Abela made these remarks during a consultative meeting with representatives of the General Workers’ Union at the GWU premises in Valletta, as part of the consultation process in preparation for Budget 2027.

Abela noted that the country is operating within an international context characterised by uncertainty and significant challenges.

He referred to the ongoing international discussions regarding these realities, including at the United Nations General Assembly, as well as the pressures linked to international energy prices.

Despite this international context, Abela maintained that Malta will continue to offer certainty and peace of mind to businesses, which keep investing in our country and creating job opportunities, including quality jobs for Maltese and Gozitan workers.

He said that this sentiment is being felt across various economic sectors and emphasised that job creation has been, and will remain, a top priority for the government.

The Prime Minister explained that a strong labour market also creates the conditions for further progress regarding job quality and working conditions.

He cited, among other things, collective agreements, better wages, and increased opportunities for workers to advance their skills and careers. Abela said that this is achievable because our country possesses an economy and a labour market that are yielding results.

He also referred to the government’s continued support regarding energy prices.

Abela said that this ensures ongoing stability for families and businesses while helping to avert adverse effects on the Maltese economy.

The Prime Minister said that, in the face of an international landscape that remains unpredictable, the government will continue to serve as a source of stability and certainty.

Abela concluded by thanking the General Workers’ Union for the proposals submitted in preparation for the 2027 Budget, as well as for its ongoing daily efforts to safeguard workers.

Also present at the meeting were Deputy Prime Minister Ian Borg; Ministers Silvio Schembri, Miriam Dalli, Clyde Caruana, Jonathan Attard, Chris Bonett, Jo Etienne Abela, and Keith Azzopardi Tanti; Parliamentary Secretary Alicia Bugeja Said; MP Anthony Agius Decelis; and the Head of the Prime Minister’s Secretariat, Mark Mallia.

The post ‘Budget 2027 will provide peace of mind to investors and workers,’ Prime Minister tells GWU first appeared on The Malta Business Weekly.

The interview also addressed matters of national interest, including environmental policy

One of the topics that I proposed was also a transition period from sectors that generate low gross value added and require several workers, whose labour force would need to be imported. In fact, I said that there must be bipartisan agreement on matters of national interest, including those related to the environment and education. We must converge on this matter both politically and economically. And the policies proposed within this area must be mature. However, the interview treated the economy, and economics is a complex topic. And as much as I understand that even politics can be a complex topic, especially here in Malta, economics becomes even more complex when theory becomes conflated with political rhetoric and partisan arguments.

Utility subsidies contribute to economic stability – Keynes vs Hayek

Indeed, I read what was issued, and I have no problem saying that utility subsidies must stay because the moment we create instability is the moment we ruin the economy. I have said this in my early podcasts in 2022, when the war in Ukraine broke out, and have kept this consistent in my arguments. There was no deviation since then. And there is not going to be any deviation, because I understand economic theory. And the part of utility subsidies is the way we view the economy, either from a Keynesian perspective or a Hayekian perspective. The former intervenes in the market in bad times to allow the economy to grow and stimulate demand without hindering growth. At the same time, the latter adopts a laissez-faire approach, leaving the market to operate on its own, much as it does with the electorate and citizens themselves. And as you may recall, I always said that I profess and follow Keynesian economics rather than Hayekian economics. This is my economic philosophy. And it dictates not to leave the market to function on its own.

However, given the complexity of the subject, I want to clarify that if subsidies are not retained, then we would shock the economy. I understand that this is not the PL’s policy, and that subsidies are here to stay. Back in 2022, I stated that had it not been for the utility subsidies, inflation would have hit double digits exactly as it happened in other EU member states. It would have wrought havoc on our economy, eroded incomes, and generated frustration among low- and middle-income earners. Such a blanket subsidy is provided to maintain economic stability. This means that the departure point must be the subsidies; then what comes after or complements it is another matter. Utility subsidies prevent imported energy shocks from cascading into domestic prices, wages, and expectations, which is crucial for a small open economy.

I respect and uphold journalistic independence

Additionally, I do not interfere with journalistic output when I sit for interviews, neither with the content nor with the headlines. And I leave it up to journalists to decide about headlines and outputs. What I always offer is that if any technical arguments are unclear, they can always revert to me; otherwise, it would be a dereliction of duty on my part not to assist. I take this approach because I am politically liberal and strongly support journalistic work that asks questions and provides readers with honest answers. This newspaper has never interfered with or altered my opinion pieces when I submit them. On the contrary, it always supported me. And I take a similar approach when this newsroom interviews me, as I do with other newsrooms. However, economics is a complex subject, and the interpretation of policies is also quite complex. And any reporting of deviation from my economic beliefs might be related to limited knowledge of the subject.

The PN’s aspirations for government

When asked what should be done if citizens wanted a phase-out of the subsidy under a different political party in government, I stated that there must be agreement on phasing it out; otherwise, it would shock the economy. And I will keep on reiterating it. If the PN aspires to be in government and politically decides to phase out the energy subsidy, it must do so in a way that does not shock the economy, with a phase-out that allows for planning, both income-wise and cost-wise. In truth, the PL in government managed to create an economy that withstood various economic shocks. Had it not been for past economic growth, including at times a surplus, we wouldn’t be in such a position to cover these costs. And as long as the economy keeps growing at the same rate and momentum, then we can sustain the current subsidies. It doesn’t make sense to remove a subsidy and create chaos, at least until this geopolitical chaos is ongoing.

Economic growth and the debt-to-GDP ratio

Those who do not understand economic theory might tell you that we are borrowing to keep what we have. True, they are seeing just one aspect of borrowing, especially when they view it in absolute terms. We need to see the other aspect of creating economic growth, too. And with creating economic growth, we are reducing the impact of the debt-to-GDP and deficit-to-GDP ratios. And I must agree with those leaving comments under the article that it is the PL in government that can solve this problem, as they did in 2013 with the reduction in energy bills. The comments reflect a limited understanding of the broader economic context. When asked where I was in 2008, I can tell Peter that I was working side by side with the Leader of the Opposition to win the government, grow the economy, and provide better policies, which policies are inter alia an increase in pensions, which he’s currently definitely enjoying, and would have been robbed of if there was an alternative government.

To conclude, I do not normally take such a direct route to explain myself. However, even the Leader of the Opposition referred to last Sunday’s article on subsidies in one of the local podcasts. And probably did not see what I said in an online post following the publication of the article. Well, now you know what I believe, economically and politically, about utility subsidies. And you may equally quote me in your next podcast. Now it’s high time for the Opposition to tell us what their alternative is for their energy policies, besides the proposed petrol station on the periphery of Hurd’s Bank, tsk, tsk.

The post Utility subsidies provide economic stability for all first appeared on The Malta Business Weekly.

Simultaneously, the part-time labour market registered an even more aggressive relative surge. Part-time positions climbed from an annual average of 77,792 in 2024 and 83,657 in 2025 to 88,050 in March, reaching 88,971 positions in April. This translates into a year-over-year increase of 8,352 part-time jobs against the revised April 2025 figure of 80,619, representing a remarkable 10.36%. Combined, aggregate job headcount across both full- and part-time activities expanded by 22,938 positions, or 6.11%, while the broader labour supply excluding part-time employment reached 310,989 in April, up from 296,044 a year earlier. Alongside this expansion, registered unemployment recorded a mild uptick, rising from an annual average of 1,128 in 2024 and 1,038 in April 2025 to 1,397 persons in April, remaining historically low relative to the size of the gainfully occupied population.

From a gender perspective, males continue to comprise the larger share of full-time employment, increasing from 177,477 in April 2025 to 186,367 in April through the addition of 8,890 workers, representing 5.01%. Female full-time participation progressed at a comparable pace, rising from 117,529 to 123,225 through the net addition of 5,696 workers, or 4.85%. Regarding the nature of employment contracts, the domestic economy remains fundamentally anchored in wage-earning employee roles rather than independent enterprise. Direct employees expanded by 13,695 individuals between April 2025 and last April, increasing from 263,373 to 277,068 workers, a 5.20% increase. Self-employment, on the other hand, displayed much more moderate dynamism, inching up by 891 individuals from 31,633 to 32,524, representing an increase of 2.82%.

The distribution of full-time net job creation across individual NACE divisions highlights the specific industries absorbing labour supply. Administrative and support service activities registered the single highest absolute full-time increase across the entire economy, expanding by 1,833 workers from 34,885 in April 2025 to 36,718 in April of this year, representing a growth rate of 5.25%. A closer inspection of this division reveals that expansion was heavily concentrated in temporary employment placement activities, which gained 767 jobs to reach 14,339, and services to buildings and landscape activities, which added 690 positions to reach 8,869.

The information and communication sector followed closely, registering the second-largest absolute gain and the fastest percentage expansion among major sectors, rising by 1,534 jobs from 10,624 to 12,158, an increase of 14.44%. Remarkably, virtually this entire sector’s net expansion was generated by a single specialised sub-discipline, computer programming, consultancy, and related activities, which surged by 1,535 jobs, or 25.29%, moving from 6,069 to 7,604 workers.

Transportation and storage formed the third-largest engine of full-time job growth, adding 1,490 positions to grow from 16,186 to 17,676 workers, an increase of 9.21%. This was spearheaded by land transport, which grew by 586 jobs to 7,671, warehousing and support services, which added 544 jobs to reach 5,963, and postal and courier activities, which rose by 181 jobs to 1,643.

In accommodation and food service activities, full-time headcount rose by 1,486 workers from 23,099 to 24,585, reflecting a 6.43% increase evenly divided between accommodation establishments, which added 756 workers to reach 9,910, and food and beverage services, which grew by 730 workers to 14,675. Human health and social work activities expanded by 1,456 full-time positions from 21,969 to 23,425, an increase of 6.63% driven equally by human health activities, which added 605 workers to reach 12,469, and residential care activities, which also added 605 workers to reach 7,245. Substantial full-time job gains were also recorded in wholesale and retail trade, which advanced by 1,410 jobs to reach 37,045, heavily propelled by retail store activities that added 848 workers to total 19,399. Public administration and defence grew by 1,216 employees to reach 19,592, construction added 1,139 jobs to reach 20,610, education gained 755 jobs to total 21,119, and professional, scientific, and technical activities increased by 732 workers to 24,086.

In the part-time employment domain, sectoral expansion exhibited a markedly distinct structural pattern centred around logistical mobility and service flexibility. Transportation and storage witnessed an extraordinary surge of 1,773 part-time positions, expanding by 33.73% from 5,257 in April 2025 to 7,030 in April of this year. This was underpinned by land transport, which added 942 part-time jobs to reach 4,327, and postal and courier activities, which added 456 part-time positions to reach 1,068, representing a striking 74.51%. Accommodation and food service activities added 1,183 part-time positions, growing by 15.19% to 8,969, led by food and beverage operations, which absorbed 864 additional workers.

Deconstructing the 14,586 net full-time jobs created over the year reveals an evident macroeconomic dichotomy regarding the value-added orientation of Malta’s employment expansion. High-value-added, knowledge-intensive sectors generated 2,810 net full-time jobs, representing approximately 19.26% of the total net expansion. Within this group, the information and communication sector stood out with its gain of 1,534 jobs, driven by computer consultancy and programming. Professional, scientific, and technical activities contributed 732 positions, with gains concentrated in management consultancy and head offices, which added 874 jobs, offset by a contraction of 406 jobs in advertising and market research while architectural and engineering activities remained stagnant with a marginal gain of three positions.

Financial and insurance activities added 544 jobs, led by financial services which added 395 roles. Meanwhile, gambling and betting activities within arts, entertainment, and recreation, historically a premier high-value sector, added a modest 86 full-time jobs from 10,705 to 10,791, signalling operational maturity, automation, and workforce consolidation.

In contrast, low- to medium-value-added, labour-intensive private service sectors absorbed 7,885 net full-time workers, comprising 54.06% of the entire net expansion. This was defined by large-scale headcount increases in administrative and support services, which added 1,833 workers, transportation and storage, which added 1,490 workers, accommodation and food service activities, which added 1,486 workers, wholesale and retail trade, which added 1,410 workers, and construction, which added 1,139 workers.

These industries are inherently characterised by lower gross value added per employee, lower median remuneration, and an operational reliance on sheer labour volume. Public administration and essential social infrastructure accounted for the remaining 3,427 net full-time jobs, or 23.49% of the total, divided across human health and social work with 1,456 positions, public administration and defence with 1,216 positions, and education with 755 positions. Consequently, roughly three out of every four net full-time positions created in the domestic economy were situated outside high-productivity knowledge industries.

Synthesising this labour data against Malta’s macroeconomic performance benchmarks provides fundamental insights into domestic productivity. In volume terms, Malta’s real GDP expanded by 3.9% over the corresponding year-ending Q1 2026 period as documented by the NSO. During this exact timeframe, full-time employment grew by 4.94% and part-time employment grew by 10.36%, and total employment headcount across both full- and part-time jobs expanded by 6.11%. The direct mathematical and economic consequence of employment growth surpassing output growth is an apparent contraction in aggregate real labour productivity per worker. This confirms that Malta’s current phase of economic expansion remains predominantly extensive rather than intensive, relying on the physical absorption of labour inputs rather than gains in capital efficiency, technological innovation, or total factor productivity.

Furthermore, because the overwhelming majority of job creation is concentrated in physical services, construction, logistics, and hospitality, the broader economic model exerts acute pressure on physical infrastructure, traffic networks, utilities, and social amenities relative to the net fiscal and value-added yield produced per worker. While the vigorous expansion of high-tech computer programming proves that specialised high-value niches continue to thrive, the overarching trajectory of Malta’s labour market up to April remains deeply rooted in labour-absorbing, volume-driven activities.

The post Malta’s employment trajectory and the productivity challenge first appeared on The Malta Business Weekly.

At the core of decentralised finance is the idea of replacing the traditional system of financial organisations (banks, investment funds, exchanges, and so on) with one on the blockchain, based on the principle of decentralisation. It is a system of financial applications built on blockchain networks that aims to replicate some of the functions of the traditional financial system in a seemingly open way, eliminating traditional financial intermediaries and centralised institutions. The current number of DeFi users in the EU is estimated to be 7.2 million, but only a fraction (less than 15%) seems to engage regularly in DeFi activities. The main use cases of DeFi appear to be staking, lending and borrowing, and exchanging crypto-assets.

Euro-denominated so-called stablecoins remain negligible in DeFi markets.

It represents 4% of the total crypto-asset market and is managed by the people who use crypto assets themselves and, unlike the world of fiat, doesn’t have a central governing body. At this stage, I shall list some of the main advantages of decentralised finance. To start with, there is more accessibility, such that anybody with an internet connection anywhere can connect to and take full advantage of DeFi, where users interact with each other directly without intermediaries, while the smart contracts monitor compliance with all the terms and conditions of transactions. Another advantage is conditional anonymity, yet, of course, everything and everyone can be tracked with enough effort, but for the most part, a crypto wallet is all you need to connect to and use the system.

Furthermore, DeFi is a system of financial applications built on blockchain networks that aims to replicate some of the functions of the traditional financial system in a seemingly open way, eliminating traditional financial intermediaries and centralised institutions. It is financial activity whose rules are expressed in smart contracts on a public ledger, so that users can trade, lend, borrow, provide liquidity, or earn yield directly through code using a self-hosted wallet, rather than opening an account with a firm that holds their assets and determines the terms. Many DeFi products route through hosted wallets, smart accounts with vendor recovery, or curator vaults. If the token is a MiFID financial instrument, MiCA rules do not apply at all. DeFi in the economic sense is “finance expressed as public smart contracts”.

MiCA treats a CASP (a crypto-asset service provider) as a legal person or other undertaking whose occupation or business is providing one or more crypto-asset services to clients on a professional basis, and that is authorised to do so. CASPs provide the various services to clients: custody and administration of crypto-assets on behalf of clients; operation of a trading platform for crypto-assets; and exchange of crypto-assets for funds or for other crypto-assets.

Furthermore, they execute orders for crypto-assets on behalf of clients and place crypto-assets via receipt and transmission of orders for crypto-assets on behalf of clients. They also provide advice and portfolio management on crypto-assets.

Moving on, let us discuss MiCA (Regulation (EU) 2023/1114). This is the EU single rulebook for crypto-assets that are not already financial instruments, deposits, funds (except e-money tokens), insurance products or securitisation positions. It applies to persons who issue or offer crypto-assets in the EU, seek admission to trading, or provide crypto-asset services. The main uses of DeFi appear to be staking, lending and borrowing, and exchanging crypto-assets. Euro-denominated so-called stablecoins remain negligible in DeFi markets, so that a majority of surveyed EU banks do not engage in crypto-asset issuance or service provision. So far, the adoption of technologies related to crypto-assets is low among EU banks. EU investment funds providing exposure to crypto-asset markets or the blockchain sector represent a very limited portion of the EU fund universe (0.02%).

One may ask: what are the main vulnerabilities of this system? Its anonymity or pseudonymity, due to the use of self-custodial wallets, can challenge the enforceability of the regulatory framework. Another weakness is that it can facilitate fraudulent activities and obfuscation of funds of crypto-assets. Because of this, there are a number of consumer protection concerns and a need for high levels of digital/financial literacy to understand risks. Users need to effectively safeguard private keys, with particular care regarding self-hosted wallet use. To mitigate such weaknesses, all crypto-asset service providers must be authorised in one member state and can then passport across the EU.

By definition, a CASP is a crypto-asset service provider under the EU’s Markets in Crypto-Assets Regulation (MiCA). It is a company (or other undertaking) whose business is providing one or more listed crypto-asset services to clients on a professional basis, and that is authorised to do so in the EU.

In summary, DeFi is a financial system implemented within the crypto industry and represented by many decentralised platforms, which are interconnected to a greater or lesser degree.

The post Discover the new requirements for Decentralised Finance (DeFi) first appeared on The Malta Business Weekly.

Major global indices have slumped into volatile sell-offs as tech-driven momentum faltered and risk-off sentiment spread across trading floors worldwide. What initially triggered this broad-based deterioration was a sudden collision of escalating geopolitical instability in critical energy corridors and the sharp re-acceleration of wholesale fuel costs, which together shattered any assumptions of an orderly, disinflationary soft landing. The market turbulence of recent sessions is no longer a localised correction; it marks the moment investors finally recognised that the underlying macroeconomic environment has taken an aggressive turn for the worse.

The initial shock originated in the global commodity complex, where supply-side disruptions rapidly reignited cost-push price pressures. Brent crude surged back beyond triple digits, compounded by sharp upward jumps in natural gas benchmarks and severe midstream bottlenecks in refined distillates such as diesel. Because transport fuels and primary energy feed directly into freight rates, industrial manufacturing, and agricultural production, the secondary pass-through into core services and food prices proved remarkably fast. This dynamic has dismantled expectations of imminent relief for household budgets, directly eroding real disposable incomes while forcing industry to contend with renewed margin compression.

Confronted with this sudden resurgence of price pressures, major monetary authorities have been forced to adopt an aggressive posture. Central banks, notably the European Central Bank alongside the Federal Reserve and the Bank of England, have halted anticipated easing cycles or pivoted back toward active tightening. Rather than offering liquidity backstops to fragile real economies, the ECB and its peers are prioritizing mandate credibility, holding benchmark policy rates at restrictive levels and accelerating quantitative tightening to shrink balance sheets. This resolute monetary squeeze has drained liquidity from the banking system, elevated debt servicing costs across commercial credit lines, and effectively removed the central-bank safety net that markets had taken for granted over the past decade.

This monetary clampdown has precipitated an acute revolt across global fixed income markets, where sovereign yields have climbed to multi-decade peaks. The link between sovereign debt and borrowing costs is deeply non-linear, creating profound structural risks for the European Union and the stability of the eurozone single currency. Several member states currently carry debt-to-GDP ratios well above the 100 percent threshold, leaving them acutely vulnerable to sovereign bond market refinancing stress. As existing, ultra-low-coupon debt matures, these high-debt sovereigns must roll over hundreds of billions of euros at current high interest rates. If international investors demand escalating risk premia to absorb new debt issuances, bond spreads between core European economies and the southern or peripheral members will widen sharply. This dynamic threatens to re-fragment eurozone sovereign bond yields, straining the ECB’s transmission protection mechanisms and exposing the euro to the existential financial fractures last witnessed during the sovereign debt crisis.

Beyond Europe, the liquidity squeeze is hitting emerging and frontier economies with devastating force. A strong dollar and double-digit hard-currency financing costs have effectively shut vulnerable sovereign borrowers out of international capital markets. Because food and fuel represent disproportionately high shares of consumption in these jurisdictions, imported inflation and widening credit spreads have triggered severe domestic financial distress, leaving numerous governments spending substantially more on external debt servicing than on healthcare, infrastructure, and basic public investment.

Compounding this financial strain is the erosion of global trade as a shock absorber. Instead of facilitating cross-border adjustment, international trade has become an engine of friction. The pre-emptive front-loading of shipments designed to evade rising tariff walls has run its course, leaving behind structurally fragmented supply chains, reshoring mandates, and retaliatory duties that systematically raise intermediate production costs. At the same time, governments have exhausted the fiscal buffers that cushioned previous downturns, having spent their counter-cyclical reserves on pandemic relief and subsequent energy subsidies, leaving public treasuries with virtually no fiscal room to orchestrate fresh interventions.

For an open, import-dependent island economy like Malta, this international tempest introduces possible domestic transmission channels, creating substantial inflationary pressures and economic growth headwinds. Because Malta imports virtually all of its consumer goods, industrial inputs, and food supplies, higher international maritime freight rates and elevated external producer prices inevitably feed directly into domestic core inflation, particularly through the food and services baskets. While the government’s policy of blanket energy and fuel subsidies insulates consumers from direct utility price spikes, an escalating global commodity shock significantly enlarges the state’s subsidy expenditure bill, consuming fiscal space that would otherwise support productive capital expenditure and long-term infrastructural upgrades. On the growth front, Malta’s primary economic drivers—tourism, transshipment logistics, and international services—are acutely sensitive to the financial health of the wider European continent. As prolonged ECB monetary tightening squeezes real disposable household incomes and dampens consumer confidence across major source markets like the UK, Germany, and Italy, inbound travel spend and external service demand could naturally decelerate. Constrained by physical capacity bottlenecks and rising intermediate operating costs, Maltese enterprises could face narrowing margins and an increasingly sluggish external market.

The international economy is now crossing an exceptionally precarious threshold as the temporary cushions that previously softened macro shocks dissolve. If elevated energy costs, restrictive monetary conditions, and sovereign refinancing pressures persist, the global economy faces a severe and synchronised stagnation. As history repeatedly teaches us, prolonged economic turbulence of this magnitude never remains confined to balance sheets and financial models. Sustained contractions in living standards, systemic sovereign debt strain, and widespread cost-of-living crises inevitably erode public trust, fuel institutional fragmentation, and trigger profound political repercussions that can reshape nations and dismantle international alliances.

The post The gathering international economic storm first appeared on The Malta Business Weekly.

Three years after Giorgia Meloni’s government revived the long-dormant Messina Bridge project, however, the most striking feature of Italy’s €13.5 billion plan is not the engineering challenge. It is the extraordinary political, legal and institutional machinery that has grown around it.

The bridge was relaunched by Meloni’s government in 2023, with Transport Minister Matteo Salvini becoming its most prominent political champion. The proposed 3.7 kilometre suspension bridge is intended to connect Sicily with Calabria and become the world’s longest suspension bridge. Yet despite repeated declarations that construction was imminent, the project is still navigating approvals and scrutiny. The current timetable envisages the project entering its implementation phase by the end of 2026 and opening to traffic in 2034.

That is a considerable shift from the government’s earlier timetable. In 2025, the project had received a green light from the Interministerial Committee for Economic Planning and Sustainable Development, or CIPESS, but the Court of Auditors subsequently refused to register the resolution. The court raised questions over environmental compliance, changes to the existing contract and other procedural and financial issues. A November 2025 ruling also raised concerns over EU environmental and procurement requirements.

Nevertheless, Rome has refused to abandon the project. Instead, the government changed the legal framework and continued working to address the objections. The company responsible for the bridge says that the revised framework has dealt with the Court of Auditors’ concerns and that the project remains fully funded at an estimated €13.5 billion. It also says discussions with the European Commission have continued without an infringement procedure being opened.

The political determination to push ahead is perhaps understandable. Supporters portray the bridge as a long-term investment in southern Italy, improving transport connections between Sicily and the mainland and completing part of the European transport corridor running towards Palermo. For Salvini in particular, it has become a symbol of Italy’s ability to deliver major infrastructure rather than endlessly debate it. But that political symbolism may also explain why the project has become so difficult to separate from politics.

In June 2026, prosecutors in Rome opened a corruption investigation connected to the bridge’s approval process. Three people were investigated, including a former deputy president of the Court of Auditors, a lawyer who had previously served on the board of Stretto di Messina, and an entrepreneur. According to investigators, the suspects allegedly attempted to influence the Court of Auditors’ examination of the project. At this stage, these are allegations under investigation, not established findings of guilt.

Throughout much of the Messina Strait bridge saga, attention has also turned to a second problem that has shadowed the project for decades: organised crime.

The risk is not merely a cinematic fear of the Sicilian Mafia infiltrating a construction site. Large infrastructure projects generate thousands of contracts, subcontracting opportunities, land transactions, transport services and supply-chain relationships. That creates opportunities for organised crime to exploit legitimate economic activity, particularly in territories where the Sicilian Cosa Nostra and Calabrian ’ndrangheta have historically demonstrated extensive economic reach.

Italy’s National Anti-Corruption Authority, ANAC, explicitly warned Parliament in March that construction of the bridge would “attract” organised crime and called for strengthened controls and strict restrictions on subcontracting.

The concern is already becoming tangible as preparatory procedures advance. In September, the start of expropriation procedures prompted warnings that compensation for land could potentially reach properties controlled by organised crime groups. Stretto di Messina has responded that legality protocols are in place.

There is also a historical precedent. As criminologist Anna Sergi has documented for the Royal United Services Institute, previous attempts to develop the bridge attracted individuals with alleged links to organised crime, including a 2005 case involving attempted involvement in the project and bid-rigging. This shows that projects worth billions create opportunities for illegal actors not necessarily by controlling the entire construction contract, but by exploiting the layers surrounding it.

Moreover, this may be the central lesson of the Messina saga. The greatest threat to a mega-project is not always that it cannot be built. It is that the politics surrounding its construction become almost as complicated as the structure itself.

Italy now has to demonstrate that the bridge can survive scrutiny from courts, regulators, European institutions and anti-corruption authorities while preventing organised crime from turning public investment into private revenue. After decades of promises, that would be a more meaningful test of whether Italy can finally build its bridge than another declaration that construction is about to begin. For now, the Strait remains crossed by ferries. And the bridge remains a political project trying to become an infrastructure project.

The post Messina–Calabria: A bridge too far first appeared on The Malta Business Weekly.

Economic sluggishness in the EU

It is true that when, in 2022, I spoke of the economic hardships that would ensue, I was ahead of the curve. My point back then was not to appease any aggressors, but to find ways to ensure a lighter impact on Europe because economies couldn’t bear another shock. The pandemic shock wrought havoc on several economies that were still recovering from the financial crisis a decade earlier. Indeed, the 2015 Juncker Plan was to leverage budgets, engage the private sector, and promote an ecosystem that facilitates business to match the pre financial crisis level of private investment. The pandemic undid all of this, and what followed in 2022 — the energy shock — was fatal for several European economies. To make matters worse, the wars in Ukraine and the wider Middle East, together with global tariff escalations, have brought some of the EU’s economies to their knees.

When I speak of energy shocks or other exogenous economic shocks, we need to see the entire picture. These shocks feed into our system, into each level of economic activity. An energy shock, with inflation hitting double digit levels in Europe, sent another shock through many sectors, including cement, concrete, iron, and all the raw materials needed to build our infrastructure, our homes, and commercial buildings. Coupled with speculation, it didn’t help the housing market, and obviously prices soared. We are at a critical point, not just in the EU, but globally. Malta did a lot to help its people, businesses, and those in need. However, we need to revisit many policies introduced long ago to ensure that those at the lowest end of the salary band are lifted out of the risk of poverty. When we consider the shocks I’ve mentioned, some markets are in a new state after reaching a tipping point, due to distinct feedback loops feeding into the system. One of these markets is the housing market.

The right wing movements across the EU

For this reason, we must admit that, from a political point of view, examining how economies are structured and behaving is not helpful. We have the far right parties soaring in popularity. And the reason for this is positively correlated with economic sluggishness and the importation of rightist narratives into Europe. Certainly, we cannot compare the political fabric and social structure of the EU with that of the US. The two operate on opposing axes for different reasons, primarily cultural. The EU was born from the ashes of the Second World War. And it takes a bit of depth to understand what I am about to say. Indeed, the far right parties in Europe are masking themselves as friendly. Let me focus for a minute on Germany. Friedrich Merz doesn’t know what hit him with the current regional results, and even more so with the economic impacts that are leaving a lasting scar on Germany’s economy. However, the far right and Alice Weidel are playing chess by portraying the latter as approachable. No minority, and even less so no academic with a deep political and economic background and historical insights into Europe, would vote for Alice Weidel. Alice Weidel is being presented as a poster figure to soften the AfD’s image and alienate the German electorate from the party’s underlying ideological positions. Think about it, why would a leader of a political party choose to live primarily in a neighbouring country while officially maintaining her registered residence in Germany? Alice Weidel’s family home is in Switzerland, not Germany.

Wrapping alternative leaders in a nice wrapper

When digging further, one can notice that everything is ready lest they win the Bundestag anytime soon, and before 2029. Alice Weidel’s image and the political philosophy that is promoted, fomenting a narrative against certain minorities, are incompatible and cannot be regarded as complete. It’s built on a false image and a narrative that is too blatant to go unnoticed; or at least those with some analytical skills can see through it. The wrapper is one thing; the content inside is another. Alice Weidel’s personal life and the AfD’s political philosophy are on two opposing axes. Sadly, I must admit that if the EU, as well as the Germans, aren’t brave enough to prevent the inevitable, then we are heading for tough times.

Now, the EU must assess the negotiations from an MFF perspective and determine which funds can be allocated to mitigate the impact of rising diesel prices. The price of diesel has soared, due in part to geopolitical instability in the Middle East, disruptions in the Red Sea, and the ongoing war in Ukraine. These events have affected refinery output, shipping routes, and supply chains. As a result, diesel prices at fuel stations have outpaced crude oil prices. It is also a matter of supply constraints, with demand increasing to service our economies.

Mistaking the image with the underlying political ideology

Normally, I do not write about foreign politicians, except for von der Leyen, and I aim to find an alternative where countries and leaders can work together. However, having a leader of the most important and powerful country in the EU promoted to the public in a way that packages her as favourable to minorities simply because of the image that she is a lesbian in a registered partnership with a Sri Lankan, while simultaneously advancing a narrative that contradicts that image, is deeply worrying. If we want to regulate economic migration we need to tackle the root cause. And the root cause is the way the EU economies have been shaped over the past decades and the low fertility rate.

To conclude, those who use these narratives to win a seat in a federal or general election are only sowing the seeds of a future political movement that will eventually haunt and devour them, because they can never keep their promises. They can get rid of a few people. But that would be for the media to scapegoat. For the rest, additional thousands will be joining the EU’s economies without noticing. And that is what will happen in every Member State, unless the fertility rate soars. Well, do take note!

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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.