The milestone of more than four million tourists in 2025 is, on paper, a success story. Yet beneath the surface lies a more troubling trend. Tourists are staying for shorter periods, and when adjusted for inflation, average spending per visitor has declined significantly over the past decade. This is not a sign of a sector moving upmarket. It is a warning that Malta risks locking itself into a high-volume, lower-yield model that places growing strain on infrastructure, public services and residents, while delivering diminishing returns.

For a small island state with limited space and finite resources, that is not a sustainable formula.

The Malta Chamber’s Rediscover to Align strategy deserves serious attention because it reframes the debate in the right terms. Tourism should no longer be measured primarily by arrivals, but by the economic value each visitor generates and by the quality of the experience offered. In business terms, Malta must improve yield, not simply throughput.

That means the product itself must improve. Tourists will pay more only if they perceive greater value. Cleanliness, maintenance, transport efficiency, public order, well-kept streetscapes and authentic cultural experiences are not cosmetic issues; they are core components of the tourism product. If Malta charges premium prices while delivering substandard infrastructure or deteriorating public spaces, it will quickly lose credibility as a destination.

This is why the Chamber’s insistence that “if it works for residents, it will work for tourists” is more than a slogan. It is sound commercial logic. Residents’ quality of life, urban aesthetics and local character are not external to the tourism economy; they are part of its value proposition. If communities are overburdened and localities are allowed to decline, the visitor experience inevitably declines with them.

Equally important is the Chamber’s warning against treating tourism as a silo. Tourism policy cannot sit solely within the remit of the Malta Tourism Authority or the tourism ministry. It is shaped every day by decisions in planning, transport, environment, heritage, local government, policing and enforcement. If these sectors remain fragmented, Malta will continue to undermine its own competitiveness.

This is where government must act decisively. The Chamber has presented a detailed strategy. Its proposals on aesthetics, local council involvement, infrastructure renewal, smarter management of visitor flows and stronger cross-ministerial coordination should be treated as an economic priority.

Malta is at a crossroads. It can continue to chase ever higher arrival figures while the real value of tourism erodes, or it can build a smarter model based on quality, resilience and premium positioning. For business, the answer should be obvious: long-term profitability lies not in doing more, but in doing better.

The post Editorial: Malta must stop chasing tourist numbers and start building value 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.

Some argue that rising militarism and a growing appetite for conflict are reshaping the EU in ways they find unacceptable. Faced with all these developments, Malta as a neutral country will face tough choices in the foreseeable future.

What are other EU members doing in their countries to beef up defence spending? To start with, in recent years, Germany has embarked on one of the most significant military modernisation efforts in its post‑Cold War history. Driven by shifting geopolitical realities and the need to strengthen both national and European security, the country is rapidly expanding its defence industrial base.

This expansion goes beyond merely acquiring weapons systems, it also involves large‑scale investment in the domestic production of such components, technologies, and industrial capacity essential for modern warfare. Germany has committed €355 billion through 2041 for new military equipment, on top of a €100 billion special fund.

Apart from munitions, there is a vast expansion in expenditure consisting of combat vehicles, communications and electronics. These categories include thousands of components – sensors, armour systems, electronics, propulsion parts, and more – produced by German industry. By comparison, France’s defence priorities, as outlined in its 2025 National Strategic Review (RNS) and the updated 2024-2030 Military Programming Law (LPM), emphasise strategic autonomy, high-intensity warfare readiness, and a balanced “complete army” model. This contrasts with many other EU countries, which focus more narrowly on territorial defence or specific capability gaps.

Back to Germany, we observe a transformation in its long‑term financial commitment. Berlin has allocated €355 billion through 2041 for new military equipment, supplemented by a €100 billion special fund established after Russia’s invasion of Ukraine. A substantial share of this funding is directed toward categories that rely heavily on component manufacturing – munitions, combat vehicles, communications systems, and logistical equipment. Germany’s strategy also emphasises strengthening domestic defence manufacturers.

Approximately €182 billion in upcoming procurement projects are tied to German companies, with Rheinmetall emerging as a particularly prominent beneficiary. The company appears in more than 50 procurement lines worth over €88 billion, covering armoured vehicles, ammunition, weapons systems, and the specialised components that enable them.

This approach reflects a deliberate effort to ensure that critical technologies from fire‑control systems to missile housings are produced within Germany’s borders. The expansion of component production is especially visible in several key areas. In the field of munitions, Germany has placed orders for thousands of DM22 anti‑tank mines and is replenishing ammunition stocks depleted by support to Ukraine.

In ground systems, the procurement of FLW 100 and FLW 200 remote weapon stations requires domestic manufacturing of optics, stabilisation mechanisms, and electronic subsystems. Germany is also investing heavily in advanced electronics, including explosion‑proof GPS receivers and thermal imaging sights, which demand sophisticated microelectronics and ruggedised engineering.

As can be expected, we note how air defence has become another priority. Germany is constructing a layered air‑defence network centred on systems such as the domestically-produced IRIS‑T SLM, which requires local production of missile bodies, seekers, launchers, and radar components. Even when integrating foreign systems like Arrow 3 or Patriot, Germany invests in domestic infrastructure and electronic support systems to ensure operational independence.

Beyond traditional weapons, Germany is channelling resources into emerging technologies. Investments in loitering munitions, drone swarms, radar satellites, and laser‑based weapon prototypes signal a commitment to future‑oriented capabilities.

These programmes rely on advanced optics, AI-enabled power systems, and digital components – areas where Germany aims to build long-term industrial expertise. Underlying all these efforts is the National Security and Defence Industry Strategy, which seeks to reduce reliance on foreign suppliers and reinforce Germany’s role as a capable and autonomous defence producer.

The strategy includes incentives for local manufacturing, streamlined procurement processes, and support for dual‑use infrastructure that enhances military mobility. By investing not only in finished systems but also in the components and industrial capacity behind them, Germany is positioning itself as a central pillar of European defence. The result is a more resilient supply chain, a revitalised industrial base, and a military better equipped to meet the challenges of an increasingly uncertain security environment.

In conclusion, tiny Malta is faced with realities of the war in Ukraine, the conflicts in the Middle East and the Gulf, so it must wisely prioritise resilience, diversification and diplomacy. Such objectives ought to be focused towards achieving an economy capable of withstanding future economic shocks while seizing opportunities in expanding its GDP levels.

George M. Mangion is a senior partner at PKF Malta

The post Discussing a new outlook for Malta’s defence strategy first appeared on The Malta Business Weekly.

This article examines whether dismissals prompted by artificial intelligence fall within the concept of redundancy under Maltese law. It argues that while AI-driven workforce reductions may formally satisfy the statutory test, they occupy the outer limits of the doctrine. Where the work output requirement persists and only the human element disappears, the analysis queries whether the proscriptive function of the law shifts from elimination of function to substitution of labour – a distinction that may invite stricter scrutiny by the Industrial Tribunal. The note further considers the procedural obligations that attach to such dismissals, the employer’s duty to explore alternatives, and the extent to which EU law and policy reinforce domestic protections in the context of technological displacement.

Introduction

The traditional understanding of redundancy is deceptively simple and blunt: the job disappears, therefore so does the employee. Artificial intelligence disrupts that simplicity in ways that existing legal frameworks were not designed to address.

Where once a production line might close, or undergo enhancements to the machine-driven aspects of production, and render its operatives genuinely surplus to requirements, the modern employer has the opportunity to deploy automated systems capable of performing the same tasks continuously and at lower cost. The result is the same as a machine replacing a human: the output remains. The economic activity is unchanged. What has altered is the identity of the actor performing the work.  It’s happened before, but in a post-Orwellian environment, the perception of machine substituting the human is more acute.

This gives rise to a more nuanced question: can redundancy truly exist where the work persists, but the human performing it is replaced by an algorithm?

The issue is not merely theoretical. It goes directly to the validity of dismissals, the entitlements of affected employees, and the legal exposure of employers who characterise such terminations as redundancies without properly interrogating whether that label is sustainable.

Maltese Industrial Tribunal reasoning has consistently favoured substance over form in assessing dismissals. That redundancy by reason of structural change is a valid redundancy (mechanisation taking over jobs) was accepted by the Tribunal.¹

It is open to debate today, however, whether the Tribunal would adopt the same point of view without going deeper into whether the function survives in materially similar form.  Of late, Tribunals have shown a willingness to look beyond formal restructuring and examine whether a claimed redundancy is genuine even by taking into account whether “the job still exists”.

AI-driven dismissals, especially if on a large scale, bring that tension into sharp focus.

Legal Framework

Redundancy in Malta is grounded in the Employment and Industrial Relations Act (“EIRA”), which recognises termination as lawful where it is based on a valid reason connected with the employer’s operational requirements.² While the Act does not exhaustively define redundancy, it is understood – consistently with comparative jurisprudence – to arise where the employer’s requirement for employees to carry out work of a particular kind has diminished.

Collective redundancies are governed by the Collective Redundancies (Protection of Employment) Regulations,³ which transpose Council Directive 98/59/EC.⁴ These impose mandatory procedural obligations, including consultation with employee representatives and prior notification to the Director of Employment and Industrial Relations (DIER).

At EU level, the framework is primarily procedural. Directive 98/59/EC regulates the manner in which redundancies are effected rather than defining their substantive validity.⁵ The question whether a redundancy exists remains a matter of national law, albeit one that must be interpreted in conformity with EU principles.

AI and the concept of redundancy

AI-driven redundancies expose a structural tension within the conventional redundancy model. The work continues. The output remains necessary. Only the human input is removed and replaced by automated processes.

On a literal reading of the statutory formulation – namely that the employer’s requirement for employees has diminished – such situations may fall within redundancy. However, this interpretation stretches the concept toward its outer boundary. Redundancy has historically been associated with a reduction in the need for work, not merely a reduction in the need for human labour where the work itself persists.

This distinction is not semantic. It marks the difference between:

• diminution of operational need, and
• technological substitution of labour.

If the latter is accepted uncritically as redundancy, the doctrine risks becoming a vehicle for workforce reduction of a fundamentally different character – one in which human labour is displaced while the underlying activity remains intact or is even expanded.

Genuineness and tribunal scrutiny

Maltese law requires that redundancy be genuine. The Industrial Tribunal is not bound by the employer’s characterisation of the dismissal and will assess the substance of the situation.⁶

Where AI is introduced, the Tribunal is likely to examine:

• whether the role has genuinely ceased to exist;
• whether its constituent functions continue in materially similar form; and
• whether those functions have simply been reallocated to automated systems.

A redundancy driven by operational necessity is legally distinct from one driven purely by efficiency or cost optimisation. While cost considerations may form part of an employer’s rationale, they cannot, without more, justify a redundancy where the underlying work remains substantially unchanged.⁷

The risk is that a purported redundancy may be re-characterised as an unjustified dismissal, with the consequences that follow under Article 36 of the EIRA.⁸

Procedural obligations

Under the Collective Redundancies Regulations, employers must:

• consult employee representatives in good time and with a view to reaching agreement; and
• notify DIER prior to implementing dismissals.⁹

These obligations are mandatory and independently enforceable.

In the context of AI-driven restructuring, consultation must be meaningful. It requires the employer to explain:

• the rationale for automation;
• the selection of affected employees; and
• the alternatives considered, including redeployment and retraining.

Consultation conducted after the decision is effectively finalised risks being treated as a mere formality and therefore non-compliant. This is consistent with the interpretation of Directive 98/59/EC by the Court of Justice, which emphasises the effectiveness of consultation as a substantive safeguard.¹⁰

Selection and alternatives

Employers must apply objective and non-discriminatory selection criteria and must consider whether affected employees can be retained through redeployment or retraining.¹¹

AI does not necessarily eliminate all human involvement. Many automated systems require:

• supervision;
• quality assurance;
• exception handling; and
• system training or calibration.

Accordingly, the employer must demonstrate – on the evidence – that such alternatives were genuinely explored and found to be unviable. A failure to document this exercise may be taken as evidence that it was not properly undertaken.

Unfair dismissal

Under Article 36 of the EIRA, a dismissal must be based on a valid reason and carried out in accordance with a fair procedure.¹² These requirements are cumulative.

A dismissal presented as redundancy will fail the validity test where the redundancy is not genuine. Even where a substantive justification exists, procedural defects – such as inadequate consultation or failure to consider alternatives – may independently render the dismissal unfair.

EU Law and policy context

Directive 98/59/EC establishes a procedural baseline for collective redundancies but leaves substantive definitions to national law.¹³

However, broader EU instruments, including the European Pillar of Social Rights, articulate policy commitments to:

• fair working conditions;
• protection against unjustified dismissal; and
• support for workers affected by labour market transitions, including technological change.¹⁴

While not directly enforceable in the same manner as directives, these instruments exert interpretative influence. Where domestic law admits of more than one reading, an EU-conforming approach may favour stricter scrutiny of dismissals arising from technological substitution.

Transfer of business

The impact of the acquired rights protection regimen also bears some consideration.  The law, prompted by EU-level regulation, tends towards protection of workers whose job has been “moved on”.  In this case, one is looking at moving the job to ChatGPT or Claude or Perplexity (this one is invented) but there’s something to be said for this aspect also having an impact.

Conclusion

AI-driven redundancies may occupy contested legal ground. While they may satisfy the literal wording of the statutory test, they challenge the conceptual foundations of redundancy by decoupling the disappearance of work from the dismissal of workers.

They therefore attract heightened scrutiny. The Tribunal is likely to examine not only whether the employer’s need for employees has diminished, but also whether the underlying work has in fact disappeared or has merely been reassigned to automated systems.

Employers contemplating AI-driven workforce reductions must engage seriously with both the substantive and procedural dimensions of redundancy. These are not formalities to be addressed retrospectively, but conditions that determine whether the redundancy label is legally available.

The trajectory of the law is already discernible: dismissals that substitute human labour with algorithmic processing, without a genuine diminution in the work itself, will be treated with caution. Those who treat this terrain as settled rather than contested do so at their peril.

Andrew Borg-Cardona is a lawyer, graduated in 1980, with a particular interest in employment law.

___________________________________________________________________________

Footnotes

1. See generally the approach of the Industrial Tribunal favouring substance over form in dismissal cases under Chapter 452 of the Laws of Malta. (See also GWU v De La Rue 1998 per Debono C et)
2. Employment and Industrial Relations Act, Chapter 452 of the Laws of Malta, Article 36.
3. Subsidiary Legislation 452.80, Collective Redundancies (Protection of Employment) Regulations.
4. Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies.
5. Ibid., particularly Articles 2–3.
6. EIRA, Article 36; see also consistent Tribunal practice assessing the real reason for dismissal.
7. Compare UK jurisprudence for persuasive guidance: Murray v Foyle Meats Ltd [1999] ICR 827 (HL), confirming that redundancy may arise where the employer’s need for employees diminishes, though not determinative in Maltese law.
8. EIRA, Article 36(2).
9. Subsidiary Legislation 452.80, Regulations 4–5.
10. Case C-188/03 Junk v Kühnel [2005] ECR I-885, emphasising the timing and effectiveness of consultation.
11. Derived from general principles of fair dismissal under EIRA and Tribunal practice.
12. EIRA, Article 36.
13. Directive 98/59/EC, cited above.
14. European Pillar of Social Rights (2017), Principles 5 and 7.

The post Artificial Intelligence and Redundancy under Maltese Employment Law – an examination of the borders of the law first appeared on The Malta Business Weekly.

I believe it is useful to understand how Malta’s public finance progressed in the last six years, from the last year before Covid in which we had a surplus, that is 2019, all the way to 2025.

The government’s revenue grew by roughly €3.18 billion over these six years. The engine of this growth has shifted from corporate tax in the early years to Social Security and VAT in the later years.

Year-on-Year Government Revenue (Millions of €)

As can be seen above, Government Revenue plummeted in 2020 due to the pandemic. The 2021 surge was not just recovery, but the start of a massive increase in Income Tax receipts from the financial and gaming sectors. Then in the 2023-2024 period VAT and Income Tax jumped significantly. As wages rose and prices for goods increased, the government’s “cut” grew proportionally.

Now in 2025, for the first time, Income Tax actually dipped (-€51m) while Social Security (+€148m) became the primary growth government revenue driver, likely indicating that while corporate profits may have stabilised (or possibly dipped), the labour market (employment volume) remained strong.

On the other hand, Government Expenditure has scaled more aggressively, rising from €4.88 billion to €8.90 billion. The primary culprit is Programmes and Initiatives, which now consumes nearly half of the entire budget. The Programme & Initiatives expenditure category acts as a “catch-all” for the government’s direct spending on social services, subsidies, and national obligations that are not related to civil service wages or the day-to-day running of a specific department.

Year-on-Year Government Expenditure Shifts (Millions of €)

As can be seen above between 2022 to 2025, the Programmes and Initiatives category exploded. This includes the energy and fuel subsidies and social benefit increases. Personal Emoluments (civil service wages) grew by 62% since 2019. In 2025 alone, this rose by €149m due to new collective agreements across health and education. While Interest payments stayed flat or fell until 2022, but as debt crossed the €10 billion mark in a higher-interest environment, the cost to simply service that debt (interest) has jumped 70% in just three years (2022 to 2025). In 2019, the government spent roughly €13.4 million per day. By 2025, that figure rose to €24.4 million per day.

The government finance 2025 data released on 27 March shows a worrying trend as total overall government revenue growth is slowing (+2.7%) while Expenditure growth is accelerating (+7.3%), as Income tax revenue has not grown in 2025. In 2025 government revenue has grown almost entirely dependent on Social Security contributions from a growing workforce and VAT.

Now some analysis of the sustainability of Malta’s public finances, in 2025 and in the near future, considering the present geopolitical scenario.

Malta’s economic reporting is characterised by significant GDP upward revisions as initial quarterly estimates are replaced by more comprehensive annual data. For 2023, the nominal GDP was initially reported at approximately €19.37 billion, only to be revised upward by 6.6% to a final figure of €20.65 billion. A similar pattern emerged for 2024, where the first provisional estimate of roughly €21.5 billion was eventually adjusted to €23.10 billion, representing a 7.4% increase.

As of the March data release, the provisional GDP for 2025 is estimated at €24.53 billion. If we apply the average revision rate from the previous two years (approximately 7%), the final GDP for 2025 is likely to be revised toward €26.25 billion by the time the final accounts are settled. Based on the NSO’s reported Consolidated Fund deficit of €823.9 million, this adjusted economic denominator would result in an annual deficit of 3.14% of GDP. This figure is particularly significant as it brings Malta remarkably close to the 3% threshold mandated by the EU’s Stability and Growth Pact, suggesting that while the absolute deficit increased in 2025, the sheer scale of economic expansion continues to provide a crucial buffer for national fiscal sustainability.

Looking forward, one has to consider that it is very likely that government expenditure would have to increase further in 2026, as it will have to pay higher fuel and energy subsidies as international oil and gas prices have soared due to the Iran war. In the meantime, if Malta has the predicted real economic growth rate of 3.8% in 2026 plus an inflation of 3.5% the nominal GDP for 2026 would be approximately €28 billion. If we were to assume that Malta would hit a higher deficit level of around €1 billion in 2026 (mainly due to increased fuel and energy subsidies), we would hit a deficit to GDP ratio of 3.5%-3.6%, which would delay our trajectory from hitting the 3% level.

Malta’s fiscal narrative between 2019 and 2025 reveals a sophisticated paradox: a government whose daily spending has nearly doubled – from €13.4 million to €24.4 million – yet remains anchored by an economy that consistently outpaces its own preliminary growth estimates. The transition from 2019 to 2025 highlights a shift toward a high-spending, subsidy-heavy model. However, the 2025 data signals a structural pivot that warrants caution. For the first time in this period, Income Tax revenue has dipped, leaving the state increasingly dependent on VAT and Social Security contributions from an expanding workforce to fund its obligations.

With Programmes and Initiatives now consuming nearly half the budget and debt-servicing costs jumping 70% in three years, the margin for error has narrowed. Looking ahead to 2026, rising geopolitical energy costs are expected to strain Malta’s fiscal sustainability, making it increasingly dependent on maintaining strong real growth (projected at 3.8%) to keep pace with mounting expenditure.

The 2026 fiscal outlook suggests that Malta is entering a high-stakes race between economic expansion and exogenous shocks. While a projected €28 billion nominal GDP provides a formidable defence, any further escalation in geopolitical energy costs could push the deficit toward €1 billion, potentially stalling the nation’s trajectory toward fiscal consolidation.

The post Malta’s fiscal tightrope 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.

In economic theory, subsidies are primarily viewed as shock absorbers. When a sudden, exogenous shock (like a war or a pandemic) hits, the “Temporary vs. Permanent Shock” framework suggests that governments should intervene to prevent a “price cliff”. By absorbing the initial blow, the state prevents a downward spiral of reduced consumer spending and business insolvency.

However, subsidies are not intended to remain in perpetuity. According to the Principle of Market Signals, prices serve as essential information. When the state permanently masks the true cost of a resource:

• Incentives vanish: Consumers have no reason to conserve energy;
• Innovation stalls: Businesses feel no pressure to pivot to more efficient technologies; and
• Fiscal drag: What was meant to be a temporary bridge becomes a permanent weight on the national debt, reducing the country’s ability to respond to the next crisis.

Malta’s commitment to price stability has come at a significant fiscal cost. Below is the breakdown of the estimated expenditure on energy and fuel subsidies alongside the average spot price of Brent crude oil for those years.

This means that over four years we have spent €1.17 billion in energy and fuel subsidies.

Which brings about the important point of resilience. We are living in an era of “polycrisis”, where the world appears to hop from one geopolitical or environmental catastrophe to another. In this reality, a country’s greatest asset is resilience. Resilience is not just the ability to spend; it is the ability to have a deep and large enough “war chest” available exactly when the peak of a crisis hits.

To maintain this fiscal firepower, a strategic shift based on sound economic principles is needed. Both the IMF and the Central Bank of Malta have advocated for an “exit strategy” – moving away from universal, untargeted subsidies toward a more flexible model. This involves limiting or reducing subsidies during “peace” periods – times when energy prices are lower or the crisis is not at its peak.

Reducing the subsidy during milder periods serves two critical purposes:

1. Fiscal replenishment: It allows the government to reduce the deficit and build reserves, ensuring that when a massive shock (like the 2026 Iran war) occurs, the state has the financial strength to protect the most vulnerable while still managing to keep fiscal sustainability.
2. The inducement for change: Removing the “artificial safety net” during stable times acts as a powerful economic inducement. When businesses and households face even a gradual return to market-reflective pricing, the Return on Investment (ROI) for renewable energy and energy-efficient retrofitting becomes far more attractive.

The economic sense of subsidies lies in their timing. Using them to blunt the sharpest edge of a war-induced spike is sound social policy; using them to hide the reality of a changing energy landscape during periods of relative calm is a missed opportunity. By tapering support when the pressure is lower, Malta can build a more resilient economy – one that is both financially prepared for the next storm and equipped to outrun it.

The post The economic sense of subsidies 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.

This rebound has occurred despite higher flight costs and longer journey times. With direct connections between Russia and the EU still suspended, travellers have adapted by routing through third countries such as Turkey, Serbia or the United Arab Emirates to reach Schengen destinations. Although these indirect routes are typically more expensive, low-cost airlines have adjusted to the rerouting and continue to offer relatively competitive fares, for example, on connections from Moscow to Paris via transit hubs like Istanbul.  At the same time, visa procedures have become costlier. Higher Schengen application fees meant Russian residents spent €48,527,520 on applications in 2024, of which €3,590,800 was effectively lost on rejected cases. Yet demand has remained resilient. Tourism representatives attribute this to improved economic conditions and rising disposable incomes, while industry insiders note that visa issuance stabilised in 2024, with many EU and associated countries still granting visas to Russian travellers.

Demand remains driven by sustained interest in classic European destinations, as reflected in booking data.  In early 2025, hotel reservations from Russia for the spring–summer season rose by around 33% year-on-year in Italy, 65% in Spain and 45% in France.  In 2024, Italy recorded the highest number of visa applications from Russian residents, followed by France, Spain, Greece and Hungary.  By contrast, EU states bordering Russia, including Finland and Poland, issued only limited numbers of visas, reflecting stricter security considerations.

The EU has steadily tightened visa rules for Russians as part of its security response.  In September 2022, the EU fully suspended its 2011 visa facilitation agreement with Russia.  This raised visa fees from €35 to €80 and introduced additional paperwork and longer processing times.  In the same period, the European Commission issued guidelines asking member-state consulates to “deprioritise non-essential travel” by Russians, meaning tourist and leisure visas are given very low priority. Consulates were told they could take up to 45 days, instead of 15, to decide on Russian visa applications and request additional documents for scrutiny.

On 7 November 2025, the Commission went further by issuing implementing rules to ban routine multiple-entry Schengen visas for Russian citizens.  Under the new rules, almost all Russian applicants must get only single-entry visas, forcing them to apply for each visit afresh.  Only a few “low risk” categories, such as close family of EU residents and professional transport workers, are exempt under certain conditions.  Notably, the Commission decision is officially advisory, and in practice, many EU embassies had already been issuing few multi-entry visas for Russians.  Industry experts argue the measure will have minimal impact on tourist flows, since consulates were already granting only one-time visas in most cases.

Most recently, in January 2026, the European Commission adopted a first-ever EU Visa Strategy, explicitly linking visa policy to security and foreign policy objectives.  The strategy proposes concrete measures to leverage visa policy to promote the EU’s strategic interests and bolster its security framework. This includes potential targeted restrictive visa measures to suspend, refuse, or restrict visa applications in response to hostile actions by third countries, such as Russia, that undermine EU security, as part of a future legislative proposal to revise the Visa Code.  In an increasingly volatile geopolitical environment, this would allow the EU to better respond to cases of hybrid attacks, information manipulation and interference, the politically motivated instrumentalisation of migrants, the weaponisation of migration, and open acts of aggression.  It would enhance the Union’s strategic autonomy and coherence, aligning visa policy more closely with the objectives of the EU’s common foreign and security policy.  In short, the strategy gives Brussels greater flexibility to tighten visa access for Russians at short notice, potentially making tourist flows more conditional and less predictable.

In conclusion, Russians have resumed seeking EU holidays when they can afford them, while the EU is tightening its visa system in response to security concerns. However, so far, the effect on tourist numbers seems limited.  The restriction on multi-entry visas is unlikely to affect tourist flows, as visa-issuing officials have issued virtually none for the past two years.  Observers note that most Russian tourists flying into Europe in 2024 did so with freshly issued short-term visas.   In short, demand rather than policy remains the main driver of travel.  Russian tourism to Europe is likely to persist, but under a tighter and more conditional visa regime increasingly shaped by geopolitics.

The post Russian tourism to Europe and the new EU Visa strategy first appeared on The Malta Business Weekly.

The distinction between transit calls and home porting is central. Transit passengers spend limited hours ashore. They contribute to retail, food and beverage, and excursions, but their economic footprint is compressed into a single day. Home port operations, by contrast, generate layered economic activity: air travel, hotel nights, ground handling, provisioning, logistics and pre- and post-cruise spending. In effect, they integrate the cruise segment with aviation, hospitality and ancillary services.

For a small, service-driven economy, this integration is commercially significant. Home port passengers behave more like traditional stayover tourists. They increase average length of stay and raise per capita expenditure. They also strengthen route development arguments for airlines, given the steady flow of embarkation and disembarkation traffic. From a macroeconomic standpoint, the multiplier effect of home porting is materially higher than that of a transit stop.

This is why the proposal to include space for a dedicated home port terminal within the Grand Harbour regeneration framework deserves serious consideration. At present, the cruise port operates in a physically constrained environment beneath the bastions of Valletta. The setting is iconic, but space between quay and fortifications limits passenger processing, logistics and operational flexibility. Efficiency gains have mitigated these constraints, yet capacity ceilings remain structural.

Infrastructure investment in a home port terminal should not be viewed as an aesthetic add-on to a regeneration project, but as a productivity measure. Without sufficient embarkation facilities, Malta’s ambition to scale fly-cruise operations will be capped. Competing Mediterranean ports continue to upgrade terminals and streamline passenger flows.

The evolution of the cruise market further strengthens the business case. While total passenger numbers are expected to remain broadly stable this year, port calls are increasing due to a higher frequency of lower-capacity luxury vessels. This reflects a broader shift towards premium experiences. These passengers demand curated, high-value services which can command significant margins if properly structured.

The Grand Harbour Revival Plan speaks of regeneration and mixed-use development. From a business standpoint, regeneration must also enhance commercial throughput and economic resilience. A modern home port terminal, sensitively integrated into the harbour’s fabric, would strengthen Malta’s value proposition in a competitive regional market.

The cruise sector is not merely a tourism adjunct; it is an economic platform intersecting aviation, hospitality, retail and maritime services. Ensuring adequate operational space and investing in home port capability is therefore less a matter of expansion and more a question of strategic alignment. In business terms, the opportunity cost of inaction may be higher than the capital cost of development.

The post Editorial: Strengthening Malta’s cruise hub for long-term economic growth first appeared on The Malta Business Weekly.