edward scicluna : central banks on the way out of the covid - 19 crisis but facing new global challenges speech by mr edward scicluna, governor of the central bank of malta, at the 2022 conference of mediterranean central banks " building resilience in uncertain times : safeguarding financial stability, encouraging investments ", jointly organised by the central bank of the republic of turkey, the organisation for economic co - operation and development ( oecd ), the european institute of the mediterranean ( iemed ) and the bank of spain, session " central banks on the way out of the covid - 19 crisis but facing new global challenges ", istanbul, 31 october 2022. * * * fellow governors, ladies and gentlemen i would like to thank our host, governor kavcolu and his team, the oecd, iemed, and the bank of spain for their invitation and for their warm welcome. i have come to share my views at this seventh annual conference of mediterranean central banks on the challenges we monetary policymakers are facing in the current macroeconomic and geopolitical environment, because as mediterranean countries we have an obligation to explain our respective position and its relevance to our region. because financial instability in any one country does not help the attractiveness of the whole region in the eyes of the investor. let me start with what is relevant to any central banker wherever he or she comes from. i think that what is sharply standing out today is the sharp trade - offs confronting us central bankers. the biggest being that between containing inflation and avoiding a recession. and in spite of the uncertainty surrounding the outcomes, the decision cannot be put off, since a wait - and - see approach is likely more costly, and certainly riskier. what is the price of not tackling inflation decisively? that we know. the high tax on the disadvantaged, on those on fixed incomes, incentivising rent seekers, the waste of dog chase tail wage - price spirals. at the same time we hear that a recession is not just around the corner but on our door step. we hear that certain indicators are also giving out the message that certain prices have peaked and some are even falling. so why all this unrelenting rush to kill off inflation when the recession has started to do the work itself. let us be careful. my understanding is that the financial markets and economic forecasters do not believe that the recession as seen today will be so deep that it will do all our

participation in monetary union by making further progress on the path of reform. the national reform programme provides a good basis for this purpose, as do the recent reports by the commission, the ecb and the imf. a common conclusion of these reports, and one which is shared by the central bank of malta, is that further fiscal consolidation is necessary in order to achieve a balanced budget by the set date. in this regard, there needs to be a greater emphasis on expenditure - based adjustment, particularly in view of rising pressures caused by ageing - related factors such as pension and health care costs. it will be equally important, in both the private and public sectors, for wage growth to be compatible with productivity growth, labour market conditions and cost developments in competitor countries. the further strengthening of competition in both product and resource markets and the creation of more incentives to work are also necessary in order to raise the participation rate. it also needs to be realized that these reforms are essential for safeguarding our social model. in recent decades we have been successful in reducing income inequality and in securing universal access to all levels of education, to health care and to pensions. these benefits, however, can only continue to be enjoyed by future generations if today ’ s generation implements the necessary reforms. the next phase in malta ’ s economic history, therefore, promises to be a challenging one, but it should also be an exciting time. for a country with a population of 400, 000 and a gdp of just four - and - a - half billion euro, having a major reserve unit as its domestic currency is indeed a significant advantage. we thus have good reason to feel encouraged and, as a people that has suffered repeatedly as a consequence of divisions on the european mainland, also reassured that we are about to reinforce our integration in europe with full economic and monetary union. for, while the eu has for fifty years brought peace and stability to the peoples of europe, the single market and economic and monetary union have created a congenial environment in which economies can grow and people prosper.