in many countries. equally interesting is the open method of co - ordination of pension reform operated by the european commission with the aim of promoting sustainability of pension systems across the eu without imposing uniformity. this method places a strong emphasis on social acceptability coupled with supply - side reforms designed to ensure that the pension system is sustainable. a society like ours that is devoting more resources to welfare payments than it can afford, is saving and investing too little and is spending more than it is earning - while financing these excesses with borrowed money - stands in blatant contradiction with its professed commitment to social justice, because it is bequeathing to its children an inheritance of debt in selfish rejection of the principle of inter - generational equity. this prospect is clearly unacceptable. it is time for all to recognise this and to shoulder what has become a moral responsibility. environmental degradation it is in a similar spirit that i approach another important challenge, namely that of environmental degradation. there is no question that a significant part of our economic achievements in recent years have been attained at the cost of the environment. it is doubtful whether this constitutes real progress, as it is eroding the welfare of current and future generations and depleting the productive potential of an economy that is highly dependent on quality tourism. from a more practical economic viewpoint, environmental sustainability, involving the conservation of existing amenities and resources for an indefinite time period, will entail significant resource outlays. this is in addition to the resources necessary to finance the investment needed to face the competitive pressures of globalisation and to meet the costs of population ageing. this requires us to produce more, and more intelligently, and to devote a larger share of the nation ’ s resources to fund the investments which are vital for its continued economic development. policy dimensions i have often stressed that the solution to such problems lies in the implementation of a coherent reform strategy that enjoys as wide a measure of support as possible. today i would like to dwell on two considerations arising directly out of eu membership, which should in themselves help to promote progress in this direction. these are malta ’ s expected contribution to the realisation of the lisbon agenda and its participation in the economic and monetary union ( emu ). malta and the lisbon agenda the central objective of the lisbon agenda is to address supply - side impediments to growth. the agenda states : “ the union has today set itself a new strategic goal for the next decade : to become the most competitive and dynamic

institutions have emphasised the need to shift attention towards sustaining growth and making it more inclusive. going back to the latest imf article iv mission, their recommendations focus on addressing housing market pressures, closing the infrastructure gap, upskilling and reskilling the labour force and strengthening innovation. we would like to discuss some of these challenges, before outlining how we think that our financial sector can play a role in helping to tackle them. the housing market in last year ’ s speech, we touched upon the need to avoid the formation of asset price bubbles. we quoted central bank research indicating that house prices were still below their equilibrium fundamental value, but warned that price trends would nevertheless continue to be closely monitored. house prices, as you know, have continued to rise. page 4 of 10 national statistics data suggest an increase of 5. 3 % during the first half of this year, as against 6. 1 % in the same period of 2016 and 3. 2 % in 2015. that said, housing supply is responding to the high demand that is contributing towards house price inflation. in the first seven months of 2017 building permits were 62 % higher than they were in the same period of 2016 and 153 % higher than in 2015. this increased supply, unless there is a further acceleration in demand, should result in housing price inflation moderating. this should also help to reduce pressure on the rental market, where there is evidence that from being at the lower end of cross - country rent - to - wage ratios, we have moved relatively quickly to being close to ratios found in the most expensive european cities. besides the impact that this rise could have on our capacity to attract foreign workers, we need to consider its impact on maltese tenants, which in turn will impact on the broader costs of doing business and, consequently, competitiveness. we believe that, going forward, if we continue to grow at the rates observed in recent years, we will need to have a much more dynamic housing market. but before discussing private provision, let us discuss social housing. recent developments have reinforced the case for replenishing our social housing stock. however, this expansion needs to be accompanied by a change in approach. in recent years, most of malta ’ s benefit system has been changed so as to create clear incentives to shift from benefit dependence to participation in the formal labour market. the only area where this is not happening yet is social housing, where the tendency remains that, once allocated, social housing tends to become a lifetime en