The Central Bank is “very worried” about the “amateurish” tariffs that sparked a US-led international trade war, acting governor Alexander Demarco told bankers and economists on Wednesday.
Demarco’s comments came during a Q&A session at the end of a meeting which reviewed the performance of Malta’s economy throughout 2024.
Asked whether the Central Bank was worried about recent developments across the Atlantic, Demarco described the situation in the US as “not normal”, saying the US has “created a crisis in the world order”.
He said he harboured three major concerns, the first being the “amateurish” tariffs themselves.
He said that, although he understands US concerns that “sometimes, certain countries might not be playing a fair game” in international trade, the tariffs imposed have been “stretched too far and done in an amateurish way”.
Local economists have struggled to define the impact of tariffs on Malta’s economy, saying that, while their direct impacts may be minimal, the uncertainty they create could cause long-lasting damage.
Demarco echoed these thoughts, noting that the global economy is experiencing “not only high uncertainty but also very high unpredictability”.
“Things change from one day to the next, so this makes things very difficult,” he said.
His second concern is “the lack of respect for the rule of law in the United States”. Demarco cited “decisions by the courts that the administration refuses to respect”.
He also raised concerns about central bank independence, mentioning Donald Trump’s repeated attacks on Federal Reserve chair Jerome Powell, including a Truth Social post declaring that “Powell’s termination cannot come fast enough”.
In an impassioned speech at a closed-door IMF conference last week, Powell reportedly told top finance officials from around the world of the need for central banks to be shielded from politics, triggering rapturous applause.
Demarco appears to share Powell’s views, pointedly telling local financiers that “price stability is better achieved with independent central banks than with central banks that lean towards the whims of governments”.
The issue of the Central Bank of Malta’s independence came to the fore last year after the governor, Edward Scicluna faced criminal charges linked to the Vitals inquiry.
A protracted tug of war between government authorities, who moved to dismiss him, and Scicluna himself ended when the latter agreed to temporarily step aside while proceedings were underway, with Demarco filling his shoes.
However, Demarco sees a silver lining, with Europe now having the opportunity to market itself as a safe pair of hands.
“We’ve seen investors withdrawing from the US, and that presents an opportunity for Europe,” Demarco said. “We have the opportunity to present to markets a reliable jurisdiction”.
He also said that the situation is a “wake-up call” for Europe to become more independent not only in terms of its military but also in its financial systems.
“There’s a greater realisation that we need to be more autonomous and rely less on US firms in terms of payment systems,” he said.
“In Europe, big decisions often take place in times of crisis,” Demarco said. “Let’s hope that we can now push forward certain items that have long been on the European agenda.”
