One... Billion... Euros!

I don’t know about you, but every time there’s a news item about how much money Malta can expect to receive in EU funding, I am always reminded of the 1997 Mike Myers comedy, ‘Austin Powers: International Man of Mystery’.

I suppose you can already guess which scene. It’s the moment when Mr Evil – sorry, DOCTOR Evil (he didn’t spend six years at Evil Medical School to be called ‘mister’, you know) - announces his plan to steal a nuclear warhead, and hold the world to ransom for… (drums rolling)…

‘One… Million… Dollars!’

So when Roberta Metsola excitedly announced on Facebook yesterday that: “The [EU recovery fund] proposal on the table gives Malta close to… (wait for it)…

One… Billion… Euros!”

… I half expected the camera to suddenly zoom in to an extreme close-up of Commission President Ursula Von Der Leyen, holding one finger to her lower lip.

But there’s more to the resemblance than just the sum of money itself (multiplied by a thousand, naturally)… or even the ‘Dr Evil’-like enthusiastic glee with which such announcements are generally made.

There is also a curiously similar inflationary force at work behind the scenes.

What makes that Austin Powers moment so memorable, is that the line itself is uttered in 1997… by a criminal mastermind who had been cryogenically frozen since the 1960s (the whole movie, in fact, derives its humour from the premise that both Dr Evil and Austin Powers are oblivious to all the changes that had taken place in the intervening 30 years).

‘One Million Dollars’ might indeed have been the standard world-ransoming sum of the 1960s; but as one of Dr Evil’s associates gently reminds him in the film, it did not actually amount to very much at all by the late 1990s: when even modest companies posted annual profits of anywhere up to a thousand times that much.

So Dr Evil promptly modifies his demands to what he thinks might be a more daunting figure for the new, unfamiliar age: and instead asks for… [quick camera-zoom]…

‘One… hundred… BILLION… dollars!”

But while that worked fine for a movie made in 1997… by today’s standards, it’s still a rather modest request. In its totality, the EU recovery fund actually amounts to over €750 billion; and some people are already arguing that it might not even be enough to mitigate the effects of the post COVID-19 economic crisis.

This, too, has parallels with Malta’s 30-year fascination with how much money we can possibly squeeze out of the EU. By an interesting coincidence, ‘Austin Powers’ came out in the same year when Prime Minister Alfred Sant had ‘frozen’ – not cryogenically, perhaps; but frozen all the same – Malta’s application to join the European Union.

I still clearly remember the reaction of former Foreign Minister (later President) Guido De Marco: who passionately decried, with much the same drama as a sudden camera zoom, that Sant’s actions had just cost the country…

“One… hundred… million… Maltese liri!” (the famous ‘mitt miljun’, for those with good memories).

I think we can all agree that that sounded like an awfully large sum of money at the time; and yet (taking into account the exchange rate, etc.) what are we talking about today is at least five times that value: and unlike Guido’s ‘mitt miljun’, it doesn’t represent the total amount of money that Malta could have expected to make by joining the EU.

On the contrary, the figure of €1 billion consists of around €350 million in grants, with the rest (around €650 million) taking the form of loans which will somehow have to be paid back by 2058 at the latest.

So most of it represents how much the EU is now willing to lend us (with, apparently, a whole bunch of conditions attached) to help us through the impending financial crisis.

And just like Austin Powers, this forces us to acknowledge how much has really changed over the past two-to-three decades. For let’s face it: while ‘One Billion Euros’ still makes for an impressive soundbite… if only just… in reality, it is but a tiny fraction of the entire recovery fund: most of which has been earmarked for other EU members states that (unlike our own, thankfully) need that sort of cash injection a heck of a lot more desperately than we do right now.

Maybe we don’t give ourselves enough credit for the extraordinary economic miracle that has evidently occurred in the meantime; but this also means that, in just 23 years, we went from being a country that constantly (and, it must be said, often embarrassingly) knocked on the EU’s door with its begging-bowl in hand… to a country that has the luxury of deciding whether it really needs to borrow €650 million from the EU, just to survive.

How much of that success is due to the fact that – despite all Alfred Sant’s efforts in the late 1990s – we did actually join the EU in the end? In all fairness, I’d say… probably, quite a lot.

But now that we’re in this enviable position of not actually needing as much financial assistance as we might have done 20 years ago… I would also argue that we need to ask ourselves another, very different question today.

What are the real economic factors behind this remarkable reversal of economic fortunes… and how may they be impacted by a sudden impulse-decision to borrow €650 million we might not actually need?

The answer to that first question must surely include the fact that, throughout its history – and under all administrations, both Nationalist and Labour – Malta has always resisted the temptation to borrow from international institutions such as the World Bank, the IMF, or the ECB.

Instead, our policy has always been to raise money through local government bonds. And while this habit of ours has occasionally wrought havoc with our GDP-to-debt ratio… it remained a case of borrowing money from ourselves: which also means that paying off that debt actually translated into Malta pumping money back into its own economy.

It was this factor, far more than any amount of billions in EU funding, that spared Malta the fate of other Eurozone economies that now need to be bailed out (yet again). And yet, here we all are: actively contemplating whether to borrow…

… 650 million euros!...

… in order to overcome an economic crisis, which most credit ratings agencies predict we can easily overcome on our own merits, without entering any debt at all.

And that’s before factoring in any of the conditions attached to the debt. In Parliament this week, Finance Minister Edward Scicluna appeared to suggest that the €650 million loan is somehow contingent on altering our taxation regime: something which the EU has been pressuring us to do for years anyway; and which both the Nationalist and Labour Parties (including all six of our MEPs) have so far fiercely resisted.

“The worst danger for Malta, and this is where we must see what is in the national interest, is that they are turning to company taxes, where Malta was already facing challenges and threats [before the outbreak of the pandemic],” Scicluna warned.

He also specifically referred “to the Common Consolidated Corporate Tax Base commonly referred to as tax harmonisation, whereby Malta would no longer be allowed to impose tax according to its national regime…”

Ironically, Malta’s historic resistance to this level of EU interference is another of the reasons for our economic turnaround in recent years. For while the pandemic has indeed decimated entire sectors of the local economy – mostly tourism, and its many dependencies – Malta’s financial services sector (which, as we all know, relies on Malta’s continued tax sovereignty for its survival) does not seem to have been affected much at all.

This in turns accounts for why Malta’s allocated share of the €750 billion recovery fund is so small, compared to that of other European countries.

Our economy has proven to be resilient enough not to need the ‘hundreds of billions’ that are being offered to other, less fortunate EU member states: largely because we always avoided taking on unnecessary foreign debt; and because we have always (rightly) insisted on maintaining sovereignty over taxation.

And yet, the EU now seems to expect us to dismantle the very causes of our own economic success, just for the benefit of being saddled with a mountain of debt – of the kind we have always avoided, in the past - that will have to be paid by our children, their children, and their children’s children, over the next half-century or so.

But hey, what’s there to worry about? Who cares if Malta throws away the only assets that have permitted us to remain competitive – even at the worst of times – and goes from being the ‘best-performing Eurozone economy’, to a debt-slave of the EU?

It’s still… (drums rolling)…

ONE… BILLION… EUROS!

And who could possibly say no to that?