If you want to know the truth, read the financial press.
My thesis advisor at university said that and it always stuck with me.
His point was that Canada’s two national newspapers came from opposite sides of the political spectrum, and so their views would be filtered through that lens. But he wasn’t implying they print one-sided propaganda. Canada does not have Party-controlled media.
He meant that the financial press delivers the most unambiguous version of events because readers of those publications are gathering intelligence and making decisions based on what they’ve learned. They’re putting their businesses — and their hard-earned savings — on the line.
That’s why it matters that The Economist Intelligence Unit has downgraded Malta in this year’s Democracy Index.
Malta was the only country to be downgraded from “full democracy” to “flawed democracy”. And the analysts made it very clear that rule of law issues were the cause of this decline.
I’ve seen a lot of comments in the papers along the lines of ‘Who cares? Lots of other countries are listed as flawed democracies and they’re doing fine’. These are the same readers who cite the latest ratings agency report as proof of Joseph Muscat’s Cash-Coloured Dream Machine, despite the fact that such reports were bought with your money.
Unfortunately, investors aren’t convinced by ‘Charlie’s failing too! Why are you picking on me?’ They aren’t looking for ammunition to score points in a local partisan conflict, and they know how ratings agency reports work.
Investors are looking for the safest, most promising place to do business. And when they look at Malta, they’re seeing instability and decline.
Rule of law weaknesses — and a willingness to look the other way — might attract the Ali Sadr Hasheminejads (Pilatus Bank) of the world to Malta. And it might attract passport customers who are using Malta as a back door into Europe, and who have no intention of fulfilling the residency requirements. They just want someone eager to take their money without looking too closely at where that money came from.
Lax enforcement also attracts mafia syndicates in search of a place in the European Union to launder the proceeds of crime.
Rule of law problems attract those people to the same degree that they repel legitimate investment.
When I left Malta for good at the beginning of 2017, it had already begun to feel like a place where anything could be done to you if you were an outsider, a place where ‘justice’ was reserved for the well connected.
In downgrading Malta from ‘full’ to ‘troubled democracy’, The Economist has revealed a nation in decline. The Financial Times, Bloomberg, Deutsche Welle and others have also written feature articles describing rampant corruption at the top of Malta’s government.
The blows seem to be falling in rapid combination. Just one day after The Economist’s story hit headlines, Transparency International published its annual report, where it described Malta as “mired in corruption”.
It’s no use playing the victim or crying ‘fake news’. The denials of government ministers ring hollow to investors and business leaders when they see those same ministers launching desperate appeals to avoid testifying in court.
This is the result of deliberate choices by Muscat’s government. The disgraced former Prime Minister made a hasty exit from the political scene, but the consequences of his actions have finally begun to hit home.
Rick Hunkin, the new Bank of Valletta CEO, admitted last week that Malta isn’t the envy of Europe. Quite the opposite. He said: “There is no denying that international countries are looking at the Maltese jurisdiction and saying it is high risk”.
BOV was able to beg for a three-month extension for its US dollar correspondent banking relationship with ING, but efforts to find a new bank willing to trust it have not been successful. They’re now looking at Western Union as a solution — the same company migrant workers use to remit funds to their families in Africa and Asia.
Frantic efforts to collect decades worth of due diligence paperwork and to shed their books of dodgy clients is a step forward, but it’s much too late. Desperately trying to fix something after you were caught doesn’t inspire confidence because it doesn’t signal fundamental change. One would expect everyone to go straight back to cashing in on shady business as soon as no one’s looking.
Malta slipped through the cracks before because it is small, and because there were larger problems in Europe. But killing a journalist was a step too far. It didn’t bury these dirty deeds. It put them under an international spotlight.
Each new hearing of the public inquiry into Daphne Caruana Galizia’s brutal murder brings fresh revelations of the rot at the heart of Malta.
We’ve learned that the FIAU filed detailed reports on Keith Schembri, Brian Tonna, and others who were close to Muscat. We heard how these reports were hand-delivered to the police by the Head of the FIAU, who felt the evidence was so serious that he didn’t even trust police messengers with it.
But Muscat dismissed it all as ‘allegations’, and the police chose not to act. Certain people in Malta were above the law.
We heard that the chief investigator in the murder case, Silvio Valletta, was jetting around on holiday with the chief suspect.
One of two interpretations could be taken from this, neither of which is reassuring to outside investors. Either this government openly flouted the rule of law because they thought they were above it, or incompetent amateurs are running the show who shouldn’t be trusted with running a band club.
Unfortunately, the damage is done, and Malta’s problems are just beginning.
It isn’t enough for the new prime minister to plaster over a few cracks and slap on a fresh coat of paint. The situation requires real, substantial change.
Robert Abela has shown signs of decisiveness by acting on fresh revelations and demanding resignations, and that’s a positive step. But the heart of the rot is still untouched.
Stability will not be restored until Schembri and Muscat are arrested, questioned, and held to account.