Malta has built a reputation as a financial services hub, with fintech becoming an increasingly important niche within its economy. From payments and electronic money to digital assets and other technology-enabled financial services, the sector has evolved considerably in recent years. With EU regulation becoming ever more harmonised, Malta has an opportunity to position itself as a launchpad from which fintech businesses can build and scale their operations across the European Union. That opportunity, however, should not be confused with simply attracting more potential licences. A licence may provide access to a market, but it does not, by itself, create a successful business.

The opportunity is bigger than Malta

For a global fintech, Malta’s domestic market, although gradually growing and attracting large players, is unlikely to be the primary attraction. The more advantageous prospect lies in utilising Malta as a base from which to access the wider European market by virtue of the harmonisation of financial services regulation across the EU. For certain regulated activities, this can allow authorised entities to provide services across Member States through passporting mechanisms, without necessarily establishing a separate regulated entity in each jurisdiction. The practical ability to expand, however, remains dependent on the applicable regulatory framework and the nature of the services being provided.

The evolution of EU regulation is also illustrated by the introduction of the Markets in Crypto-Assets Regulation (“MiCA”), which has established a harmonised framework for crypto-asset service providers across the EU. For businesses operating in this sector, the regulatory landscape has therefore shifted from a collection of national approaches towards a more integrated structure. Malta’s early experience in digital assets gives it an opportunity to build on the expertise and ecosystem developed over recent years, provided that this experience can be translated into a broader proposition for businesses seeking to establish and scale in Europe.

Applicants, however, should not assume a frictionless route into the European market. Regulation may be increasingly harmonised, but European markets remain commercially diverse. Customer expectations, payment preferences, languages, competitive environments and established financial infrastructure can differ significantly from one Member State to another. For Malta, this creates an opportunity to offer something more valuable than simply a jurisdiction in which to obtain a licence: a credible European base from which businesses can build, operate and scale across multiple markets.

In practice, Malta’s approach to financial services has also increasingly placed emphasis on quality over quantity. The strength of the businesses establishing themselves here should therefore matter more than simply the number of licences granted. Factors such as local substance, financial backing, the potential of a product to contribute to or disrupt the market, and an applicant’s regulatory track record are important considerations in determining whether a business can genuinely add value to Malta’s ecosystem.

For a business intending to use Malta as its European base, the question of substance is an important consideration. Establishing a Maltese entity does not mean that the business has established a meaningful operation in Malta. The location of decision-making, senior management and key control functions, together with the resources supporting them, can be important in determining whether the structure reflects genuine local substance.

Building beyond the licence

Obtaining a licence should not be viewed as a standalone regulatory exercise. The authorisation process itself requires a business to demonstrate that it has the foundations necessary to operate effectively and sustainably. A fintech seeking to establish itself in Malta needs to consider matters such as local substance, governance, financial resources, compliance and risk management arrangements, technology and operational infrastructure, and the oversight of outsourced functions. These factors form part of the regulatory assessment of whether the proposed business has a sustainable operating model, supported by adequate resources, expertise and clearly defined responsibilities. These considerations do not end with the granting of a licence. A regulated business must be able to maintain the substance, governance and operational capabilities that underpin its authorisation as the business develops. This becomes even more significant where Malta is intended to serve as a base for expansion into other European markets.

The operating model may also involve outsourcing certain functions to third-party providers. This can allow a fintech to access specialist expertise or technology without building every function in-house, but it does not remove the need for the business to retain appropriate oversight and control. Outsourcing the performance of a function does not necessarily transfer responsibility for that function away from the regulated entity.

This is where the distinction between obtaining regulatory access and building a sustainable European business becomes important. A regulatory framework may provide the means to access other markets, but the underlying business still needs the people, systems, capital and governance to support that expansion. The licence, in this context, should be viewed not as the end-product, but as the foundation of the business’s operating platform.

Malta’s challenge

Malta has several characteristics that can make it attractive to an international fintech considering an EU base. Its membership of the European Union, English-speaking environment, established financial services industry and relatively concentrated ecosystem of professional and regulatory expertise provide a foundation on which businesses can build. Malta has also developed experience across payments, electronic money and digital assets, creating an ecosystem that can be particularly relevant to businesses operating at the intersection of technology and financial services.

However, fintech is an increasingly competitive sector, and Malta is competing with other established European financial centres for businesses, investment and talent. A credible regulatory framework is therefore only one part of the proposition. Businesses also need access to specialised employees, reliable infrastructure, banking and financial services, professional expertise and an environment in which they can scale.

Malta’s objective should not be to attract every business seeking an EU licence, but to create an environment in which high-quality businesses have a genuine reason to establish and grow here. Doing so requires continued investment in the wider ecosystem and close cooperation between regulators, government and industry.

Malta does not need to become Europe’s largest financial centre to succeed in fintech. Its opportunity lies in becoming a particularly attractive home for the right businesses: applicants that view Malta not simply as a place to obtain regulatory approval, but as a jurisdiction from which they can build and grow. The test of Malta’s fintech strategy should therefore not be how many licences it attracts, but how many businesses choose to make Malta part of their long-term European operations.

If Malta can combine the credibility of its regulatory framework with an ecosystem that encourages high-quality fintech businesses to establish genuine substance and grow here, it can offer something more valuable than regulatory access: a genuine launchpad into Europe.

Mark Farrugia Debrincat is a lawyer

The post Beyond licensing: Can Malta become a launchpad for Europe’s next fintechs? first appeared on The Malta Business Weekly.

Since Independence, Malta has come a long way in growing its economy. GDP per capita in pps has increased from merely 65% of the EU average in the 1990s to 110% by 2025. Nevertheless, despite the significant progress in living standards and prosperity, in recent years discussions on quality of life or well-being have risen high on the national agenda.

Such debate is essentially driven by an underlying sentiment of over-crowding or congestion, be it on the roads, pedestrian streets, in public places of relaxation and recreation, in health services, in the infrastructure, like electric power and sewage services, and noise and dust levels, especially from construction activity, which are all viewed as impinging on citizens’ quality of life.

In recent years, this sentiment has led to debates on how economic growth should focus on quality, rather than quantity, and driven by productivity gains, with the government’s Vision 2050 shaped in this direction. These are objectives that can be hardly disputed. But would achieving such objectives be sufficient to address over-crowding or congestion?

Would replacing demand for low-skilled workers with higher skilled ones, or welcoming 4.5 million or more better quality tourists than those visiting today, result in less congestion or less over-crowding? This would most likely result in stronger GDP growth and higher income levels, and given the nature of human beings, it would probably create a desire for even more of both to further enhance wealth, but it would not nonetheless make over-crowding or congestion, and their side-effects, fade away!

While shifting focus towards upskilling workers to better equip them in engaging in higher value-added activities and enhance their productivity is necessary, by itself it is not a sufficient condition to address over-crowding or congestion as it does not tackle the root cause which citizens feel is impacting their quality of life and well-being.

The root cause of congestion and over-crowding stems from the addiction to investment in various forms of residential real estate. By residential real estate, it is meant all immovable property used for shelter by persons to work, retire, or holiday in Malta.

The addiction to investment in residential real estate, however, has not been limited to “developers” or “speculators”, but is more widespread, including households pulling down their own dwelling to profit from developing it in apartment blocks, either directly themselves or by selling it to a developer, and those households holding a small portfolio of properties for investment purposes, be it to earn rent, for capital appreciation, or for both. Indeed, the 2023 HFCS report of the Central Bank of Malta shows that 36.5% of the surveyed Maltese-born households in 2023 owned additional property apart from their residence.

Such addiction is not irrational. It is a logical response to incentives that affect the rate of return on such assets relative to other assets (financial or other real assets) that operators in the field, including households, observe. After the curtailment of significant public provisioning of housing in the late 1980s, the rise of the private market in residential real estate since then provided an attractive rate of return as property prices climbed steadily, with annual property price inflation over the past two decades averaging at 5.75% each year.

While in the past, investment in residential real estate mostly generated returns in terms of capital appreciation, over the past decade, residential real estate generated also strong income flows with the rise of the rental market to accommodate the inflow of migrant workers and tourists, making the overall rate of return much higher. Indeed, in the years 2016 to 2025, building permits of dwellings swelled by 77%, or almost 42,000 units over the previous decade, while building permits for hotels increased almost nine-fold from 125 to 1,118.

The incentives that fuelled the addiction to residential real estate investment are several. While addictions of various kinds initially usually generate high satisfaction, eventually when their side-effects begin to dominate, negative consequences begin to creep in.

Investment in residential real estate critically hinges on the expectation that such dwellings are occupied by people, and therefore such kind of investment inevitably presupposes a desire for further growth in inflows of people, be it for work, pleasure, or any other reason. If this is the driver of the sentiment of loss in quality of life or well-being, then what is needed is a review of the incentive structure that sustains such addiction.

The incentives for investment in residential real estate are many and varied. From a fiscal perspective, advantages range from a lower tax rate of 15% on rental income relative to a maximum 35% on corporate or personal income, to annual zero taxation on single and even multiple holdings of residential real estate, irrespective of their utilisation. The latter ensures that in periods of downturn, declines in property prices can be very limited as owners, especially those without outstanding debt obligations, may hold on rather than sell as they would not be exposed to negative cashflows on their investment.

Besides, various universal fiscal schemes providing grants and tax benefits, to a growing broader definition of first-time buyers, help support demand and hence sustain property price inflation. Electoral pledges to exempt residential real estate not for own use from inheritance tax would also provide a further incentive to such kind of investment.

Subsidies to airlines and water and electricity consumption to collective accommodation establishments as well as rented apartments help support tourist inflows. At the same time, weak enforcement on unregistered residential real estate used for tourism purposes increase further the after-tax rate of return on such kind of investment. In 2019, Central Bank of Malta staff had conducted a web-scraping exercise which identified 8,761 distinct properties advertised for short-term letting, while the number of officially registered holiday furnished premises back then were around less than half of this figure despite a favourable low tax rate that was aimed to disincentivise tax evasion on rental income.

The banking sector also provides incentives for this addiction with a very low mortgage interest rate, currently at around 2.7%, with bank lending portfolios increasingly concentrated in real estate, as savers earn virtually a zero rate of return on their bank deposits, thus effectively subsidising borrowers and at the same time enabling banks to record healthy profits and increasingly diversifying their risk across a larger pool of borrowers. Although since 2019 macroprudential policy by the Central Bank of Malta has been increasingly restrictive to address such sectoral concentration in bank lending, the rising share of bank lending for this activity remains relentless.

Even the local capital market has in recent years been infected by such addiction. Some issuers have been borrowing funds even to acquire property owned by related companies of the same UBO and use such cash to invest in other residential real estate.

Low labour taxes also provide incentives to employers in preferring adding labour resources to capital, which sustains demand for labour and hence inward migration given the demographic trends in the indigenous Maltese population. Both employers and trade unions have strongly resisted the introduction of a mandatory second pillar pension to improve pension adequacy because this would effectively raise taxation on labour, where according to European Commission data, Malta has among the lowest labour taxes at about 70% of the EU average.

As with any other addiction, withdrawal cannot be sudden but requires a period of transition since it often involves unpopular choices that usually generate short-term pain for longer-term benefit. However, such kind of timeline often presents challenges to policy-makers operating in a democracy as the time horizon is usually determined by the date of the next election.

As long as the incentive mechanism remains untouched, the addiction to investment in residential real estate will remain, together with the need for people to fill such properties, irrespective of their skill levels, productivity, or the quality of tourists, though steering the economy to “quality” together with more productivity-led growth, would undoubtedly help ease transition pains.

Ultimately, households need to reconcile their addiction to residential real estate investment, and the population growth it presupposes, to earn them an attractive rate of return, with their desire for a better quality of life and higher well-being from less over-crowding and congestion. The island state of Singapore has shown that a higher population density and level of quality of life than Malta’s can co-exist. However, this needs to be accompanied by a robust planning and management culture, together with strong political will, in the absence of which, trade-offs become inevitable when side-effects begin to dominate.

Alexander Demarco is governor Central Bank of Malta

The post Addiction to real estate investment – when side-effects begin to dominate first appeared on The Malta Business Weekly.

The liquidity preference theory

The first motive is a transaction motive. People need cash for day-to-day living as well as business transactions. The demand reflects one’s income level rather than the interest charged on the market. The second motive is the precautionary element. People hold cash as a safety buffer in case of a force majeure event, including war or emergency medical costs. This is driven mostly by income rather than the interest rate. And the third motive is speculative, where people keep money to invest in future opportunities, such as improved bond prices or interest rate improvement. Low interest rates increase demand for cash while high interest rates reduce it. Besides, cash deposits are not idle. Banks use that cash to dish out credit.

Banking regulations and competitiveness

Moreover, we have many regulations in place that were put in place after the financial crisis, which choked investment. Banks are not allowed to provide credit as they were in the past due to the highly regulated markets. Even in the Draghi report, it is noted that the EU needs to revise its banking regulations to compete with those of the United States and China. In fact, people will still hold money for precautionary reasons, and one of those relates to an event such as war. And let’s face it, President von der Leyen is associated with defence matters, and therefore one would expect a more nuanced understanding of precautionary motives. But in truth, I cannot understand her logic. At times, von der Leyen tries very hard to emulate Margaret Thatcher but runs counter to the latter’s economic beliefs. Margaret Thatcher’s economic policies were Hayekian. Ursula von der Leyen’s economic policies, however, appear inconsistent, from the centralisation of power to measures that have placed significant strain on Europe’s economic resilience.

Von der Leyen’s political and economic confusion

As much as I wasn’t eagerly waiting for the State of the Union speech to see what would be delivered, what’s been said from an economic point of view reinforced my belief that what will be delivered is purely nonsense. It will continue strangling Europeans’ personal budgets during periods of economic sluggishness. Obviously, the rest of the speech was the usual rhetoric that has characterised the past six years. We have another two and a half years left with her at the helm, unless political developments change the course. In truth, I am not comfortable with von der Leyen’s economic narrative, and we truly need to see and dig deeper into what this truly means. When I listen to such a bizarre economic narrative, I pause and wonder who is behind the speeches and the policies. If it is von der Leyen herself, then someone must tell her that she is approaching a Marxian ideology. Nobody should meddle with European citizens’ savings. And it’s up to them to see how to invest it. The EU is indeed approaching a difficult moment.

However, I forecast this back in 2022 when I said that if EU citizens do not have food on the table, far right and fringe parties will grow. We cannot take this with complacency any longer. Look at what is happening in Germany. It gives me chills to listen to Alice Weidel from Alternative for Germany. The narrative against migrants is just chilling. When I wrote about this a few years back, it was ill-timed and ahead of time. Now, we can see for ourselves what this truly means.

European savings are private, not public

We cannot allow a situation where we have politicians like von der Leyen at the helm, making decisions that may inadvertently fuel the far right with the wrong policies. If Ursula von der Leyen wants Europeans to invest their money truly, she must have a little word with Christine Lagarde and see how markets can be better deregulated, how costs can be harmonised across the EU, because the cost of capital to invest is still quite expensive relative to the US, and then come to us to allow our money to be used for additional projects. Ursula von der Leyen’s policies have placed Europe in a challenging position. Now we need to find a way out of this situation, and surely, we need leadership capable of delivering that outcome.

As John Maynard Keynes put it, “In the long run, we are all dead.”

The post If it’s not Pfizer, then it’s European savings for Ursula first appeared on The Malta Business Weekly.

Rather than testing memorised curriculum facts, PISA gauges whether students can extrapolate from what they have learned and apply their understanding to real-world challenges across four critical domains: science, reading, mathematics, and computational problem solving. The newly-released 2025 results present sobering findings for Malta, where students lagged significantly behind international standards across every core discipline.

Malta recorded a mean score of 453 points in science against the OECD average of 482, while falling to 415 points in reading compared to the OECD benchmark of 461. In mathematics, Maltese students scored 439 points against the international average of 463, and in the newly-introduced assessment of computational problem solving, Malta achieved 463 points, trailing the OECD baseline of 500.

A comparative analysis within the European Union places Malta firmly in the lower performance quartile. The island trailed regional frontrunners such as Estonia, which posted 527 in science, 499 in reading, and 508 in mathematics, as well as Finland and Ireland. Instead, Malta’s educational outcomes aligned far more closely with southern and eastern European economies like Greece and Romania, which registered science scores of 434 and 425 respectively. When set against leading non-European systems, this gap widened into an outright chasm.

Leading Asian jurisdictions established global benchmarks far out of reach: Beijing-Shanghai-Jiangsu-Zhejiang in China registered 597 in science and 612 in mathematics, while Singapore achieved 560 in science alongside an international high of 535 in reading.

In computational problem solving, territories such as Macau and Singapore set the pace with scores of 572 and 563 respectively, illustrating an advanced command over computational thinking that contrasts sharply with Malta’s struggles to move beyond rudimentary digital literacy.

The trend analysis over recent cycles reveals a worrying systemic deterioration. Between 2022 and 2025, Malta suffered steep declines across the board, dropping 13 points in science, 27 points in mathematics, and a staggering 31 points in reading.

Given that the OECD benchmarks a 20-point drop as equivalent to an entire year of formal schooling, Maltese cohorts effectively lost roughly one-and-a-half years of foundational reading competencies in just three years. Across a 10-year horizon from 2015 to 2025, Malta’s decennial trajectory fell by seven points in science, 36 points in mathematics, and 29 points in reading.

Crucially, 29.4% of Maltese students are now classified as low performers who fail to attain baseline Level 2 proficiency across all three core subjects, a proportion that far exceeds the OECD average of 19.7%. In stark contrast, only 8.3% of local students reached top-tier status at Level 5 or 6 in at least one domain, compared to 11.9% internationally. Furthermore, behavioural assessment metrics show that Maltese students recorded an exceptionally high rate of hasty responses at 18.4% on reading tasks, more than double the OECD average of 8.9%, indicating pervasive disengagement, shallow comprehension, and an aversion to sustained cognitive effort.

This educational erosion reflects a deeper structural distortion. In an economy increasingly saturated by immediate consumer stimulation, the cognitive stamina required for delayed gratification is systematically compromised.

More critically, as speculative returns from property continuously outpace wages earned through rigorous professional pathways, the perceived economic return on demanding study dissolves. Educational underachievement ceases to be merely a classroom failure; it becomes an entirely rational adaptation. When societal rewards disproportionately favour physical asset speculation over human capital formation, students intuitively grasp that deep intellectual effort is no longer compatible with economic success.

While the educational pipeline signals likely constraints on Malta’s productivity, the Malta Fiscal Advisory Council’s report on economic and fiscal developments over the first half of 2026 reveals immediate vulnerabilities in public spending. Malta’s real gross domestic product expanded by 3.9% year-on-year in the first quarter of 2026, outpacing the European Union’s projected growth rate of 1.1% and remaining consistent with the government’s annual projection of 3.7% set out in the Annual Progress Report.

This momentum was supported by domestic consumption, a 3.5% unemployment rate, and a thriving tourism sector where arrivals rose by 18.1% in the first half of the year. However, the Council pinpointed government expenditure as the principal risk to fiscal stability. On an accrual basis, total public outlays grew by 14.5% in the first quarter to reach €2.34 billion, meaning that €296.3 million, or 85.8% of the total €345.5 million expenditure increase projected for the entire year, had already materialised within the first three months.

Cash data through June confirmed that these spending pressures persisted, registering a 17.5% year-on-year surge across the first half of 2026. This rapid increase was driven by broad-based spending commitments: intermediate consumption jumped by 22.4%, cash operational and maintenance expenditure increased by 48.9%, and personal emoluments grew by 11.7% due to public sector wage revisions, collective agreements, and new recruitment. At the same time, social payments absorbed almost one-third of their entire annual allocation in the first quarter alone. Consequently, the general government deficit expanded to €339 million in the first three months, consuming nearly 80% of the €428.6 million annual deficit ceiling.

Although buoyant cash revenues from VAT and direct taxes provided a temporary buffer, the Council underscored that meeting the annual fiscal targets will require second-half expenditure growth to slow down to an unrealistically tight 0.7%. Compounding this challenge, nominal employee compensation rose by 9.1% with average wages up 4.8%, while real labour productivity contracted by 0.3%. When coupled with the government’s failure to transpose EU Directive 2024/1265 on national budgetary frameworks within the prescribed deadline, these accelerating expenditures threaten to breach the 5.8% net primary expenditure ceiling committed under the EU Medium-Term Fiscal Structural Plan.

These fiscal imbalances are set to collide directly with volatile international energy markets across 2026 and 2027. Following renewed geopolitical disruptions and security threats in the Strait of Hormuz, Brent crude climbed above $100 per barrel, driving global petrol and diesel prices higher and squeezing refinery margins. Dutch Title Transfer Facility (TTF) natural gas and spot LNG climbed to roughly €80/MWh, their highest levels since late 2022, as European utilities scramble to refill lagging storage reserves. Because gas remains the marginal price-setting fuel across continental power plants, wholesale electricity prices on the European grid, including Italy’s single national price (PUN), have spiked, transmitting severe upward price pressures.

The latest forecasts point towards energy prices that are expected to remain elevated through late 2026 before gradually moderating in 2027 as new global LNG export capacity from Qatar and the United States comes online and non-OPEC crude output expands. This trajectory however depends heavily on geopolitical stability – particularly shipping security through the Strait of Hormuz and the Black Sea – alongside OPEC+ supply discipline. On the demand side, outcomes hinge on winter weather severity across the Northern Hemisphere, European storage depletion rates, and broader industrial recovery, which will collectively dictate marginal gas and wholesale electricity pricing on the continental grid.

With Malta’s universal energy subsidy mechanism, introduced in 2022, it is reasonable to anticipate that the €150–€172 million initially budgeted for energy support measures in 2026 will be exceeded, with the possibility that this elevated level of subsidies may persist into 2027.

When one considers that between 2022 and 2025 Malta has spent some €1 billion on fuel and electricity subsidies, the arguments made by various quarters advocating for at least part of these subsidies to be redirected towards stronger incentives and greater investment in renewable energy appear particularly valid. Such an approach would help reduce Malta’s exposure to sudden international energy and fuel price shocks, thereby strengthening the country’s energy resilience.

As in other situations, we are plagued with thinking and adopting short-term policies while paying a very high price in the medium to longer term.

The post Human capital gaps, fiscal overheating and the gathering energy storm first appeared on The Malta Business Weekly.

The case concerned Venetian Macau Limited, a subsidiary of Sands China, and a VIP customer, Hu Yangning. After years of gambling at casinos in Macau, Hu entered into a credit agreement with Venetian Macau in 2023 for up to HK$15 million and signed a promissory note in connection with the credit extended to her for gambling. When the debt remained unpaid, Venetian Macau sued in Hong Kong and obtained a default judgment in March 2025 for approximately HK$19.35 million, plus interest and costs. It subsequently sought to register and enforce that judgment in Singapore. However, the Singapore High Court refused.

The important point is that the court was not deciding whether the Hong Kong judgment was valid. Nor was it re-trying the underlying dispute. Instead, the question was whether Singapore should allow its own courts to be used to enforce a foreign judgment founded on a gambling debt.

Justice Philip Jeyaretnam held that it should not. Under Singapore’s Reciprocal Enforcement of Foreign Judgments Act, registration can be set aside where enforcement would be contrary to public policy. The court found that Singapore has a firmly established public policy against the enforcement of gambling debts, reinforced by legislation, parliamentary debates and previous case law. In particular, section 5(2) of Singapore’s Civil Law Act provides that no action may be brought or maintained to enforce claims based on gambling debts.

The fact that the debt arose in Macau was therefore not enough to overcome Singapore’s domestic policy. Indeed, the court considered the promissory note inseparable from the credit arrangement that enabled the customer to gamble. Enforcing the Hong Kong judgment would consequently undermine Singapore’s policy against gambling on credit and against using its courts to recover gambling debts.

For the gambling industry, the decision is significant because it illustrates a fundamental feature of an increasingly cross-border business. A gambling operator may be licensed and operating lawfully in one jurisdiction, but the legal consequences of that activity do not necessarily travel with the licence. This is where the Singapore decision becomes particularly interesting from a Maltese perspective.

Malta has spent decades positioning itself as a major European hub for remote gaming. Malta’s controversial 2023 reform, commonly known as Bill 55, introduced Article 56A into the Gaming Act. The provision establishes, as a matter of public policy, that Maltese courts must refuse recognition or enforcement of certain foreign judgments which undermine the legality of gaming services lawfully provided under an MGA licence. The stated legislative objective was to codify Malta’s longstanding public policy in favour of gaming operators lawfully providing services from Malta.

The issue arose particularly from Austria, where courts have awarded players refunds for gambling losses incurred with Malta-licensed operators on the basis that the operators were not licensed under Austrian law. Those players subsequently sought to enforce their Austrian judgments in Malta. Maltese courts have increasingly resisted such enforcement, ruling that certain Austrian judgments ordering refunds conflicted with Malta’s public policy.

There is therefore an intriguing common thread between Malta and Singapore: public policy can place a boundary around the recognition and enforcement of foreign gambling judgments. But the direction of that policy is fundamentally different.

Singapore’s policy says, in effect, that its courts should not become a mechanism for collecting gambling debts, even where those debts were incurred lawfully abroad. Malta’s policy, by contrast, seeks to ensure that its courts do not undermine the legal status of gambling services provided by operators holding Maltese licences.

This distinction matters as Malta is not saying that every judgment involving a gaming operator is unenforceable. The Malta Gaming Authority itself has stressed that Article 56A is narrowly framed and applies only where the foreign action conflicts with or undermines the legality of activity that is lawful under Malta’s regulatory framework.

It also explains why Malta’s position has generated considerably more controversy within the European Union. The European Commission has challenged Article 56A, while Advocate General Nicholas Emiliou concluded in April 2026 that EU law precludes a provision of this kind where it prevents recognition of another Member State’s judgment concerning an operator whose services are lawful in Malta. His Opinion stressed that Member States cannot use unilateral measures of this kind to respond to what they consider to be infringements of EU gambling rules by another Member State.

The Singapore judgment therefore offers Malta an illuminating comparison, but not necessarily a precedent. Both cases demonstrate the power of public policy in private international law. Yet they also show that “public policy” is not a universal concept producing a universal result. It reflects the values and regulatory choices of the jurisdiction asked to enforce a foreign judgment.

Dr Lina Klesper is an International Legal Assistant at PKF Malta

The post When gambling crosses borders, public policy follows first appeared on The Malta Business Weekly.

A rigorous examination of the output, expenditure, and income approaches reveals the precise catalysts underpinning this economic momentum.

From the output perspective, Gross Value Added (GVA) expanded robustly by 5% in volume terms in Q2 2026. Service activities served as the primary engine of this expansion, contributing a commanding 4.3 to 4.7 percentage points to overall volume GVA growth.

Leading the sectoral performance was the financial and insurance activities sector, which registered a stellar volume growth rate of 12.2%. This was closely complemented by the information and communication sector, recording double-digit momentum with a 9.2% volume expansion driven by ongoing digitalisation and the scaling of digital services. Professional, scientific, and technical activities also maintained solid upward momentum, registering a 7.5% volume growth rate that reflects robust legal, engineering, and business consultancy operations. Conversely, industry (NACE Sections B to F) contributed a modest 0.3 percentage points to volume growth, while agriculture and fishing maintained a neutral impact.

An expenditure-side analysis underscores that domestic demand was the central pillar of economic growth, contributing 5.3 percentage points to the year-on-year volume GDP expansion. Final consumption expenditure witnessed an impressive overall increase of 6.7% in volume terms.

While private household consumption contributed a steady 1.7 percentage points (reflecting a 3.5% volume increase), general government final consumption expenditure emerged as the preeminent catalyst for domestic expansion. Government consumption surged by an extraordinary 14.7% in volume terms, contributing 2.5 percentage points to overall volume GDP growth. This intense public sector expenditure effectively counterbalanced external headwinds, offsetting a negative contribution of -0.7 percentage points from net external demand where import growth outpaced exports. Gross fixed capital formation added a further 5.1% increase in volume terms, providing balanced support to domestic formation.

The €417.1 million nominal increase in Q2 2026 GDP was distributed across factor incomes in a manner that highlights a distinctly labour-driven and wage-led trajectory. Compensation of employees (wages) rose by €253.8 million, moving from €2,628.5 million to reach €2,882.3 million, thereby capturing 60.84% of total nominal growth and contributing 4.1 percentage points.

Meanwhile, gross operating surplus and mixed income (corporate profits) rose by €136.6 million, increasing from €3,059.8 million to €3,196.4 million, which captured 32.75% of growth and contributing 2.2 percentage points. Net taxes on production and imports accounted for the remaining €26.7 million increase, contributing 0.4 percentage points. Aggregating these dynamics across the first half (H1) of 2026, cumulative nominal GDP reached €12.72 billion – a 6.88% increase over H1 2025 – with employees capturing over 63% of total nominal income growth.

While Malta’s macroeconomic indicators reflect undeniable headline resilience and healthy nominal expansion, a deeper strategic appraisal reveals significant structural vulnerabilities and long-term sustainability risks.

The primary issue lies in the economy’s heavy reliance on public sector stimulus. With general government consumption surging by 14.7% in volume terms and driving domestic demand, the public sector is currently acting as the main economic anchor. Building upon the expansionary fiscal habits observed in prior years, debt-financed or expenditure-driven public stimuli introduce acute fiscal risks if recurrent public spending persistently outpaces structural productivity gains.

Furthermore, the distinctly wage-led nature of the expansion – where over 63% of total nominal income growth during H1 was channeled into employee compensation – creates a delicate balancing act. Although tight labour markets are successfully rewarding workers, nominal wage increases risk fueling persistent pressures which unless matched by commensurate gains in labour productivity and advanced technological automation, will erode Malta’s competitiveness. For Malta’s growth trajectory to remain viable over the long-term, future expansion must pivot from being predominantly public-expenditure and wage-reliant toward sustainable, productivity-driven private sector innovation.

To put Malta’s economic trajectory into proper perspective, the economy can be viewed as an interconnected chain where every component is linked – from public spending and labour compensation to infrastructure and private enterprise. Because these elements are interdependent, the current reliance on debt-financed public consumption and wage-led growth without matching productivity gains places undue stress on Malta’s physical infrastructure and long-term fiscal stability. Moving forward, sustainable growth requires a structural shift where investments are purposefully diverted toward total factor productivity gains and technological advancement, ensuring that economic expansion reinforces infrastructure resilience rather than overstraining it.

The post What is fuelling Malta’s economic growth? first appeared on The Malta Business Weekly.

Anticipating certain market dynamics

This week, I intended to focus specifically on the housing market and its affordability, as well as the strain on our infrastructure derived from the expansion of sectors requiring additional labour and higher volumes of people to host as a small island state. In my current post-election campaigning, even though the next general election is five years away, it is evident that markets are constantly evolving and that people feel the changes in how these dynamics play out in daily life. Economists, upon observing market patterns, are guided by the principle of intervening and regulating when necessary. When market failures arise and adversely affect society, prompt regulation is required. Nevertheless, markets should ideally operate within the framework of government policies designed to ensure optimal performance when left to function independently.

Before implementing government policy and regulation, it is essential to assess market failures and ensure that regulations across sectors, beyond EU directives and legislation, are effective and timely in stabilising markets. My recent interactions with the public highlighted that affordable housing and infrastructure strain are the most pressing concerns. Although I am no longer engaged in research and lack the resources, not least time, to construct detailed econometric modelling, my current focus on climate and environmental risks underscores the need to examine how markets are failing some segments of society. Economic intuition is guided by a strong background in economic theory and by what people feel on the ground.

The housing market, prices, and rent subsidies

Let’s start with affordable housing. Certainly, rent subsidies and market affordability do not reflect what is happening on the ground, and clearly there is a gap between statistics and reality. Surely, we need to address such a gap as quickly as possible. While I was writing this article, some followers coincidentally texted me to say they cannot afford the rent. I am not suggesting we encourage dependency. Rather, we should help those who have faced difficulties in life to improve their situation. For example, single persons, divorced or separated individuals, and those working in retail are struggling to keep up with rent and housing prices. I understand that some policymakers tell you that the key to success is education. However, we still need to be aware of people who cannot make it, for reasons such as social backgrounds and vulnerabilities.

We need a system that promotes social justice. It is fine to own 10 apartments if you can afford them and to live off the market. However, policy must be adjusted to promote social justice. I am glad to see people earning money, but there must be a limit on speculation to give others a chance; otherwise, inequality will grow. Current Minister Owen Bonnici is doing a great job in social housing, and the ministry’s personnel are efficient in responding to queries. Certainly, the government’s policy aims to promote the development of additional affordable housing units to support these groups. However, we need not just purchases but also units providing affordable rent.

The introduction of tapered subsidies represents progress. However, it remains unclear why eligibility for rent subsidies is assessed based on gross rather than net income. While banks use gross income to assess mortgage credit risk and maintain financial stability with respect to the debt-to-income ratio, this approach is not suitable for government rent subsidies. Net income should be considered to reflect individuals’ financial realities better. Many individuals struggle to afford basic expenses after paying rent, even with subsidies, while also fulfilling separation income obligations and paying taxes on gross income. After all deductions from gross income, some are left in relative poverty with net income. The rental market has also undergone significant changes since reaching a tipping point some years ago.

The tapering of the rent subsidy benefit and the supply of apartments

The government is attempting to address these market dynamics by also implementing a tapering system for individuals whose incomes increase and who no longer qualify for the full rent subsidy. However, if an individual’s income rises slightly above the threshold, the system begins tapering the rent subsidy. In a context of labour shortages, this can discourage individuals from working additional hours, including overtime, as the extra income results in the loss of benefits. Fewer hours of work would result in more people being imported to fill the gap, unless automation gradually fills part of the gap. Perhaps an alternative approach is to introduce a percentage buffer rather than a fixed income threshold. For instance, if an individual earns an additional €500 per year and exceeds the entitlement threshold, the subsidy will taper gradually. Establishing a 10% or 15% buffer on annual income before disentitlement, and then tapering it, would enhance transparency and incentivise greater participation in work. People could easily plan the hours of work, and so will employers. Ultimately, perceptions of taxes and benefits are shaped by considerations of fairness.

Moreover, it is becoming increasingly difficult for Maltese people to rent out apartments. I even saw messages exchanged by property owners and agents stating that the property is to be rented to foreigners, meaning that, in addition to the price, the supply is also excluding locals. Hence, there are two problems here: rent prices and supply. There are two options available to authorities. Either taxing more in areas where locals are excluded or providing additional units. I mean, providing additional units means the government must supply them. We do have a situation that requires urgent attention to revise regulations and policy to manage and support such cohorts. And we need to accelerate the affordability process, building on the work already underway.

The marginal benefits and costs of additional economic growth

Surely, beyond rent subsidies, I have advocated for a comprehensive assessment of current GDP growth, particularly from sectors that place additional strain on infrastructure. For example, if certain sectors contribute an extra two percentage points of growth but require the importation of labour and increased activity, this must be balanced by investments in infrastructure upgrades, the allocation of agricultural land for sewage treatment facilities as well as road upgrades, and measures to address noise pollution, emissions, and rising rents and property prices. It is essential to consider the multiplier effects of economic growth, but we must also measure the costs to our infrastructure. When natural capital is depleted, the resulting pressure on limited resources can lead to economic overheating and destabilisation of our social fabric. This necessitates a revaluation of policy priorities and our collective responsibilities. And the Opposition must express which sectors they refer to when they speak of planning, as hitherto, they did not mention any.

Ultimately, we must reconsider what we, as human beings, owe to nature, and certainly what we all owe to each other, if we are to live in peace, sharing progress and prosperity.

The post Zooming in on certain markets is a necessity first appeared on The Malta Business Weekly.

The latest developments illustrate the problem. On Monday, a tanker was reportedly struck by three unknown projectiles while travelling eastbound through the Strait, while Iran’s Revolutionary Guard reported intercepting a US MQ-9 drone. Renewed US strikes on Iranian positions have pushed Brent crude back above $90 a barrel, after prices had fallen below $80 earlier in August. This market reaction is significant, but perhaps more important is what lies behind it: uncertainty.

According to UN Trade and Development (UNCTAD), before the military escalation began on February 28, Hormuz carried around 38% of global crude oil trade, 29% of LPG, 19% of LNG and 19% of refined oil products. The waterway is also important for chemicals including fertilisers, while its disruption has repercussions for wider maritime transport and supply chains.

By late August, however, traffic had reportedly fallen by approximately 95%. Between July 15 and August 23, an average of only around five vessels a day passed through the Strait. Much of the remaining traffic has involved tankers operating under naval escort or with tracking systems switched off.

The International Energy Agency’s (IEA) latest assessment, published on August 31, points to mounting pressure. Global oil supply is now forecast to decline by 4.3 million barrels per day in 2026, with increased production elsewhere only partly compensating for losses from the Middle East and Russia. At the same time, global oil demand is now expected to fall by 1.6 million barrels per day, a dramatic reversal from the 850,000-barrel-per-day increase forecast before the war.

Refined products are already feeling the strain. Tight supplies and declining inventories have pushed diesel, gasoline and jet-fuel refining margins to record levels. Although global inventories remain an important buffer, the IEA warns that they are being drawn down rapidly. The longer the disruption persists, therefore, the less comfortable that buffer becomes.

The economic consequences of the crisis cannot be measured simply by today’s oil price. They extend well beyond the energy sector. Higher fuel prices increase transportation and production costs, while higher freight rates, bunker fuel costs and war-risk insurance feed into the price of moving goods. Fertiliser is another critical concern. Higher costs or reduced availability can eventually translate into more expensive food, particularly in countries already vulnerable to food insecurity and high debt.

Moreover, the UN recently warned that disruptions to the Strait of Hormuz, the Bab al-Mandeb Strait, and the Black Sea are effectively choking important arteries of global trade. The result of these crises is higher prices, weaker harvests and greater suffering for vulnerable populations.

Findings from the World Economic Forum highlight that industrial supply chains are also exposed to disruptions involving commodities such as methanol, aluminium, sulphur and graphite. These materials feed into manufacturing, chemicals and clean-energy industries, demonstrating that the Hormuz crisis is not merely an “oil shock” but (yet again) a broader test of the resilience of globalisation.

According to a European Commission Joint Research Centre scenario published in May, Europe appears particularly exposed, as it illustrates how severe a prolonged disruption could be. Assuming Hormuz traffic remains severely restricted through the end of 2026, oil prices could reach around $180 per barrel and gas prices €80 per megawatt-hour in the fourth quarter. Under that scenario, EU GDP growth would fall to 0.7% in both 2026 and 2027, compared with baseline forecasts of 1.1% and 1.4%. Inflation could rise to 3.5% in 2027, compared with 2.4% in the baseline.

These figures are scenario estimates, not forecasts of what will necessarily happen. Yet their importance lies precisely in demonstrating the economic price of prolonged uncertainty. This is where the growing call for a stronger UN role at the centre of mediation and for examining an international maritime mission to monitor shipping, facilitate civilian passage, establish de-escalation mechanisms and protect seafarers becomes economically significant.

Currently framed as part of a solution is the UN task force established in March to protect maritime transit for humanitarian purposes through the Strait of Hormuz, with an initial focus on commercial fertilisers and related raw materials. Such a mechanism would not, by itself, resolve the underlying US-Iran confrontation. Nor would it remove the need for diplomacy between the parties. But it could be a practical first step toward restoring predictability, which markets desperately need.

In a global economy built on interconnected supply chains, certainty has become an economic commodity in its own right. And the longer Hormuz remains uncertain, the more expensive that commodity becomes.

The post The uncertainty crisis of the Strait of Hormuz first appeared on The Malta Business Weekly.

Backed by a Brussels-approved economic strategy and an injection of public funds that has seen government equity swell to €350 million, the airline was supposed to represent a new era of fiscal responsibility in local aviation. Yet, as the months tick by with zero transparency, the business community and the taxpaying public are left asking an uncomfortable question: are we witnessing the slow-motion prologue to another Air Malta disaster?

The core of the issue lies in a deafening silence from both the airline and the administration. To date, KM Malta Airlines has not filed a single set of audited accounts with the Malta Business Registry. Vague assurances from Finance Minister Clyde Caruana regarding filing extensions ring hollow when deadlines continuously pass unfulfilled. When inquiries from the press are met with stonewalling, it invites the worst kind of speculation. In the absence of audited figures, observers naturally assume the worst, with rumours swirling that the carrier is losing money.

This is not merely a matter of administrative bureaucracy; it is a fundamental breach of public trust. Taxpayers are involuntary shareholders in this enterprise, having contributed hundreds of millions in hard-earned capital. They are not asking for trade secrets; they are demanding the basic right to know whether public funds are being stewarded responsibly and whether the airline is adhering to the viability plan promised to Europe.

Transparency does not undermine a national airline; rather, opacity is what ultimately destroys it. Shrouding the company’s financial health in secrecy only serves to erode confidence among business partners, passengers, and staff who deserve stability, not a repeat of past failures.

The Nationalist Party has rightly ratcheted up pressure on the government, emphasising that accountability is non-negotiable where public money is concerned. Good governance requires that those entrusted with taxpayer funds answer for how those resources are utilised. If KM Malta Airlines is performing well and meeting its targets, the administration should be eager to publish the numbers and reassure the public. If it is struggling, hiding the truth will not make the losses disappear – it will only delay the inevitable reckoning until the damage is far harder to repair.

Malta cannot afford another aviation debacle. The government and the airline’s leadership must drop the defensive posture and come clean immediately. By publishing the outstanding accounts and detailing a clear financial outlook, they can (hopefully) dispel the rumours and chart a credible path forward.

Anything less is a disservice to the Maltese public and another severe blow to the principles of transparency and good governance.

The post EDITORIAL: Opening the books – Will KM Malta Airlines avoid Air Malta’s fate? first appeared on The Malta Business Weekly.

Over the past decade, Malta’s fiscal trajectory has transitioned through several distinct phases. In the pre-pandemic period between 2016 and 2019, the general government maintained fiscal surpluses, reducing the debt-to-GDP ratio to 43.1% and creating sufficient fiscal space. This shifted abruptly in 2020 when the onset of Covid-19 necessitated massive expansionary support packages and created large primary deficits. The subsequent recovery between 2021 and 2023 saw fluctuating fiscal stances as pandemic aid was replaced by extensive energy subsidies to shield the economy from international price shocks. By 2024 and 2025, the government re-embarked on discretionary fiscal consolidation, unwinding major one-off support measures and steering the headline balance toward sustainable benchmarks.

On the positive side, Malta achieved a milestone in 2025 as the general government deficit narrowed to 2.2% of GDP from 3.4% in 2024, falling below the EU’s 3% Maastricht threshold for the first time since the pandemic. This consolidation prompted the European Council to formally close the Excessive Deficit Procedure against Malta in June. Overall revenue expanded by 9.4% in level terms to reach 34.8% of GDP, bolstered by strong corporate tax collection, sustained wage and employment growth that lifted household income taxes to 7.6% of GDP, and a tourism-driven rebound in value-added tax receipts. Furthermore, Malta’s debt-to-GDP ratio closed at 46.4%, standing substantially below the euro area average of 87.4%.

Despite these positive headline figures, this CBM report highlights several significant structural and medium-term fiscal risks that demand closer scrutiny. A primary vulnerability lies in the composition of government revenue, which has become increasingly dependent on direct corporate taxation. Corporate tax receipts reached an all-time high of 7.1% of GDP in 2025, driven largely by foreign-owned firms operating under specialised refund and group consolidation frameworks, alongside incentives connected to the EU Pillar 2 minimum effective tax rate. This leaves public finances exposed to shifts in international tax environments, multinational restructuring, or cross-border regulatory changes. This concentration risk is compounded by the permanent loss of revenues from the citizenship-by-investment scheme, which was terminated following an adverse European Court of Justice ruling in April 2025. Meanwhile, indirect taxes and social contributions remain structurally subdued relative to their historical pre-pandemic shares in output.

A deeper risk stems from the rigidity and momentum of public expenditure, which reached 37% of GDP in 2025. Recurrent spending remains elevated due to the 2025 civil service collective agreement, higher outlays on contractual services and residential care that pushed intermediate consumption to 8.1% of GDP, and accelerating pension commitments driven by an aging demographic. In addition, permanent energy subsidies continue to consume 2.2% of GDP – double their pre-pandemic baseline – creating a recurring fiscal burden. The report also points out that while annual expenditure growth in 2025 aligned with national targets, cumulative net expenditure growth continues to exceed the benchmark path set under the EU’s revised fiscal framework.

Finally, the favourable snowball effect, which historically offset borrowing costs through rapid nominal GDP growth, has started to weaken as economic expansion normalises and effective sovereign financing rates edge higher, leaving the fiscal balance vulnerable to future macroeconomic shocks.

The macroeconomic projections detailed in the Central Bank of Malta’s Outlook for the Maltese Economy (2026:3) establish direct structural and cyclical links with the previously mentioned fiscal review, Fiscal Developments in 2025. Together, the two documents provide an interconnected narrative of Malta’s transition from post-pandemic recovery to mapping out the shared drivers of growth and persistent downside risks.

On the positive side, the macroeconomic outlook reinforces the ongoing consolidation trajectory outlined in the 2025 outturn. Real GDP growth is projected to remain robust at 3.8% in 2026, 3.6% in 2027, and 3.8% in 2028, largely anchored by resilient domestic demand and private consumption, which accelerates to 4.3% in 2026. This underlying economic strength continues to feed directly into public revenue. The widening of income tax brackets and continued employment growth, which increased direct household taxes in 2025, are expected to support household disposable income and consumer spending through 2028. Consequently, the general government deficit is projected to narrow progressively from 2.2% of GDP in 2025 to 1.9% in 2026, 1.7% in 2027, and 1.6% by 2028, ensuring Malta remains safely below the 3% EU threshold. In parallel, the structural deficit is forecast to improve to 1.9% of GDP, while the debt-to-GDP ratio extends its downward trajectory to 44.2% by 2028, well beneath the euro area benchmark.

However, both of the mentioned CBM reports bring into sharp focus the common structural vulnerabilities and heightened risks facing the economy. A prominent link is the fiscal burden of energy policy. While the 2025 review noted that energy subsidies had locked in an expenditure floor at 2.2% of GDP – double pre-pandemic levels – the 2026 outlook reveals that these outlays will likely rise during the year due to renewed commodity price shocks following geopolitical conflict in the Middle East and the war in Iran. Because the government maintains fixed retail energy tariffs, any escalation in global fuel import prices passes straight through to public expenditure rather than consumer prices, presenting a direct downside risk of budget overruns.

Both reports also mention the downside in public expenditure rigidities and the public investment cycle. The 2025 outturn identified persistent upward momentum in intermediate consumption and public sector wages following the new civil service collective agreement. The 2026 outlook confirms that real government consumption will continue expanding by over 3% annually across the forecast horizon due to these same binding wage agreements and operational costs. On the capital side, the planned deficit reduction depends largely on a decline in government investment after 2026, following the completion of major Recovery and Resilience Facility (RRF) projects and the second electricity interconnector. This creates a sharp drop in capital expenditure from a 17% surge in 2026 to near stagnation by 2028, leaving fiscal targets exposed should project timelines slip or capital transfers re-emerge. Forecasting capital expenditure stagnation creates a severe disconnect between fiscal modelling and physical reality, as suppressing public investment directly clashes with the urgent need to address Malta’s mounting infrastructure bottlenecks. Relying on capital cutbacks as the primary mechanism for deficit reduction risks forcing sudden, unbudgeted emergency spending later to prevent infrastructure failures, which could ultimately derail the government’s medium-term consolidation targets.

Finally, revenue sustainability and macroeconomic imbalances intersect across both reports. As the 2025 review cautioned against an over-reliance on volatile corporate direct taxes, the 2026 outlook expects tax growth to track just at or below nominal GDP expansion. At the same time, employment growth is projected to moderate toward 2.3% as foreign worker inflows decelerate due to new migration policies, which may dampen future social contribution growth and compound demographic pressures on pension outlays. Coupled with upside risks to headline inflation from global supply disruptions and persistent services costs, these fiscal and macroeconomic interlinkages underline that Malta’s fiscal consolidation path remains highly sensitive to external shocks and rigid domestic spending commitments.

The post Malta’s fiscal consolidation: Headline gains masking structural vulnerabilities and expenditure risks first appeared on The Malta Business Weekly.