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raphael_vassallo
Raphael Vassallo

Some debts are more equal than others

Adrian Delia has been called many names in recent weeks; but whatever you or I make of him in his new political role... he is ultimately just another ordinary citizen of this country

raphael_vassallo
Raphael Vassallo
3 October 2017, 7:30am
Debate between Adrian Delia and Chris Said
Debate between Adrian Delia and Chris Said
A small detail in an article this week caught my eye. The story itself was about Adrian Delia’s decision to claim a salary for his role as leader of the Nationalist Party: and I could almost stop there, because something already feels deeply amiss.

Adrian Delia has been called many names in recent weeks; but whatever you or I make of him in his new political role... he is ultimately just another ordinary citizen of this country. And last I looked, this country adhered to the basic labour model prevalent all over Europe, and pretty much everywhere else in the developed (and even undeveloped) world: you do a job, you get paid for it. 

So since when is the fact that someone – anyone – aspires to receive a salary just for working, considered newsworthy enough to even print?  How did we reach a stage when one of the most basic and widely understood tenets of global economics seems to actually surprise us?

Well, I suppose you don’t really need me to answer that. What made this story so eminently newsworthy was the fact that the political party Delia now works for – and hopes to claim his salary from ¬– is approximately 25 million euros in the red. 

"The real issue concerns how the PN can continue to exist at all... when, if it were anything but a political party, it would have been stripped to its bare bones"
And we were given a tentative breakdown of that extraordinary debt, too. This is a small excerpt:  “The party and its media arm have to raise thousands every day to finance their debts.
The repayment programme in fact has to cover several outstanding debts with various banks: €3 million payable to Bank of Valletta, €7 million to HSBC, €1 million to APS Bank, the €4 million that was collected through the PN’s ‘cedoli’ loans scheme – which capital was used to repay other loans and reduce interest rates on outstanding loans; but also another €6.5 million in outstanding national insurance contributions, €2 million in pending utility bills to ARMS, and other creditors.”

There are multiple ironies staring out at us from that paragraph: probably too many to fit into a single article. But I’ll start with the most obvious one, just to get it out of the way. 

One of the main objections to Adrian Delia as PN leader was the fact that he comes to the role saddled with an estimated eight million euros in personal and company debts. There was speculation that HSBC would be foreclosing on a seven million euro debt incurred to finance a development project in Mgarr: questions were asked about how local banks could extend personal credit to someone who has (apparently) no savings or visible means to ever pay it back, etc. This gave rise to claims that he had entered politics in the first place just to plunder the PN. “Because the PN has so much to plunder,” Delia scornfully retorted. 

The question therefore becomes inescapable. If Adrian Delia is deemed unsuitable as PN leader on account of his personal and professional debts... then why isn’t the same argument made about the PN as a whole? How do we all accept that a political party can be eligible for political engagement, when it is equally crippled by unpayable debt... and then kick up such a godawful fuss when a single individual decides to do the same thing?

At this point, the issue of Delia adding to the financial burden through a personal salary becomes purely academic.  The real issue concerns how the PN can continue to exist at all... when, if it were anything but a political party, it would have been stripped to its bare bones by creditors years ago.

"For political parties there really is no tomorrow when it comes to paying off debts. The banks will never foreclose; the tax authorities will never come down on them like a tonne of bricks... "
This forces us to turn our attention to the creditors. I’ve already started with the banks, so I may as well continue. The real purpose of the cedoli scheme was (as indicated above) not so much to actually pay off debts, as to secure lower interest rates on existing debts with all three of Malta’s major banks. I don’t deny that makes a certain financial sense: to anyone who owes money, anything that can result in lower monthly instalments is generally viewed as a good thing.

But it was also a one-off scheme, and as such doesn’t even begin to address the underlying problem. Indeed it adds to them: those 4 million euros will have to repaid at 4% interest in 10 years’ time.

Meanwhile the PN has no permanent, reliable source of revenue: on the contrary, its so-called ‘commercial arm’ – mostly comprising a technically bankrupt media empire – is actually a money-guzzling black hole.  All that’s left (short of literally begging on a street corner) is regular fund-raising marathons: and even these may be threatened by the ongoing internecine feud, which will no doubt put off potential ‘investors’ in future.

When I occasionally bring such matters up with PN exponents during interviews, the answer I normally get is that the PN also has assets to counter-balance its outstanding dues. It owns property in the form of (inter alia) clubhouses in practically every town and village in the island, which amount to more than 25 million euros in value. 

Leaving aside the curiosity that some of the ‘other creditors’ alluded to in that paragraph are landlords who have been owed rent for some of those clubhouses for decades – funny, how you can claim to ‘own’ something you can’t even afford to rent, huh? – well, what’s stopping the banks from foreclosing on those loans, and seizing the properties in question to pay it off?

That’s what would happen to any other commercial entity under the same circumstances; it’s what happened to Price Club in the 1990s. There are only two reasons I can think of to make an exception in this case: and neither is particularly pretty.

The first is that the banks are simply comfortable with a situation that places them in theoretical ‘ownership’ of one of Malta’s two political parties. Bearing in mind that (however remote that possibility seems today) the PN might one day get back into power... allowing it to persist under such circumstances may be viewed as a ‘sound investment’.

The second is roughly the same as the pretext not to press criminal charges against international banks during the 2008 crisis: ‘too big to fail’.  Whatever its current predicament, the PN constitutes Malta’s main Opposition party. If it combusts, a vital component of the democratic process combusts with it (at least, in the short term). 

It could, of course, be a combination of the two. Either way, we are left with Malta’s main Opposition party entirely controlled by its creditors, including powerful international financial institutions that rely on governments to set interest rates, etc. I can see the advantage for the financial institutions, naturally. What I find slightly harder to spot is the advantage for the country.

OK, enough about the banks. Next up, it’s the tax authorities. The PN also owes 6.5 million euros in unpaid National Insurance contributions.  Now: I won’t pretend to be ‘shocked’ when pointing out that this, as far as I am aware, constitutes a crime. If so, the PN is hardly the only guilty party. But I would be a little shocked to discover that the stipulated penalties were not applied in this particular case.

Chapter 318 of the Civil Code goes into very specific detail about fines for unpaid NI arrears: it’s too complicated for any detail, but since 2000 the fee has been calculated as a percentage of “the total difference obtaining from the rate at which such contributions were paid and the applicable rate due at the time when such contributions were due.” 

However that works out in practice, though... it’s still money that has to be paid, over and above the missing NI contributions. Those are the penalties faced by lesser mortals: I would like to think they apply in this case, too. (Note: I checked the ‘exemptions’ schedule, and there is no mention of political parties anywhere). 

The real issue, though, concerns those PN employees who will sooner or later reach retirement age. Will they get a State pension? If so, who will pay for it?  The same party that has, at various points, been unable to pay even their monthly salaries? (Speaking of which: what makes Adrian Delia so confident the PN will be able to pay his own wage, anyway? Hmm...)

But I’ve left my biggest bugbear for last: because, unlike the Inland Revenue Department or the banks, debt with ARMS Ltd is something we ALL have to face: no matter what. With the situation as it is – Enemalta being a State monopoly, and all that – just to use electricity in this country automatically means to owe money to ARMS Ltd. 

So we don’t even need to consult the Civil Code to find out the penalties for failing to pay for it. It’s a reality many among us have faced before: you get three warnings, then it’s lights out until you cough up the money. Oh, and they also slap a 160 euro reconnection fee... on every property that has a meter.

Well, that’s what happens to us lesser mortals. But not, it seems, to political parties. Here, I can include Labour, too. ARMS Ltd recently disclosed that it is actually owed 3.5 million euros by political parties: we can account for at least two million of that figure; so unless Alternattiva Demokratika left the hairdryer on full blast for 20 whole years... it’s pretty safe to guess who owes the rest.

Did Labour and PN ever get their electricity provision cut off for failing to pay an astounding 3.5 million euros in utility bills? As has happened to me... I mean, to people I know... over unpaid arrears of as little as 1,000 euros? I think not. Unless their kazini are all equipped with in-house generators, it’s plain to see they’re all guzzling electricity like there’s no tomorrow... without paying a cent for it, still less any reconnection fees.

Because for political parties... there really is no tomorrow when it comes to paying off debts. The banks will never foreclose; the tax authorities will never come down on them like a tonne of bricks... and ARMS Ltd would cut off its arms before issuing a warning addressed to either the Stamperija in Pieta’, or Mile End up the road.

Instead, they will squeeze you and me to compensate for their failure to collect other people’s debts. And you’re still worried about Delia’s financial situation? HA!  

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