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So much for the Chamber’s New Year’s wish for stability. Only two months in
and 2022 is already shaping up to be possibly one of the most turbulent in the
last eighty years. It is still early days in the war in Ukraine, but the risk of a wider
and more terrifying conflict across Europe is a very real possibility.
Perhaps one of the most extraordinary and unforeseen consequences of Putin’s
invasion of Ukraine is the speed and extent of the unifying forces it has had
on Western governments. Virtually every economic, political, financial and
diplomatic lever has been brought to bear against the Kremlin’s kleptocratic
cabal. Whether the extensive collection of sanctions make any difference
remains to be seen, but the hope is that the intense pressure of them will force
some sort of groundswell of revolt against Putin and his siloviki sycophants.
The war will have lasting effects on Gibraltar and its economy in two ways:
The first is that as with all large conflicts, there is likely to be an economic
downturn in Europe with knock-on effects for the Rock. The severity and
duration of this will depend on how long the conflict lasts. A short war will be
less costly in lives lost as well as economically and the recovery should be equally
swift. A more drawn-out conflict though will be expensive for all concerned and
it will sap the confidence of neighbouring countries who fear being drawn into
the conflict.
The second effect will be longer term but there will be growing pressure on
smaller jurisdictions to be more transparent in their dealings with individuals
and companies who use them to hide assets or avoid taxes payable elsewhere.
MoneyVal’s recent follow up assessment on Gibraltar gives a degree of reassurance
that our regulatory structures and procedures are sufficiently well-developed to
guard against money laundering or to be used for terrorist financing. One lesson
from the current conflict though is how quickly G7 economies and their allies
can rally their influence to exert significant pressure to bring about a desired
outcome.
In this issue we look at recent lobbying by the Unions for an annual pay rise.
This is despite the fact that their members, most of whom work in the civil
service, have enjoyed pay rises ahead of inflation for most of the last ten years.
Given the current pressures on the private sector and the fact that average pay in
the public sector is now around 40% higher than in the private sector, now is not
the time to add further to the cost burden of local businesses.
Lastly, it looks as if the parties to the treaty discussions are in the final stages of
the negotiations. Indications appear to be that, barring a last-minute hitch, an
agreement will be reached and as with all such accords, there are likely to be
elements which are not popular here in Gibraltar. However, these need to be
considered in the wider context of whether the agreement in its entirety will be
good for Gibraltar and its business community. If an agreement gives greater
long term political stability and opens up new markets and new opportunities
for Gibraltar it might make it more digestible.
Gibraltar’s economic and political development will continue to evolve with or
without an agreement. Given the momentous changes currently taking place
elsewhere in Europe it would be preferable to reach an agreement providing
that certain red lines can be adhered to. We will know either way in the fullness
of time.