The sound of doors slamming shut

What must it be like to be Clyde Caruana, at this moment in Malta’s sad history? A finance minister with no political pedigree or experience, catapulted into an impossible job, picking his way through the fiscal minefield bequeathed by his incompetent, self-serving predecessor, Edward Scicluna.

Nothing in Caruana’s background can have prepared him for the baptism of fire that was the FATF grey-listing in June. He may be an economist, but his professional history, as a statistician at the NSO, then chairman of Jobsplus, then, for a few months, Chief of Staff to Prime Minister Robert Abela, can hardly have given him the experience or the skills needed to deal with a financial calamity of this magnitude.

In the meantime, any and all other income-generating avenues are rapidly being closed off, blocked and booby-trapped by the particular combination of stupidity, greed and criminality that has characterized every step this PL government has taken since it returned to power in 2013.

Scicluna’s stewardship of Malta’s finances, so appallingly inadequate and enabling of outright criminality that he really should be facing charges of gross dereliction of duty, has left Malta on the brink of economic cataclysm.

Just how a lowly statistician, lifted out of obscurity via a political appointment, is going to drag the country off this stomach-churning precipice, is impossible to see.

The country’s finances are in deep disarray. Having been plundered by this government and its ministers, both during the time of disgraced former Prime Minister Joseph Muscat and his gang of thieves and continuing now, there’s nothing left and nowhere to turn.

Not only is there nothing left, but in their determination to wring every last penny out of this poor, benighted country,  they’ve ramped up their borrowing to an eye-watering degree, thus ensuring that not only will the current population of Malta have to make good for their debts, but generations to come will also be lumbered with paying for this PL government’s sins.

But how they’ll do this isn’t at all clear. The doors to prosperity, so carefully and astutely constructed by Eddie Fenech Adami’s post-1987 governments, later curated and enhanced by Lawrence Gonzi’s team, are now, one by one, slamming firmly shut.

The financial services sector, that took many dedicated and determined years to create, writing the smart and timely legislation and regulation that would attract foreign investors, producing the well-educated university graduates to staff the incoming companies and creating the physical and virtual infrastructure to support it, has been dealt a death blow.

The island’s now much-maligned tax system, allowing foreign companies to pay an effective tax rate of just 5%, was a key element in the financial services industry’s success, of course. And despite coming under harsh criticism from countries like Germany and France, who challenged it, and lost, in European court several times over the years, it was not an illegal or disallowed type of taxation system. It’s important to remember that the system itself was approved by the European Union, even if a few of the larger member states saw it as unfair.

However, the shameful shenanigans of the Labour government since 2013 are likely to put paid to that. The grey-listing has put everything that’s connected to Malta’s financial services industry into question. Getting off the grey list will mean making concessions that the island would never otherwise have needed to make.

All the most promising of Malta’s industry sectors, financial services, ICT, iGaming, even what’s left of manufacturing – all of these depend on foreign direct investment to grow. Grey-listing and the eventual, inevitable, dismantling of the tax regime, will decimate them all.

Tourism, the first industry to be created post-Independence in the transition from fortress economy to fully-fledged state, is a tired and flagging sector. The heady days of the 1990s, when the island dared dream of marketing itself as a five-star resort, focused on high-value but low volume arrivals, are now but a distant memory.

The manic frenzy of construction in the complete absence of any aesthetic imperative has turned our once-beautiful island into a hideous concrete mass, and scarred it with a landscape of cheap, grey bunker-style massifs piled higgledy-piggeldy atop each other like other countries’ landfill sites.

The covid pandemic would have been devastating for the industry on its own, of course, but it wouldn’t have been fatal. The devastation of the island’s environment, however, almost certainly is.

And without these industries, there’s nothing left. The PL government’s get-rich-quick scheme to sell EU passports to anyone with a few hundred thousand euros to spare, a scheme swiftly recognized as dangerous and potentially threatening to the security of the EU as a whole, has been condemned.

Ursula von der Leyen, President of the European Commission, hammered another nail into the PL government’s coffin a few days ago. Malta’s so-called Golden Passport scheme has to stop, she said. The European Union started infringement proceedings against Malta because of it, in October last year, yet the government continues to defy the EU, and is set on retaining it, backed up, incredibly, by the Opposition.

Parliamentary Secretary Alex Muscat, in response to von der Leyen’s remarks, dug his heels in yet again, insisting that citizenship issues are a “national competence.” Never mind that a Maltese passport actually allows holders to move freely about all the countries of the European Union, thereby making passport sales very clearly an EU-wide competence.

This obviously deliberate obtuseness may satisfy PL supporters and trolls, but it doesn’t fool anyone else. And the passport selling scam will have to go in the end, no matter what the goons in government say.

It’s apparently suspended at the moment, having reached the maximum number of passport sales originally envisaged. It’s hard to imagine how, in this climate, it could actually be restarted.

And that’s the PL government’s last door to income slamming shut. There’s nothing else. Domestic consumption may contribute a large amount to GDP, but without income being generated from external sources too, that will soon grind to a halt.

Joseph Muscat’s economic miracle unmasked for the falsehood that it always was, the cheap swindle that it clearly was. And now that the fraud has been uncovered, the con exposed, Malta will have to pay the price. There’s no way off this cliff but down into the abyss.