Italy’s economic recovery is not what it seems

Italy’s economic recovery is not what it seems

Ask to Maltaway, Why Malta is a great opportunity for Italian Business and Skilled People as well

Italian Prime Minister Matteo Renzi looks on as he arrives to meet Ireland's Prime Minister Enda Kenny at the Chigi palace in Rome, Italy, July 10, 2015. REUTERS/ Max Rossi©Reuters

Italian prime minister Matteo Renzi

Yoram Gutgeld last week made one of the most astonishing economic statements I have heard in a long time. The adviser to Prime Minister Matteo Renzi said in an interview that Italy’s economy was immune to global developments for the next 12 to 24 months because of the tax cuts and reforms of the present administration.

The idea that a G7 club of rich nations is immune to the global economy is ludicrous. This is the 21st century. Granted, Mr Gutgeld may have spoken as the prime minister’s spin-doctor. That is part of his job. But what worries me is that the Italian government is not ready for when the impact of the slowdown in China and emerging markets hits Europe. Friday’s preliminary figures for eurozone gross domestic product show that the slowdown has started. Italy’s quarter-on-quarter growth rates have been falling: from 0.4 per cent in the first quarter to 0.3 per cent in the second to 0.2 per cent in the third.

Italy’s ability to sustain a healthy rate of growth is critical — for the country’s political stability, for its young people with no hope of finding work, for debt sustainability and in particular for its future in the eurozone. The euro has brought Italy nothing but stagnation. Real GDP is now at the same level as at the start of 2000, a year after the euro was launched. GDP today is 9 per cent below the pre-crisis level in early 2008.

If Italy fails to bounce back strongly from this recession, it is hard to see how it can stay in the eurozone. At some point it might well be in the country’s undisputed economic self-interest to leave and devalue. So when we ask whether the economic recovery is sustainable, we are not having a technical dialogue about economics. We are talking about Italy’s future in Europe.

There are three reasons why I am sceptical. The first is evident in last Friday’s GDP data. Italy is not exceptional.

The second reason is the lack of restructuring of Italian banks. The stock of non-performing loans as a percentage of all loans is about 10 per cent, which is close to the peak level in the current cycle. Many of the small and medium-sized banks are in effect insolvent. The clean-up of the banking system — following the 2008 crisis and the two subsequent recessions — has yet to happen. If it does, it will take place in a much tougher regulatory environment. From next year EU “bail-in” rules take effect. Then the Italian government will no longer simply be able to bail out banks but will have to make bondholders and depositors pay up first. Can we be sure the rotten banks will continue to sustain the recovery in this environment?

My third concern is Mr Renzi’s fiscal policy choices. His priority has been to ensure that these create more winners than losers. This is exactly what Silvio Berlusconi did when prime minister. And it should come as no surprise that Mr Renzi ends up with similar policies. Instead of reforming the public administration or the judiciary, he has opted for a cut in the housing tax. This will win votes but will not deliver the change to the economy. We have been here before.

The danger of this strategy is that it could go horribly wrong if the economic shock is big enough and the banking sector weak enough. On current projections, Italy’s 2016 budget deficit will be 2.2-2.4 per cent, depending on how you account for the cost of addressing the refugee crisis. This includes flexibility clauses that Rome has negotiated with the European Commission to take account of that cost. The original deficit goal would have been 1.4 per cent for 2016, but the EU has allowed more leeway because of economic reforms.

I have no objections to any measure to loosen the grip of austerity. But if the downturn comes along with a banking crisis, the 2.4 per cent could easily turn into 3.4 per cent or 4.4 per cent. At that point all flexibility will come to an abrupt halt. Italy will once again have to tighten policy as the economy slows.

Another non-elected “technical” government might take over. Italy might never choose to leave the eurozone for political reasons. But, if Mr Renzi’s calculations prove wrong, Italy will be at the point where it would be rational to leave for economic reasons.


16 Things to Consider When Retiring Abroad….or why MALTA is a the top destination

16 Things to Consider When Retiring Abroad….or why MALTA is a the top destination


MALTA way is your gateway to Malta opportunity to retire with sun shine, stability, great health system, low cost of living, low taxation, security, safety, global community, banking, economic and social growth, residence programme and much more…… the best of North Europe in the middle od Mediterranean sea 

We’ve already listed for you the 25 best places to retire, and we know you’re all dying to move to Ecuador when your careers in tax and law come to an end.

However, before selling your home, keeping your family heirlooms in an acclimatized storage facility and packing your bags, you need to carry out in-depth research to make sure Ecuador (or any other country, for that matter) is the right one for you. Retirement planning is essential to having a happy, relaxing and easy life in your handpicked home away from home.

In order to help you with your future retirement plans, we’ve come up with 16 things to consider when retiring abroad.

1. Don’t Flush Money Down The Toilet: The cost of living in the country you’ve chosen might be one of the most important factors when retirement planning. You want your pension, savings or supplemental income to go a long way and allow you to live a comfortable life abroad. Make sure to do your due diligence in terms of the pricing of housing, transportation, healthcare services, food and utilities, among countless others, prior to boarding that plane.

2. Planes, Trains & Automobiles: Mobility is crucial to your wellbeing when retiring abroad. A solid system of highways matched with extensive and safe public transportation, as well as an international airport with a good domestic and international flight schedule, will grant you greater flexibility when it comes to discovering your new country and heading back to your old one to visit friends and family.
Retiring Abroad: Healthcare

3. An Apple a Day Keeps the Doctor Away: At the latter stages of life, staying healthy is primordial to one’s happiness. A modern and highly professional healthcare system should be at the top of your list of things to consider when retiring abroad. Pay close attention to the quality of hospitals, the experience and levels of training of physicians and other medical doctors, and the availability and cost of medicine and medical supplies, among others. Also, make sure there are healthcare facilities nearby, say, at most 25 to 30 minutes away from where you live.

4. Put That Gun Away: Safety and personal security is of utmost importance when planning for retirement. You want to avoid at all costs dangerous, violent, and socially unstable regions of the world where your life will be in peril on a near daily basis. Pick cities (or at least neighborhoods) with low crime rates and an established expatriate community that is willing to show you the ropes.

5. Rain or Shine: Would you like to wake up to rain 75% of the year? Or scorching heat hovering near 50 °C? Yeah, we didn’t think so. is your friend, so make sure to study your country of choice’s weather patterns. Personally speaking, it’s hard to beat the climate in San Diego, California: year-round sun and temperatures ranging from 9°C to 25°C. Paradise.

Retiring Abroad: communicating with the locals

6. Je No Parle Español: Not everyone in the world speaks English and not all of us are polyglots. Language spoken should come under consideration when retirement planning. Pick a country where you’ll feel comfortable enough communicating with the locals, be that in English or a second language. In any case, chances are you will quickly become proficient—either by choice or because you have to—in that second language.

7. Don’t Bank on It: Finding a place with a solid banking system is fundamental to retirement planning. You need to locate a reliable, professional and stable bank in which to stash away your money while living abroad. Often, branches of major European and American banks are your safest bet to protect your savings and remain at ease in cases of economic volatility.

8. Expats in the House: Living abroad, it’s always nice to find kindred souls that are experiencing what you are. Look for expatriate communities in the city of your choice and reach out to them prior to making your move. They’ll be able to answer your questions, provide you with recommendations, and make you feel more at home once you make your big move.

9. Big Macs on the House: Don’t laugh but every so often we crave what’s familiar. Living abroad among all the new smells, sounds and flavors can be overwhelming. So it’s always good to know that some of those comforts readily available back home—be it junk food or specific ingredients like, say, maple syrup or chipotle chilies—can be tracked down in your new country.

Retiring Abroad: Place to Live

10. Home Sweet Home: Real estate—its costs, availability, location and quality—might be one of the most crucial factors to consider when planning for retirement. Whether you are renting or buying, you want a comfortable, ample, well-located and affordable place to live. We suggest carefully studying the real estate markets in your shortlist of countries to retire.

11. If You Build It, They Will Come: Access to sturdy, safe and modern infrastructure can enhance one’s life abroad. The availability of good roadways, hospitals, shopping malls, hotels, restaurants, transportation hubs, theatres and museums, efficient utility services, etc., raises standards of living and makes retiring somewhere far away from home a more attractive option.

12. Inflation! Devaluation! Crisis!: Economic volatility is another factor to consider when retirement planning. Inflation, currency devaluations, tax hikes and other types of negative economic fluctuations can make life difficult for you and your bank account. Have a basic understanding of the economic history and performance of the countries on your shortlist and put together a contingency plan so that you’re not caught by surprise when things do go wrong.

13. Residency Requirements: If it’s a hassle to acquire residency to the country of your choice, then it might be better to move somewhere else. Look into residency requirements for your top choices and make sure these are not too burdensome. Many countries—for instance, Panama—offer special visas for retirees that allow them to make use of a wide range of discounts on utility bills, transportation, entertainment and more. These types of residency are highly advantageous and should be explored.

Retiring Abroad: access to the Internet

14. Can You Hear Me Now?: No one these days can live without access to the Internet or a smart phone. A reliable and efficient communications system to keep in touch with friends and family via Skype and log onto your Facebook, Twitter and Taxlinked accounts is a must. Unless what you want is to disconnect from the world and become a hermit up on a hill.

15. Take a Hike: Now that you have plenty of time on your hands, you might want to pursue all those recreational activities you weren’t free for as a working professional. Be it playing tennis, hiking, painting or dabbling in handcrafts, make sure there are facilities nearby for you to practice your favorite hobbies.

16. Don’t Make It Taxing: You cannot run. You cannot hide. Taxes will always be there, waiting for you. Even if you’re living abroad, you might still have to pay taxes back in your home country, so speak to a financial advisor to help you figure out who you owe, how much and when. You wouldn’t want to skip a payment and be penalized for moving to lovely Ecuador.

MALTA is fully OCSE and EU complaiant with a frontier market growth rate

Malta is this year expected to register the fastest growth rate in the EU, with property prices rising year after year and local banks recording bigger turnovers.

Maltaway is your access to the malta world…business in the sunshine

However, over the years Malta has gained an undesirable reputation as an offshore haven for all the hot money within the eurozone.

Since joining the single currency in 2008, successive governments have championed an investor-friendly economy, to the degree that other EU countries, including Germany, France, the UK and Italy, view Malta as a tax haven, similar to Luxembourg.

On a global level, this race to the bottom often irks larger economies and the EU’s economic powerhouses are less than pleased with Malta’s lax tax regime. This has led Germany and other countries to attempt to curtail Malta’s tax benefits.

Traditionally dependent on tourism and manufacturing, the Maltese economy has become service-based, with an emphasis on financial services and banking.

In order to maintain a competitive edge, Malta offers wealthy individuals and corporations advantageous tax rates, using tax breaks to attract investment or hot money, which could originate from criminal activities.

But what makes Malta so attractive?

The law

Maltese legislation on banking, mutual funds, insurance and trust services underwent an overhaul upon EU accession in 2004 and although Malta has moderately high internal taxes, the country offers low-tax regimes to companies and individuals.

Malta shrugged off its reputation as a fiscal paradise by adopting a “full-imputation” tax system where corporate profits are taxed at 35%.

However, Maltese registered companies do not pay inheritance tax or wealth tax. Moreover, companies are exempted from paying an annual property tax and other benefits include zero tax on interest and dividends.


Companies registered in Malta are considered as resident and domiciled in Malta. But companies incorporated outside Malta are considered resident in Malta only if the management and control of the company is exercised in Malta.

The term ‘management and control’ is not defined in Maltese tax law but if a company’s board meetings and general meetings are held in Malta the Inland Revenue Department would consider the company as resident in Malta.

Such companies are subject to tax on income arising in Malta and foreign income – excluding capital gains – received in Malta. The same applies to individuals who are resident but not domiciled in Malta.

The statutory rate of tax for corporations is 35% and when dividends are distributed to shareholders out of the company’s taxed profits, it carries an imputation credit on the tax that has already been paid by the company. After the tax refund, a shareholder’s tax burden decreases to 0% – 5%.

Under Malta’s tax law all income coming from a company that qualifies as a “participatory holding” company also qualifies for a full refund of the taxes paid by the company, when distributions are paid back to the company’s shareholders.

However, there is a Value Added Tax rate of 18% applicable to those companies that are trading within the EU.

Income or gains from participating holdings in foreign companies are exempt from tax and there is no tax on gains realised from transfers of corporate securities by a non-resident, as long as the recipient is the beneficial owner of the gains and the securities are not held in a company whose assets consist principally of immovable property in Malta.

Corporate tax

International Trading Companies, International Holding Companies, companies licensed under the Malta Freeports Act and the Business Promotion Act may benefit from tax holidays of 10 years or more.

International Holding Companies operating foreign income account where they receive income from abroad, pay 35% tax on net income but can make use of four levels of abatement of the tax.

A Maltese registered company owning 10% or more in a foreign company effectively pays zero tax.


Malta does not keep a public register of trusts and private foundations. Under the Trusts and Trustees Act, foreign owned trusts are exempted from paying tax. Maltese residents can also form trusts but the trust is a taxable entity unless both the beneficiaries and the income are foreign, in which case the trust remains exempt from tax.

Furthermore, foreign trusts do not have to file tax returns given that a Professional Trustee company which is acting as their trustee makes an annual declaration of conformity with the law.

In order to receive tax-exemption, registration is obligatory.


For tax purposes, foundations are treated in the same manner as a company but these could also be taxed in the same manner as a trust in accordance with the applicable provisions dealing with trusts which would be applicable to a founder, the foundation and the beneficiaries.

The law also allows the establishment of segregated cells within a foundation in such a way that the foundation may be divided into various cells and each cell would, for tax purposes, be deemed to be a separate foundation and taxed accordingly.

maltaway highway stairway

S&P: Malta’s exposure to Greece ‘limited’, Economic growth outlook positive

S&P: Malta’s exposure to Greece ‘limited’, Economic growth outlook positive, debt/GDP 55%, real GDP +3,5%

Maltaway is your gateway to access Malta’s stability,banking system, growth and competitiveness….why the gap…

Standard and Poor’s rate Malta’s economic growth outlook ‘positive’, revised upwards from ‘stable’ • Events in Greece unlikely to have a material bearing on Malta’s credit profile

Malta’s economic growth prospects remain strong relative to its EU and ‘BBB’ rating category peers, credit rating agency Standard and Poor’s said last night.

Malta’s budgetary consolidation is expected to continue, leading net general government debt to decline to 55% of GDP in 2018, from 59% in 2014.

S&P is also of the opinion that the ongoing financial crisis in Greece will not have a material bearing on Malta’s credit profile.

“The positive outlook reflects a one-in-three likelihood of an upgrade within the next 24 months if medium-term economic growth prospects are maintained and fiscal consolidation continues, while no bank- or nonfinancial public enterprise-related contingent liabilities or external risks materialize.”

Malta’s real (not nominal) GDP grew by 3.5% in 2014. This is projected to expand by close to 3% annually on average in 2015-2018.

“We believe Malta’s economy will continue to outpace the eurozone as a whole, notably because of investments in the energy sector,” S&P said referring to the interconnector and the Delimara LNG project.

Beyond 2016, further diversification of the economy–particularly into information and communication technology and medical tourism–could boost investment. Domestic demand is expected to be backed by stronger private consumption, resulting from government-mandated cuts to utility tariffs that have reduced electricity prices by 25%.

Lastly, consumption trends are being supported by rising real wages and, more importantly, broader female participation in the labor market.

“On the external side, we view Malta as an open, services-oriented economy. We expect the tourism sector will continue to perform well on the back of a favorable euro/pounds sterling exchange rate, the increased perception of terrorism-related risks in some other Southern Mediterranean countries, and the current turmoil in Greece.”

Malta’s exposure to Greece ‘limited’

“We do not believe events in Greece will have a material bearing on Malta’s credit profile. Like all eurozone members, Malta is exposed through common monetary, fiscal, and development institutions such as the European Central Bank, the European Financial Stability Facility, and the European Investment Bank.

“Apart from contingent liabilities associated with those institutions, Malta’s exposure to Greece is limited. Malta’s trade with Greece is small and direct financial links are few. We assess the external debt of Malta’s domestic banks as sufficiently contained such that Malta would cope with a permanent real increase in external funding costs spilling over to eurozone markets from Greece.”

Financial services

The low corporate tax rate has attracted significant foreign investment into Malta’s banking, insurance, and gaming industries, implying that the economy would be sensitive to potential pressure for a eurozone-wide standardization of corporate tax regimes.

“We expect that Malta will run a small current account surplus over our 2015-2018 forecast horizon, and remain in a narrow net external asset position of about 16% of current account receipts (CARs) on average during 2015-2018.

Offshore banks dominate Malta’s international investment position and it is understood that foreign banks use Malta as a booking center for their own financing needs.

Economic growth

S&P believes that Malta’s favorable economic growth prospects support further

budgetary consolidation. It forecasts general government consolidation to progress gradually through 2018, primarily owing to increased tax receipts from strengthening domestic demand and the expected decline in current expenditure from 2016 onward.

Net general government debt is expected to decrease to 55% of GDP by 2018, from 59% in 2014. General government gross debt forecasted to be 68% of GDP in 2015, excluding the guarantees related to the European Financial Stability.

General government interest payments forecasted tol average 7.1% of general government revenues per year over 2015-2018.


Malta’s contingent fiscal liabilities stemming from NFPEs derive mostly from

Enemalta’s government guaranteed debt (9.7% of GDP as of end-March 2015). Enemalta will likely not generate profits until 2017.

“We note that the current drop in international oil prices is helping Enemalta’s expected return on investments. Nevertheless, other state-owned enterprises also represent fiscal risks, as exemplified by this year’s government financial support to Air Malta, estimated at 0.5% of GDP.”

Government guarantees of NFPE debt totaled 16% of GDP at year-end 2014.

Reforms needed to avoid straining public finances

S&P reports that without further reforms in the pension and health care systems, public finances will become strained in the medium term.

“Under our criteria, we see contingent fiscal risks to public finances coming from the banking sector. Malta’s domestic banking sector operates alongside a large offshore sector which, we believe, the government would not support in case of financial distress.

“However, dislocations in their funding could affect the island’s reputation as a financial center.”

Assets of the total banking sector are nearly 7xGDP while assets of core domestic banks amounted to about 2x GDP. Domestic systemically important banks include 25% state-owned Bank of Valleta (total assets €7.7 billion or about 8% of GDP) and HSBC Malta Bank (total assets €5.15 billion).

To this list, S&P would add fast-growing Mediterranean Bank (total assets €2.2 billion), which the agency expects to join the other two under ECB supervision soon.

Euro area membership

Membership in the eurozone anchors Malta’s monetary policy and provides its banks access to funding at low nominal interest rates. Nevertheless, S&P believes that membership in a monetary union increases the onus on member governments to support competitiveness through fluid labor, product, and services markets, and to build up fiscal buffers against future shocks.

This is more the case now than a year ago, given that the ECB is undershooting its medium-term price stability target of close to, but lower than, 2% for the eurozone as a whole.

“We note that nominal unit labor costs have been increasing at one of the fastest rates in the euro area, posing risks for competitiveness when many euro area neighbors are undertaking structural reforms and internal devaluations.”

Maltese trust their banks more than fellow Europeans

Maltese trust their banks more than fellow Europeans

Maltaway is your bridge to connect you with Malta banking system….a north European model in the middle of Mediterranean sea

The latest Eurobarometer survey assessing Europeans on data protection issues reveals that a staggering 85% of the Maltese trust private banks with ‘protecting’ their personal data, more than the 75% of Maltese who trust tax authorities with their personal data.
The level of trust enjoyed by banks in Malta is 30 points higher than in the rest of Europe.
Only 56% of Europeans trust banks and financial institutions with protecting personal information which they store.
In this aspect the Maltese are more in line with Nordic Europeans than fellow Southern Europeans.
Less than four out of ten people trust banks and financial institutions to protect their personal information in Spain (33%), Greece (34%) and Italy (39%).
People in the Nordic countries are more likely to have a high level of trust in these institutions, with 93% of people in Finland, 89% in Denmark, and 84% in Sweden expressing trust in banks.
The Maltese are generally less worried than other Europeans about institutions and businesses storing their personal data. While 66% of European trust national tax authorities with their data, the percentage rises to 75% in Malta.
European institutions are also more trusted in Malta than in most other EU countries. In Malta 62% trust EU institutions with their data but the level of trust falls to 51% among all EU citizens. European institutions are least trusted with personal data in Greece (41%) Spain (42%) and the UK (44%) and are most trusted in Finland and Belgium (67%).
The least trusted in both Malta and the rest of Europe are online businesses. Only 27% of Europeans and 24% of Maltese trust them with on-line data.
Shops and stores are trusted by a higher percentage in both Malta (43%) and the whole of Europe (40%).
Mobile companies also enjoy a higher trust in Malta than in the EU. Only 33% of European citizens trust mobile companies with their data, but 48% of Maltese trust them. Only 18% of people in Spain and 25% in France trust these companies to protect their personal data.


Fixed Pay May Be Next Target After Bonus Curbs

Regulators may need to target bankers’ fixed pay as well as bonuses to rein in incentives for market abuse and excessive risk-taking

Carney’s warning of a further regulatory crackdown on pay comes a week after six banks including U.K.-based Royal Bank of Scotland Group Plc and HSBC Holdings were fined $4.3 billion as part of a global probe into rigging of foreign-exchange benchmarks

The European Banking Authority last month moved to close a loophole that allows banks to sidestep the EU bonus cap by awarding staff payments under different measures. Thirty-nine banks are paying staff discretionary role-based payments they classify as fixed pay, breaking bonus rules, it said.

A proposal from William C. Dudley, president of the Federal Reserve Bank of New York, for certain staff to be paid partly in performance bonds “is worthy of investigation as a potentially elegant solution” for targeting fixed pay, Carney said. “Senior manager accountability and new compensation structures will help to rebuild trust in financial institutions.”

New curbs would build on top of existing pay rules put in place by regulators, which require payment of bonuses to be deferred for several years, while allowing banks and regulators to retroactively cut and recoup variable pay.

“We are consulting on extending deferral periods, widening the scope for groups of employees to have their bonuses reduced where there are more pervasive issues of performance or risk management, and considering options to prevent individuals side-stepping these rules,” Carney said.

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