one of the most significant anti-Soviet movements of the Cold War, still shaping Hungarian identity. Back then, Western Europe looked away, becoming complicit in the aftermath when the secret police opened fire and triggered wider revolt. Hungarians demanded Soviet withdrawal, free speech, and a new government. Now, Hungarians demanded better governance in a democratic set-up.

Certainly, with Ukraine invaded by Russia and Orban aligning with Vladimir Putin’s foreign policy, this was a significant factor. Hungarians chose freedom in 2004 and reaffirmed that choice. The path to joining the EU is not easy, as it involves rigorous tests and scrutiny. I was there and witnessed this firsthand. Although the EU Commission may be somewhat lenient, the principles of democracy – especially independence of the judiciary and other institutions – cannot be altered. The sentiment that Hungarians did not want to slide back to regime alignment was clear. History teaches us all a lesson.

Besides, the US interference in Hungary did not go well either. In a period where there is a chaotic situation going on in the Middle East, and the surge of gas prices and oil prices because of a war that has the support of the US, this is reminiscent of the economic hardship that Hungary had to endure during the invasion of Ukraine and might once again need to bear due to the interference in Iran. Now we can argue that there are many economic factors stemming from the Ukrainian war, inflation that eroded people’s pockets, and the wrong economic policies of Orban’s government. However, interference from the EU or the US is still interference. And having Vice President JD Vance endorse Orbán in such a chaotic time certainly did not go down well with the electorate, given that many within the Trump administration don’t look favourably on the EU’s modus operandi. Besides, Magyar managed to convince and onboard Orban’s stronghold base in villages to vote for him.

Indeed, many of my readers may disagree with my position, but I have never and will never support Orbán’s government. Orban, during his tenure, demeaned minorities and implemented non‑Western policies that compromised freedom and liberties, especially in foreign policy. The EU stands apart from the US, and the prevailing US narrative about the EU does not resonate with many educated Europeans. While we have always been US allies, recent years have revealed growing cracks in the relationship – originating not in the EU but across the Atlantic. The EU and US operate differently, and US policies and rhetoric – especially recent discourse against minorities – do not resonate with European voters. Despite the EU’s flaws, the bureaucracy and incompetence at the highest echelons of the EU Commission, I would rather live here than anywhere else. Though I often find the President of the European Commission’s approach lacking due to her incompetence, I still prefer the EU’s way of life. Nevertheless, today, the EU must reassess itself, as the rules‑based order is faltering. I am not suggesting that we abandon rules, but clinging to unchanged policies will not serve a democratic Europe.

Now that Magyar has become Hungary’s Prime Minister, we can fairly say that his government will pursue a pro‑EU approach, or at least I hope he doesn’t descend into Orban’s path. To give my readers some background, Magyar is the leader of the Tisza Party, a centre‑right, pro‑European political movement. He was a Fidesz (Orban’s party) insider who later became a strong critic of Orban’s government. Peter campaigned on anti‑corruption reforms, restoring democratic institutions, and strengthening ties with the European Union. Indeed, his campaign achieved a historic victory in Sunday’s parliamentary elections, reaching a two‑thirds supermajority in Parliament. The turnout was also historical, with 77% of the electorate voting.

The EU’s approach to Hungary remains to be seen, particularly regarding EU funds, the new prime minister’s stance on the war in Ukraine, EU assistance on Cohesion funds to keep him in power for the long term, migration, and foreign policy. The next four years will be challenging, especially in restoring Hungary’s reputation abroad, navigating relationships with other governments, and stabilising the economy in a messy world. In truth, Magyar is no outsider, and that’s probably what augmented the victory and allowed him to beat Orban. He was shaped by the Fidesz party within the same political culture and networks that engineered his predecessor. And the way it looks is that he is still deeply embedded in that neo-patrimonial system. His politics aren’t that different either. However, it won’t be wise to pursue Orban’s policies, the same polices that the electorate just dumped in the trash bin of history.

The post You cannot fiddle with democracy! first appeared on The Malta Business Weekly.

I have seen some numbers and plots that, in truth, are a little worrying from a global economic perspective. Everything was revised downwards, due to this conflict, not least global economic growth. This week, President Trump lost his patience with the Iranians, to the point of asking them to open the ahem, Strait. However, the Iranians seem to be defiant, and they are totally ignoring the USA. To make matters worse, Iranians are telling EU countries that the passage is open to them, but not to the USA. Those allies aiding the USA will be targeted by Iran, and many merchant vessels passing through will be targeted. Under UNCLOS and the Law of the Sea, the passage cannot be blocked. However, no insurance company will cover the trade and the stock carried on those vessels. And this is making the situation even worse. So, besides the oil price spikes, the problem is also one of supply. By the time this article was written, the US and Iran had agreed to a ceasefire brokered by Pakistan. This, though, does not include Lebanon, and Israel seems to be forging ahead with their military interventions.

The EU has already signalled a move to ration fuel by encouraging carpooling and public transport, reducing air travel, and lowering the speed limit on highways to reduce fuel consumption, especially diesel. All this shows that the economic strain is now inseparable from the political and military escalation. Now that a two-week ceasefire has been agreed, there is a possibility that oil, LNG and other related energy commodities will pass through the Strait as it will be open. However, as I reiterated, it does not guarantee insurance of commodities, and the risk premia may be quite high. This week, the US, or better the President of the United States, resorted to Truth Social, going further in saying that if Iran is not ready to make a deal by the time of the deadline, an entire civilisation will die and will not come back. That threat is an ugly one. As the understanding is one that would go to lengths we haven’t seen since the Second World War. God forbid that something so ugly occurs.

Certainly, if Iran’s nuclear infrastructure has been decimated by the US, the regime is arguing that sanctions imposed on it might as well be lifted. There is no threat anymore. Meanwhile, Israel kept bombing Lebanon, pursuing Hezbollah members. And the entire region is in chaos. And naturally, this chaos is feeding directly into the global economic outlook. The global economic figures are not looking good. The IMF revised the economic growth downward. And if we carry on like this, next month will be crucial for feeling the pressure of the price spike. Inflation will pick up, wreaking havoc on many EU and Western economies. As many want this conflict to end as soon as possible, it doesn’t seem to be the case, even though a ceasefire has been agreed upon.

Even if the war stops, stability will take longer to restore. What I am intrigued to see is the EU at the negotiations and mediation table. The EU is looking conspicuous. By the EU, I do not mean the European Parliament. The latter lacks competence in foreign affairs and defence. They can only issue political statements that, in truth, only fuel further problems, misunderstandings and chaos. Some of the EU parliamentarians do not even know the history of Iran. When they speak, they look idiotic by the verses they write for themselves and the citations they cite from uninformed history books. And while the EU struggles diplomatically, it is also struggling economically.

What will surely hit us here is the increase in oil prices, although after the temporary ceasefire, prices eased. We must make sure to cushion this impact. The EU economy cannot handle such a shock. And the EU must intervene with its budget to look after its citizens. We cannot have a situation where money is spent on defence while people do not have food on their table. It’s becoming even more difficult for the EU to understand the economies. They are just trying to stay within the rules, which were designed years before any conflict or shock and do not make sense in today’s context. When meeting with economic operators in the industry, they tell you that costs are exorbitant, including compliance, green, and sustainability costs. The EU was not ready to issue legislation on reporting requirements amid a pandemic, a war in Europe, and ongoing conflicts. And the latest revisions were neither proportional to the original text nor a travesty of green initiatives. And this brings us to the reality we must face: many companies have incurred costs and uncertainties.

What we must deal with in the coming month, economically and security-wise, is the result of years of postponement of the EU’s problems. Luckily, in Malta, the GDP grew three times as much as it was in 2013. And we can cushion part of the impact and sustain it for a short to medium-term period. If it were not the case, we wouldn’t be able to sustain all the benefits provided by the PL in government since 2013, not least free childcare, increased pensions, and the public sector wage bill. People must realise that we do not live in a bubble. We are part of the world, and any impacts, regional or global, will affect our economy. The choices we make today will shape our future stability and prosperity. It is crucial that we remain vigilant, adaptive, and ready to take responsible decisions, both as individuals and as a country. The cushioning of these impacts depends on the ideologies of those governing the country. You either choose a government that believes in intervention or a party that believes in the free market. The choice is ultimately yours.

The post We do not live in a bubble here in Malta! first appeared on The Malta Business Weekly.

The President of the United States has threatened to withdraw security guarantees to NATO allies if they do not participate in the conflict in Iran and contribute to safeguarding the stability of the Strait of Hormuz. Europe’s security – encompassing both energy and defence – remains heavily dependent on the transatlantic relationship. The President stated that allies must either help maintain the stability of the Strait of Hormuz or purchase energy from the United States, which he claims is abundant in supply. Donald Trump has branded EU allies as “freeloaders”, reiterating his position that the United States should not increase defence spending to protect them unless they support his efforts regarding the Strait of Hormuz. This pressure adds another layer of complexity to Europe’s already fragile energy landscape.

Given the EU’s ongoing conflict with Russia over the war in Ukraine, the sanctions imposed in recent years, and its commitments to Ukraine, the alternative suppliers identified by the European Commission to replace Russian energy have proven problematic due to one route. The crisis in the Persian Gulf further complicates the situation, as even an immediate end to the conflict would leave the region highly unstable. Resolving the war through displays of strength would likely only extend the energy crisis. Commissioner Jorgensen’s recent statements echoed those of Commissioner Kadri Simson in 2022, but also incorporated rhetoric reminiscent of the pandemic era, when citizens were encouraged to work from home, reduce air travel, limit private vehicle use, and adopt renewable energy practices. The European Commission is currently adhering to the International Energy Agency’s (IEA) recommendations, which prioritise remote work to reduce oil demand, particularly diesel. The IEA also identifies jet fuel as a significant concern and thus advocates for reduced air travel to lower demand, ease energy price pressures, and curb emissions.

The IEA has recommended that remote work for at least three days per week can substantially reduce commuting‑related fuel consumption, particularly diesel. Last week, I highlighted on my social media that the energy crises of the 1970s led to a decade of stagflation, drawing on my experience as an economist analysing markets, international trade and geopolitics from my former PSC seat in Brussels. This perspective has provided me with insights into market behaviour, interconnectedness, and the influence of geopolitics. A single event can trigger widespread global economic disruption, as evidenced by the 1970s oil crisis, which caused significant economic hardship despite lower energy intensity in products and services at that time. In contrast, today’s environment is characterised by increased energy demand driven by advances in artificial intelligence, technology adoption, and rising consumerism. This makes the current crisis far more challenging to navigate.

The outlook for Europe is concerning. Historically, Europe has relied on external energy sources. The core issue is that the EU delayed investment in renewable energy for three decades. Now, the geopolitical context has shifted, and the EU has severed ties with Russia, a major supplier of liquefied natural gas and other energy products. In my view, it is imperative for the EU to invest in renewable energy or nuclear energy and pursue energy independence. Without substantial investment in renewables or nuclear energy, this issue will persist.

However, the challenge extends beyond energy security to encompass defence. The EU is currently economically ill‑equipped to address multiple crises simultaneously due to high public debt levels. Additionally, the new Multiannual Financial Framework (MFF) has adopted a different approach to defence investment. Prioritising energy security is essential before increasing defence spending. While concurrent investment in both areas is necessary, NATO and the United States remain irreplaceable in terms of defence capabilities. The United States is the primary provider of defence resources, and without its support, the EU would face significant difficulties. The bill is costly to replace the USA. This reality underscores the strategic imbalance Europe must confront.

Certainly, it is important to recognise that the President of the United States is fully aware that the EU cannot manage these challenges independently. Consequently, the EU requires stronger ties with the United States to maintain and advance its defence and security. Realistically, the EU cannot simultaneously invest heavily in defence and accelerate its transition to renewable energy. The economic situation in the EU is precarious, particularly debt to GDP ratio in major economies such as France and Italy. Surely, any significant economic instability in these countries could trigger a crisis for the euro, the currency used to purchase energy against the US dollar. A weakened euro would increase the cost of energy imports, compounding the effects of the current energy shock with a potential currency shock. This combination would be highly problematic.

Since Israel and the United States initiated attacks on Iran less than a month ago, oil and gas prices have surged by over 70%, as around one‑fifth of the world’s crude oil and liquefied natural gas supply is now obstructed in the Persian Gulf. Russia cannot serve as an alternative supplier, due to the EU’s intentional efforts to lessen reliance on Russian gas  – a milestone the EU has publicly celebrated. Reversing this policy is not feasible, particularly given the ongoing need to support Ukraine. Recent informal EU energy discussions have reportedly examined the necessity for state aid and greater investment in renewables or nuclear energy. It now appears that nuclear energy is being considered as the next step in the EU Commission’s strategy to strengthen energy security.

Malta’s political parties should consider the recommendations of the IEA and the EU Commission. Indeed, the Maltese government, along with the public sector should implement a teleworking schedule. Specifically, they should enable remote work and reinstate teleworking at pandemic levels, as I have previously advocated, to reduce CO2 emissions and ease traffic congestion. Nevertheless, policy in Malta is slow to implement, and by the time these measures are enacted, the Persian Gulf crisis may have subsided. Yet the global structural vulnerabilities will remain, and Malta cannot afford to ignore them.

The post If it is not Russian gas, it is the crisis in the Persian Gulf first appeared on The Malta Business Weekly.

To understand this, consider how, during periods of rapid economic growth, benefits are felt across all groups. Yet those at the upper end of the income percentiles typically do best compared to lower- and middle-income earners. I explained this in my preceding articles tackling the K‑Shaped economy. Top earners have more opportunities to benefit from economic expansion, often possessing dormant capital and better liquidity to invest. To illustrate, let’s look at what happened over the past decade in Malta.

For instance, those who owned land that could be developed, much of it included in the 2006 rationalisation under a Nationalist government, saw an opportunity in 2013 to develop and earn money. The push was for development because the country needed investment to boost the economy. This helped landowners increase their income and generate more wealth by developing, building, and selling or renting their properties. This situation has a cascading effect, or what economists call a multiplier effect. Additional foreign direct investment increased GDP and helped sustain such developments. Over the past decade, the increase in foreign workers has further boosted rental income for many, who are using it as an additional pension for those now retired.

At the same time, digitalisation changed the way we live, especially in flight and hotel bookings. Many took advantage of increased tourism and invested in properties to rent, using platforms like Airbnb and Booking.com. They are earning a good income, even though it comes with additional infrastructural costs. Still, it remains a good business for many, and over the past decade, people have managed to invest and earn money. I mention property because it is topical, and when things get bad, especially during global inflation shocks, the property market is highly affected as prices rise again. When the economy struggles, and inflation hits hard, the lower- and middle-income percentiles are hit the hardest. The higher income percentiles hedge for future risks and have additional income from rents or interest on other investments. The impact is cushioned more smoothly, and those at the upper income percentiles can weather the storm better than the rest of the population.

Given these realities, my point is that, considering what is happening now, neither the government nor the Opposition can promise much to the electorate, since the priority is to cushion the impact of energy prices and maintain current tax cuts. However, the PL government – particularly under Dr Abela – has greater credibility, having managed three unprecedented events with minimal negative impact on our economy, without increasing taxes or adding a fuel surcharge, unlike in 2009.

Malta’s economy has tripled in growth since 2013, and the PL has enough fiscal space to navigate what lies ahead. However, promising the impossible is not credible, and even Prime Minister Robert Abela knows this from experience. For instance, when we talk about lowering VAT to 7%, we need to examine the industry’s structural problems first. This is not about keeping 11% of the difference between 18% and 7% as liquidity to invest in training and retraining. I understand the industry needs some breathing space because liquidity may have been hit, just as consumers’ liquidity was hit by inflation. We were all affected. However, we need to be careful and first examine structural costs unrelated to the VAT rate, including BCRS, waste management, and rental costs.

When considering these proposals, it’s important to understand that the industry is characterised by monopolistic competition. This market structure drives improvements in products and services. Competition breeds healthier products, and whatever the impact of the VAT reduction, it is competition that has improved our restaurants’ products under a VAT rate of 18%, which was introduced by a Nationalist administration. Restaurateurs and caterers are hardworking, and this is evident in the products they offer to consumers. My understanding is that the VAT decrease will not lower prices, so in the end, consumers will not benefit. As I reiterated in my previous article, the difference is intended to be invested in other areas. However, these areas must not be overlooked, as training and other costs have increased over time, indicating that the root of the problem lies in other unrelated costs, not the VAT rate.

With the general election approaching, we will see many hawkish proposals. We must pay attention to detail and not overlook what is being promised. If it is possible to lower VAT to 7% – if the European Commission allows it – and consumers ultimately benefit, then so be it. But the money lost from the VAT reduction is an opportunity cost of funds that could be invested elsewhere, including energy subsidies to maintain economic stability. Normally, if there are too many restaurants, the market adjusts itself. The invisible hand of Adam Smith takes over, profits balance out, and the least cost-effective go out of business. The struggle in the catering sector to work harder for better earnings is not only about reducing VAT rates but also about keeping costs low, as I outlined in my article last November. Sadly, the political class in this country lacks economists at the helm.

When you look at our Parliament, aside from a few parliamentarians, I am not sure whether the problem is chronic or acute. However, we need experienced economists and financiers in Parliament to have proper discussions. When Clyde Caruana and Silvio Schembri speak about finances and the economy, you can tell they are competent. There are others from the Opposition benches, but their performance is sometimes poor because, even if the arguments are good, their technicalities lack the depth of intellect seen in government. I appreciate these discussions, but they must be informed and supported by proper economics. What we need are not just a few numbers thrown at the electorate’s face to win an argument but economically backed arguments that most of us can process, digest, and decide on when the time comes.

This article was inspired by loyalty. Loyalty to colleagues and the electorate is essential in a democracy. People are tired of populist promises. Voters want truth, bold decisions for Malta, and consistent integrity. Sadly, many see politics as a celebrity show. I believe competence will guide voter choices in the next election. And this is why I chose the title. Because, in truth, when global economic shocks affect our economies, they do not align with the local political narrative!

The post When global economic shocks do not meet local political narratives! first appeared on The Malta Business Weekly.

As things evolve, the conflict is likely to topple a regime, which in turn could further signal global economic disruption. I have no sympathy with the regime’s modus operandi, and it is indeed a ruthless regime. However, these potential global and regional instabilities were visible from the outset, suggesting that early signs can predict wider impacts. Iran occupies a strategically significant geographic position due to its proximity to key neighbours and control over the Strait of Hormuz. Because of this, any military action against Iran would have likely escalated into a broader regional conflict. Surely, recent developments have shown Iran engaging in hostilities with several neighbouring states and threatening retaliation in more distant countries, potentially through covert means.

Since the Strait of Hormuz is critical for global commerce, instability – already in question when the Houthis in Yemen targeted merchant vessels a few years back – directly impacts energy suppliers and indirectly financial markets due to the war sentiment. The prospect of a regional conflict, along with threats to close the Strait, is generating considerable concern among these markets. Surely, this concern prompted action, and the G7 sought authorisation to release 400 million barrels of oil reserves to ease pressure on prices. Additionally, the United States has taken measures to alleviate supply constraints resulting from sanctions on Russia. The Strait of Hormuz is quite important for the shipping of oil, LPG, LNG, and fertilisers needed to grow crops for several countries. Russia and Belarus hold a good market share of the latter. With the West at loggerheads with Russia, Belarus and Iran, it shows how vulnerable the world is in cooperating with each other.

In my view, there is going to be a trade-shifting pattern, exactly or perhaps the equivalent of what happened when the EU weaned or tried to wean itself off Russia, LNG and other commodities from its export market. If the Strait of Hormuz stays closed, irrespective of what the Iranians are saying, that it is closed only for the USA and Israel, it is going to send the world into another global energy shock. The Strait of Hormuz is unstable, and paramilitary or militias can continue to attack merchant vessels without Iran being directly involved. Such proxies are visible in the region. We already witnessed this with the Houthis in Yemen. Only the presence of a Western military can ensure the Strait of Hormuz’s safety, which is why the Trump administration is calling on NATO allies to aid and provide military assets.

Indeed, insurance risk premia rose, with some insurers not even insuring commercial commodities, which is detrimental to their shipment. The increase in prices is compounded by rising energy prices, squeezing consumers. Iran knows that further economic instability exerts pressure on Western economies due to oil price hikes. The double pinch of inflation is going to be bad, after two preceding supply chain and energy shocks as a result of the COVID19 pandemic and the invasion of Ukraine. Sincerely, the prolongation of this war will wreak havoc on many Western economies. The impact is imminent, not distant, because prolonged conflict disrupts supply chains and market confidence.

This situation mirrors 2022, when Russia invaded Ukraine. In my view, the start of this war was a little mishandled. Flawed military calculations led to decisions that had far-reaching economic consequences. This military miscalculation is the equivalent of that economic miscalculation under the Biden administration, which assumed only limited inflation would result from involvement in Ukraine. History demonstrated otherwise and the conflict caused a massive global energy shock and astronomical inflation in Europe, with lasting effects – particularly in housing and property markets – that are still being felt. Higher raw material and energy costs, as a direct result of shifting trade patterns, created feedback loops across markets, especially the property market. The shocks were amplified, and the impact affected several first-time and single buyers.

Besides, many actors are at play in this war. We have the USA and Israel attacking Iran. Israel is attacking Lebanon to eliminate Hezbollah. Iran is attacking all its surrounding neighbours, including Bahrain, the UAE, Oman, Saudi Arabia and Kuwait, thereby disrupting their economies. Besides, Iran is threatening to push for further instability, while the EU is completely absent. I understand the EU’s worries about not getting involved in the regional war. However, it’s going to cost the EU further in the coming months, not because they didn’t involve themselves, but because the European economy is economically exposed. Besides, the EU is highly dependent on NATO for its security. The security architecture of the EU is highly dependent on the transatlantic relations. And President Trump is already sending strong messages to those who are not supporting him in this war.

Certainly, the EU must continue to maintain its diplomatic position with Iran, as its credibility makes it well-placed to help resolve the crisis. Disappointingly, the EU has not even positioned itself as a diplomatic actor in this conflict, which limits options for de-escalation. They kept themselves distant. To make matters worse, recently, the President of the European Commission stated that we cannot rely on the global rules-based order any longer. Well, such statements weaken the foundation of democracy and undermine the purpose of a treaty-based order. When leaders express scepticism during turbulent times, it encourages instability rather than providing reassurance. In summary, von der Leyen’s endorsement of instability during chaos does not bode well for the EU or its democracies. Definitely, I understand her Chef de Cabinet’s script, because ultimately, he studied at the Fletcher School of Law and Diplomacy at Tufts University in the USA. However, the script for such media appearances must not fall into the hands of Bjorn Seibert. Au contraire, her Chef de Cabinet must stay a little removed, both as a penholder of her scripts or narrative, and as a decision-maker at this point in time. And the EU must talk to the Trump Administration to de-escalate.

Alas, current developments indicate that the conflict is expanding beyond a regional scope. The EU’s active engagement as a global diplomatic actor would contribute significantly to de-escalation and stability. It would be beneficial for leaders such as Ursula von der Leyen and HRVP Kaja Kallas to collaborate in formulating a unified and effective response. Hitherto, their efforts have not met expectations, and the European Council has been reduced to a spectator rather than a diplomatic leader.

The post If a day is long in politics, two weeks are an eternity! first appeared on The Malta Business Weekly.

The Iranian regime has maintained power since 1979, following the overthrow of the Shah during the Iranian Revolution. Since then, Iran has contributed to regional unrest through its support of proxy groups targeting Israel and neighbouring states. In Lebanon, Iran established and supported Hezbollah, in Gaza, it has funded and aided Hamas, in Yemen, it has backed the Houthis, and in Iraq, it supports several organisations. Iranian Shahed drones have also been deployed in Ukraine, where Russia has used them to target civilian infrastructure since the onset of the conflict. Approximately 60,000 of these inexpensive drones, often referred to as the AK-47 of the skies, have been used in Ukraine. Consequently, President Zelensky has offered to share expertise on countering these drones with Middle Eastern countries, given Ukraine’s extensive experience in this area.

If the regime’s actions were limited to Iran’s own affairs, the world might pay less attention. Most Iranians are Shia, and Iran leads what is known as the Shia Axis, which is organised under a clerical system where the Imam is seen as the main interpreter of divine will. This system includes Ayatollahs and Grand Ayatollahs, like the Supreme Leader, who was recently killed in a targeted attack. Soon after, the new interim Supreme Leader, Ayatollah Arafi, was reportedly killed – although still unverified – in another airstrike just hours after taking the position. On the military side, Chief of Army Staff General Abdulrahim Mousavi and IRGC Ground Forces Commander Mohammad Pakpour, a key figure in Iran’s military strategy, were also reportedly killed. Other high-ranking officials were eliminated as well, including Defence Minister Aziz Nasirzadeh, former Supreme National Security Council head Ali Shamkhani, Saleh Asadi (head of the Intelligence Directorate of Khatam al-Anbiya emergency command), Mohammad Shirazi (head of the Military Bureau of the Supreme Leader since 1989), Hossein Jabal Amelian (chair of advanced weapons programmes), and Reza Mozaffari-Nia (former head of the same weapons programme).

Beyond the individuals and internal hierarchy, it is necessary to examine the tension between legal norms and perceived legitimacy in these events. Article 2(4) of the United Nations Charter requires member states to refrain from the threat or use of force against the territorial integrity or political independence of any state, except in cases of self-defence or with Security Council authorisation. Legally, the attack on Iran lacked explicit authorisation and is therefore considered illegal. Nevertheless, proponents of intervention sometimes cite the Responsibility to Protect doctrine, which advocates for international action when governments perpetrate grave abuses against their populations. Although not codified in binding law, this principle has influenced debates regarding “just cause” versus legal prohibition. This circumstance poses a critical question. Should legality always take precedence over legitimacy, or can breaching the law be justified to prevent greater harm? However, it is important to consider the consequences of such reasoning.

This operation represents one of the most significant setbacks for the Iranian regime. The United States and Israel have indicated that the conflict may be prolonged. In response, Iran launched missile and drone attacks against Arab states aligned with the United States, including the UAE, Kuwait, Iraq, Jordan, Bahrain, Qatar, Saudi Arabia, Oman, and Israel. Iran also targeted British military bases in Cyprus, asserting that these bases supported US logistics. The Strait of Hormuz, a critical maritime chokepoint between Iran and Oman, has reportedly been closed. This strait is vital for global energy transit, with approximately 20% of the world’s seaborne crude oil and 25% of global liquified natural gas passing through it, primarily from Qatar. Oil exports from Saudi Arabia, Iraq, Kuwait, the UAE, Qatar, and Iran rely on this corridor. The closure or restriction of the Strait of Hormuz has immediate global repercussions, including energy price spikes and supply disruptions. Energy prices have already increased, and the duration of this circumstance remains uncertain. It is plausible that the resulting economic impact may rival that of the Russia-Ukraine conflict four years ago. This scenario constitutes significant challenges for the European economy, which remains highly dependent on external energy sources. Having diminished reliance on Russian gas, the European Union is now dependent on alternative suppliers and faces considerable vulnerability.

Also, if the Strait of Hormuz remains closed, China, as the world’s largest energy importer, will be significantly affected. China relies on the Strait for approximately 40 to 50% of its oil imports from Gulf states such as Saudi Arabia, Kuwait, Iraq, and Iran. Nearly all Gulf oil exports transit through this chokepoint, so its closure would jeopardise China’s energy security. In response, Beijing could pursue an urgent diplomatic initiative by dispatching envoys to Gulf capitals to advocate for restraint and a negotiated reopening. Alternatively, China might propose international naval escorts for energy tankers, though this approach could give rise to complex interactions with regional navies. A third option is to draw on China’s strategic petroleum reserves to resolve immediate shortages, but this would only deliver temporary relief. Each of these strategies highlights China’s dependence on stable maritime routes. Most countries would likely seek assistance from the United States to increase oil and gas supplies. The European Union is particularly vulnerable, having shifted away from Russian gas and now relying on alternative suppliers.

The EU’s previous diplomatic initiative, notably through the Joint Comprehensive Plan of Action (JCPOA) negotiated with the Obama Administration, established its credibility as a diplomatic bloc. However, current EU leadership appears largely absent from the crisis, prompting doubts about its capacity to respond effectively. Indeed, President von der Leyen seems to have gone AWOL. It remains to be seen whether this operation was genuinely intended to liberate Iranians from an oppressive regime. The central question is a moral one. Under international law, the operation is illegal because it lacks a United Nations Security Council mandate. However, if the intervention was aimed to free Iranians from a government responsible for violent repression, it is for the people to determine whether such action is justified.

Before reaching a conclusion, each of us must consider whether we would support an unlawful strike if it promised to end violent repression. Is it ever justified to violate international law to save lives, or does this approach risk greater harm? I encourage readers to reflect on these dilemmas. If the removal of the regime ultimately brings stability to the region, some may argue that Western intervention deserves recognition.

The post The fine line between legal prohibition and moral justification first appeared on The Malta Business Weekly.

Against the backdrop of the EU’s push for sustainability, we cannot expect that technology, on its own, will solve the traffic problem when applied to road network upgrades and flyover construction. It will help us, but it won’t solve all the problems. I reiterate that the road network upgrades were desperately needed. Prior to the PL taking over the administration of the country, our road network was in a real dilapidated state. I still remember the Santa Venera tunnels wrapped in Perspex to redirect water dripping out. In 2017, the upgrades started, and I can tell you that they were desperately needed. Surely, we need to have such upgrades and complement them with a continuous process of behavioural and institutional adjustments. This never happened since the 1990s. Change does not happen overnight, especially when it comes to changing the behaviour of using our vehicles. We would have been better off had we started this in the 1990s. However, there were other priorities back then, including our application to join the EU, and GDP was low.

The Jevons Paradox describes how, in economic theory, increasing efficiency – such as upgrading road networks – ultimately raises demand rather than lowering it. If we build a new road, it is only to be used. And more vehicles will use it. In the long run, the improved efficiency attracts more users, leading to heavier traffic and bottlenecks. Short-term benefits from these upgrades are quickly eroded, as rising demand offsets the initial gains, a phenomenon known as the rebound effect. I analysed this back in October 2024 in this weekly column, termed “The Jevons Paradox and the traffic problem”. Even mass transportation improvements face the same pattern. Increased efficiency boosts demand, reducing marginal benefits over time, especially if we give everything away or do not apply price discrimination as we do with the bus transportation system. It is simple economics.

It can be difficult to measure how efficiency improvements compare with changes in demand because of varying assumptions. Nevertheless, the Jevons Paradox is evident both locally and in the EU. If traffic persists after network upgrades, it’s because demand outpaces efficiency gains. It was always clear that Malta’s road upgrades would only offer short-term relief, especially in the south. In the long-term, sustained investment in alternative transport and a shift in user behaviour are vital. Currently, we often drive even for short errand trips. And this is where the problem lies.

It is irrelevant to propose a mass transport system if we do not change our behaviour. True, the Opposition might have engineers working on a quick-fix solution. Or perhaps a short-term solution for the 2027 election campaign, but the reality is different. Although the discussion is welcome, placing this issue high on the national agenda is not equivalent to the PL’s proposal to reduce utility bills or shift from Heavy Fuel Oil to Liquefied Natural Gas. In my honest opinion, the Nationalist Party cannot make this its main campaign promise because as much as time wasted in traffic is measured in money, in tangible terms people do not feel its direct effect, that is, the pinch in their pockets, as much as when they used to receive a utility bill. The bimonthly surcharge differing from one bill to another forced households to cut back on electricity use and rush to fuel stations simply to make ends meet by the end of the month.

From my experience in politics, whether direct or indirect, people do not change a government because of traffic, as they know the problem won’t be solved immediately. If that were the case, the PN wouldn’t have survived 25 years in government, because traffic has been around that long, coupled with a poor infrastructure system. And please, this requires a bipartisan agreement to start thinking differently, also for the next 25 years. This mass transportation system must complement the Malta Vision 2050. We cannot keep taking the electorate for a ride. The Opposition and government must sit down with maturity and talk to each other civilly about such problems. We need to tackle them as a country, not as individual political parties. Can’t you all realise that people have had enough of petty politics?

A complete behavioural shift toward mass transportation will not happen quickly. My idea of using the sea as a transport corridor for the urbanised eastern coast offers an alternative, and EU support may be available. However, successful implementation demands infrastructure investment and policies that motivate people to shift from private vehicles. And let’s be honest: who are those politicians, on either side, truly prepared to risk political suicide without a bipartisan agreement, so that voters know exactly what they are getting if they choose the PN or the PL? Politics should prioritise public service, not short-term image.

In summary, I support developing a mass transportation system, but real progress requires realistic timelines, cost transparency, and honest discussion of challenges. While a Manchester overground-style system could work if connected to the sea, technology or infrastructure upgrades alone won’t solve traffic. The key takeaway is that lasting solutions depend on behavioural change and a bipartisan, long-term approach, not just quick fixes on the eve of a general election.

The post Revisiting the traffic problem once again first appeared on The Malta Business Weekly.

Reflecting on those days, I realise many Maltese likely share nostalgia for childhood haunts. Long, carefree summer days outside, chatting to neighbours, or seasonal smells and sounds, unite us all. For many, technology was absent, except for the Commodore 64 and, later, the Amiga, which were mostly used for games. Certainly, the old buses seemed to have been built before our parents were born. Well, almost everyone has stories about summers at the sea, bumpy bus rides to the coast, and finding adventure. In our conversation, we recalled the summers spent in Marsaskala. Catching bus number 22 and walking to St Thomas Bay was always a highlight. Back then, both Marsaskala and the St Thomas Bay areas were still pristine. We remember rows of fields and sometimes trespassing just to grab a melon. That was risky, but we were just carefree teenagers. Later, we spent evenings till nine o’clock either at Cool Club, Yogis, X‑Generation, or Osiris clubs. It was just listening to the music of those days. We were never allowed in the Reeds Club, which was for older teenagers.

These memories sparked a deep nostalgia, but also a realisation. Our simple lives in Malta and Cottonera were shaped by both fond community ties and real hardship. We had no luxuries and little income, yet the warmth of neighbourhood bonds contrasted with our economic struggles. The stigma Bormla faced after the second world war only added to our disadvantages. We lived without modern comforts, barely making ends meet, and this difficult reality underpins the true meaning of nostalgia. Today, we complain about everything and hardly want to make any sacrifices or appreciate what we’ve achieved. I remember catching two buses to Sliema for a job as a night auditor when I was just 17. And, coupled with 12 hours of work, was my duty to care for my grandparents and to cope with my studies. Today, we have the luxury of choosing and changing jobs. I remember the early 1990s, when children’s allowances became means‑tested, and the rise in prices when the property market was liberalised. I do not blame the younger generation today for not knowing what life was like. True, it is hard to afford certain properties today. In truth, it’s always been the case. However, that is the model we built once it was liberalised. Alas, there was no aid in my time either, no government grants, no stamp duty waivers, and no help with VAT reimbursements on finishes.

The way we built apartments and some urbanised areas in Malta shows how we think as a nation. This brings us to the issue of partisan politics, which must stop. For example, the Nationalist Party cannot blame the Partit Laburista in government for property prices. In reality, it is the way we shaped our economy over the past four decades. While in government, they did nothing to stop property prices from rising astronomically, especially before Malta joined the EU between 2002 and 2004. And they cannot do it. Although I am one of those who advocate for affordable housing, I do not blame the problem on the current administration, as it has been long in the making. It is true that the past two economic shocks amplified, further increasing prices and perhaps landing us in a new state. And I wrote extensively about it in my articles, a K-Shaped economy.

Certainly, I advocated for solutions to aid the younger generation and to build additional affordable housing units. However, politicians on the other side of the bench cannot blame the property industry either. Some politicians on the opposite benches seem to simplify things and blame everything on the current administration just to score a little brownie point with the electorate. In fact, those working in property see it as a profession, with many agents working in this area and several others earning their income. It is their bread and butter, and we cannot blame anyone or politicise the industry. We must find the right balance as a country. The current PL administration improved pensions, supported young people buying property with the €10,000 grant, and introduced numerous social benefits, including a carer’s grant, in‑work benefits, and free childcare. The full list is extensive.

Nostalgia is natural, but it is important to remember what was lacking in the past compared to today. Still, some past values should be preserved. The strong sense of community, neighbours supporting each other, and the joy of time spent with family enriched our lives. Though life was harder, shared bonds and a sense of belonging made a difference. Incorporating these connections and communal spirit into today’s fast‑paced world would benefit society. However, even as we value these past lessons, we must ask ourselves a hard question. The question is whether we are ready to return to a life with less income and services. Are we ready to give up our cars to less traffic, our holidays abroad, our mobile phone contracts to be freer, our internet to stop contact with the rest of the world, and many other things to return to a simpler life? Are we ready to reduce our GDP, shrink the economy, and give up many of our social benefits, including the energy subsidies? Are we ready to accept higher energy bills and higher childcare costs? Or are we ready to give up on many other benefits that nobody dreamt of in 2013? I believe the answer is no.

According to reading polls (Eurobarometer), the majority want to keep earning money, enjoy life, benefit from lower taxes, and live better. Surely, we are better off in terms of income and benefits. However, if we grow nostalgic about the past, we must also accept that we lived deprived of many things that make our lives easier. This is the question many need to ask when they go to the ballot box in a few months’ time. Are we better off or worse off? Looking at both the progress made and the lessons of the past decade, I believe that the current administration and Prime Minister Abela deserve another chance.

The post The true meaning of nostalgia first appeared on The Malta Business Weekly.

However, strong macroeconomic performance does not automatically translate into equitable outcomes, and this is where the story becomes more complex. Despite strong headline economic indicators, certain segments of society remain unable to purchase property. Aggregate data often masks the specific challenges individuals face. As I noted in a recent article, first-time buyers, as well as divorced and single individuals, are struggling to find affordable options within their budgets. And struggling not just financially but also to find suitable properties, in terms of space and quality. While statistical data is valuable for monitoring trends, it is necessary to examine the underlying causes of these structural challenges. Interpreting data requires sound economic judgment. I have learned this from Thomas Piketty’s book Capital in the Twenty‑First Century. Certainly, multiple factors contribute to these persistent structural deficiencies. Indeed, economic growth benefits many, but those who own financial assets and real estate tend to benefit disproportionately. Although these individuals have assumed greater financial risk and paid higher interest and capital costs, it is also evident that digitalisation has fundamentally altered economic dynamics and exacerbated disparities.

Well, the impact of technological advancement is evident across various aspects of daily life. For instance, technology has transformed the way we book holidays, satisfy our needs instantly, and maximise profits and make purchases. Previously, travellers chose traditional hotels, but now platforms such as Booking.com and Airbnb offer a wide range of holiday apartments. Similarly, booking flights has shifted from travel agents to direct online reservations with low-cost airlines like Ryanair, facilitating affordable travel for both residents and inbound tourists. As a result of digitalisation, increased airline competition, and simplified travel, tourism has grown significantly. I am encouraged to see individuals purchasing and refurbishing properties, notably in Urban Conservation Areas (UCA), to offer as holiday apartments. This strategy preserves cultural heritage by generating income. We are hitting two birds with one stone. And I certainly want to see additional investments in preserving our cultural heritage. Surely, with the rapid development of artificial intelligence, further progress is anticipated in the creation of additional tourism and hospitality sectors. However, some segments are being pushed out of the housing market.

This divergence between opportunity and exclusion is visible at the community level. This underscores why aggregate data fails to reflect the lived experiences of all residents. The effects of these changes are evident in my own community of Cottonera, namely in Bormla, where I have observed palaces and historic houses being purchased and renovated as holiday apartments. In Malta, if we align ourselves with economists who believe in rational expectations, we can deduce that the property market is following such a trajectory. However, some reject the notion of rational expectations and argue that they are driven by psychology rather than optimisation. In fact, Keynes coined the term “animal spirits” to refer to the psychological drivers of confidence, fear, optimism, and herd behaviour. Keynes argued that investors follow sentiment, while consumers follow confidence, with the markets following waves of optimism and pessimism.

In reality, Maltese behaviour is reflecting a blend of both frameworks. Maltese households and investors are anticipating that tourism will continue to perform strongly. They are fully aware that the tax regime for rental income remains efficient and predictable. As a result, many are purchasing and renovating additional properties for holiday accommodation. They are acting today based on the returns they expect to earn in the future, driven primarily by sentiment and confidence. Yet property dynamics are not driven solely by tourism. Besides increased tourism, demand from economic migrants have also contributed to rising property prices. While economic growth is a factor, it is not the sole driver of higher rents and prices. Although Malta’s property prices have increased in recent years, they have often remained below the European Union average, and aggregate statistics do not reflect those who continue to face difficulties in purchasing property. In response, I have advocated for the regulation of temping agencies, and the introduction of a skills’ pass to moderate labour inflows and better assess Malta’s workforce requirements. There is a need to transition from labour-intensive sectors to higher-productivity industries and to plan workforce development accordingly. The International Monetary Fund has also highlighted that labour-intensive sectors are nearing saturation and that Malta must diversify. While Malta Vision 2050 outlines long-term goals for new industries, immediate and medium-term measures are also necessary.

Labour market pressures are just one structural challenge. Regulatory measures have improved management of worker inflows and skill requirements, but further progress is needed as labour shortages still constrain growth. It is imperative to transition to higher-productivity sectors. For example, the government should probe why machinery remains idle and road projects are delayed, reducing productivity and quality of life. Residents are affected by inefficiencies, inconvenience, and increased dust. A flyover can be built in under 11 months, so it is unreasonable for basic roads to take as long. Given these challenges in productivity and labour market efficiency, infrastructure efficiency must be treated as an economic priority, not an afterthought. To address these challenges, infrastructure projects must be expedited and completed within a defined timeframe. Prolonged delays often result from inadequate coordination among entities responsible for utilities or from contractors being overextended. Such inefficiencies lead to unproductive investments that displace more productive initiatives. Projects should only commence if they can be completed efficiently. Additionally, investment in renewable energy must be accelerated, moving away from perpetuating reliance on subsidies toward more productive, future-oriented investments. This issue requires serious attention in the medium-term.

In conclusion, upgrading the skills of permanent residents must be prioritised to ensure Malta’s continued progress and shared prosperity. Addressing skill mismatches will enable us to maximise the benefits of economic growth, strengthen our workforce, and create a more inclusive future. As the IMF’s report highlights, these steps are crucial for meeting Malta’s long-term ambitions. Now is the time for decisive action to secure sustainable growth that benefits all segments of society.

The post Aggregate data doesn’t really tell the full story! first appeared on The Malta Business Weekly.

Certainly, when global powers are in conflict, small states must act with caution, deliberation, and strategic calculation. However, the context is significant, as the European Council discussion was not merely about random diplomacy but specifically concerned Malta’s stance on Greenland. From a geopolitical perspective, Malta must retain its neutral, non-military-aligned status while aligning with the European Union’s positions, particularly on NATO and European security. Well, Malta is not a member of NATO. Furthermore, there have been instances where Malta did not support the EU’s stance on military missions, such as Operation Irini, nor did it participate in PESCO projects. I recall these issues distinctly, having served on the Political and Security Committee in Brussels, where I directly observed the decision-making process.

I also remember the 2020 discussion about the peace plan for Palestine. However, the Quartet was still alive and brought some recalibration. Now it is completely dead. That was the last format under international law to have a mandate to accompany the Two-State Solution process. Given that Russia was part of the Quartet, after the invasion of Ukraine, we can conclude that it is officially dead. Back in 2020, I saw how Palestine was split and what conditions were proposed to achieve peace, including the idea that Palestine would only have civilian police while its security would be handled by Israel. Even the Jordan Valley, was annexed. Jared Kushner led the process and is also currently on the Board of Peace. Surely, I agree with the concept of such a board under the auspices of the UNSC.

However, we need to see the governance of the new Board of Peace, as it currently lacks diplomatic depth. What needs improvement is the governance structure, transparency around the proposed fees, and clarity about the board’s actual purpose. If Malta were offered a place at the table, then, as a country that has recognised Palestine as a state, the best outcome would be to influence decisions. We can change outcomes. This should not be taken lightly. We were the ones who achieved a partial ceasefire agreement, or a de‑escalation, when we presided over the UNSC seat. That was not a coincidence. It was the result of diplomatic skill, credibility, and the ability to speak to all sides.

We must also remember that the United Nations is effectively paralysed because the structure allows it. The permanent members of the UNSC have different political interests and, even when they block each other on unrelated matters, are incentivised to use their veto. This is the system’s structural flaw. What we lack today is pragmatism. The European Union is also paralysed. We saw fanfare when Israel was attacked by Hamas, with the President of the European Commission, Ursula von der Leyen, visiting and effectively blessing what followed. There seems to be a lot happening behind the scenes to keep up with the Trump administration’s approach. Ursula von der Leyen seems out of breath.

This is where strategy, diplomacy, and game theory intersect. When we study game theory as economists, we also study strategy. The first‑mover strategy and knowledge are important. Equally important is the Nash equilibrium, the point where each player’s strategy is the best response to others. In diplomacy, this means no country can unilaterally improve its position without triggering a counter‑reaction. Small states like Malta must understand this deeply. If the United States offers a seat at the table and the EU struggles to articulate a coherent position, Malta must calculate its moves. A seat at the table is not a gift. It is an opportunity to shape outcomes. Though guiding outcomes requires credibility, consistency, and the competence to navigate between competing powers without losing accordance with our European commitments.

Malta’s neutrality is often misunderstood. Neutrality does not mean silence or absence. It means strategic independence within a framework of alliances and partnerships. We are neutral, but we are also EU members. We are not NATO members, but we benefit from NATO’s security umbrella through our EU membership. We do not participate in PESCO projects, but we cannot pretend that European security does not affect us. We also cannot ignore that the EU’s diplomatic posture has weakened significantly. The paralysis in Brussels is visible. The fragmentation in the Council is real. The Commission’s leadership has struggled to preserve coherence amid worldwide crises. And I can tell you, because I sat in the meetings in Council, that there aren’t more than 10 member states that believe in the Palestinian cause.

This is why Malta must approach the Peace Board with seriousness. If we have a seat, we must use it effectively to promote Malta’s values and strategic aims. We should steer outcomes through engaging with other members and bringing an equitable perspective. Our credible track record, shown during our UNSC presidency, is an asset we should leverage. At the same time, we must insist on clear governance, transparent fee structures, and clarity about the board’s purpose and direction before fully committing. Our actions should strengthen our credibility and align with our diplomatic goals, not diminish them. Alas, the UN is paralysed, and the EU’s current leadership is struggling. The United States is recalibrating, or better, revising its foreign policy.

And Malta, small as it is, must manage this landscape with intelligence, memory, and tactical foresight. We have done it before, so I do not see why we cannot do it again. But only if we recognise that diplomacy is not a show but a strategy and ignore those with no experience at the international level. Indeed, empty vessels make the most sound!

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