More than just ‘misjudgement’ | Sven Giegold

After this week’s EP Rule of Law committee’s fact-finding mission, MEP SVEN GIEGOLD argues that Malta is now a ‘test-case’ for the new European Commission’s resolve to tackle corruption and financial crime

Sven Giegold
Sven Giegold

Can you describe the atmosphere inside the Prime Minister’s office during your meeting with Muscat earlier this week?

First of all, the meeting with Mr Muscat was very different from those before. At previous meetings, I always saw him as overly self-confident; this time, he was much more on the defensive, for obvious reasons. He was not able to successfully explain to the delegation why he wants to stay in office any longer. The delegation was very unconvinced by his reasoning, and that was also clearly expressed.

Second, while we saw progress in the Daphne Caruana Galizia murder investigation, we couldn’t see any substantive progress when it came to the long list of corruption allegations; nor when it came to prosecutions.

Some of the cases are rather old. We do not feel that the Maltese justice system is able to fight successfully against financial crime and corruption. And that is, of course, a major concern for us, as it is also for a concern for many Maltese citizens.

At this juncture it appears that Mr Muscat was either (naively) unaware of what his chief-of-staff was up to all this time; or that he might have allowed Keith Schembri to be complicit in this sordid affair. What is your own opinion?

I can only say that Muscat admitted ‘misjudgement’; but I would argue that this is not simply a case of misjudgement. The Prime Minister, together with the finance and justice ministers, have always protected Keith Schembri and Konrad Mizzi, despite evidence that was found by Maltese authorities, and which has been in the public domain for some time.  

This is not just a misjudgement; it is basically a case of protecting those who are highly-placed suspects in serious crimes…

But the evidence you are talking about is connected with financial crimes. Evidence of involvement in the murder is something that only came out in the last two weeks…

I’m not talking about the murder investigation, at this stage. The discussion with Malta does not focus only – or even primarily – on the murder of Daphne Caruana Galizia. It’s about a much more systematic concern over the rule of law in Malta.

I don’t know who is behind the murder; I’m not an investigator, and I’m not in a position to divulge what the police told us. It is really up to Maltese institutions to disclose what they have found.

But what is clear is that Schembri in particular, but also Mizzi – and to a certain extent, also Chris Cardona – were involved in a whole number of suspicious procedures. The fact that none of them faced any consequence for that is not only misjudgement; it is a case of protecting public officials suspected of serious crimes, in some of the highest positions in government. And that is very serious.
There seems to be a form of double standards among the Maltese public.

What I mean by this is that… the Daphne case was really too much. So, we had very firm promises by the Prime Minister to find those responsible. On the other hand, we have never seen the same commitment to ensuring the rule of law when it came to corruption and financial crime.

This simply shows us that there is a problem in the constant application of the rule of law in Malta.  

Muscat has announced that he will resign, but he could still attend the European Council of 12 December. Do you think Muscat should not go there for his last meeting as Prime Minister?

Yes. I think the best scenario would be that he steps down immediately. There is a vice premier [who could attend in his stead], so I don’t see why this would cause a major disruption.

But the problem is that Muscat is putting all Europe’s heads of state into a difficult position; because they have to make common decisions – shake hands, and so on – with someone who has obviously protected corrupt practices in his own government for years: despite knowing better, to say the very least.

This is causing deep concern for the public legitimacy of the next Council, and I indeed think Muscat would be best advised to step down before the next meeting. It’s already bad enough that the Christian Democrat [Hungarian premier] Mr Orban is still attending…

You have suggested that procedures begin to apply Article 7 against Malta. A lot of people here, who voted for Muscat’s Labour Party in good faith, are now asking the question: why should the entire country be punished for the actions of its government?

That is a misunderstanding. What we are demanding is not to open Article 7 now; but to start the preparations for this to happen later. This means starting a structured dialogue between the European and Maltese institutions over the consistent application of the rule of law.

This is not a ‘punishment’ for Malta; it is a chance to regain the trust and reputation, which your country needs in order to be successful in the future.

So, I think it is a very serious misunderstanding. Even now, your reputation as a financial centre has suffered.

Also, the i-gaming industry depends on a location that has a good reputation when it comes to governance. If this does not change, Malta will be harming its own economic prospects.

European institutions can help to shift the balance of forces in Malta. That is very important. And I would argue that even the consistent application of environmental law in Malta would help your country. Do you think that Malta would be a more attractive place if everything is full of concrete?

European and national legislation already puts Malta under much more environmentally-friendly obligations; but there seem to be systematic problems in the planning process, which do not allow their consistent application because there is simply too much money at stake.

Well, this newspaper has consistently flagged problems in the planning process…

I know; and you are right because your islands are not endlessly large; Malta is an attractive tourist destination; a great place to learn English; a great place to study. Do you really want to risk it all because of a corrupted planning process? Therefore, I think better rule of law is not a threat; it is an opportunity for Malta.

On the subject of our reputation: some Maltese feel they have been dealt an unfair blow since the Panama Papers broke, for example, because the European Commission took greater interest in issues such as the Pilatus Bank affair, than it did with Deutsche Bank or Danske Bank. Do you think this criticism is valid?

I would say that, for me, financial crime does not wave a national flag. The German Greens are the toughest critics of Deutsche Bank in Germany. We have pushed for the strengthening of anti-money laundering supervision. In Deutsche Bank today, there is a permanent money laundering supervisor positioned in the bank’s headquarters. He has been placed there because of public pressure.

In Malta, on the other hand, we received lots of promises; lots of announcements of anti-money laundering strategies, and so on… and then, we received a damning report from the European Central Bank on the important Bank of Valletta.

Clearly, the words and actions of this government do not fit together.

But I agree: money laundering is a big problem everywhere. You mentioned Danske Bank; and rightly so, it was the biggest money laundering scandal we have had so far in Europe. We Greens, together with others in the European Parliament, ensured that this had a direct consequence when we reformed the European Banking Authority.

In the Council we successfully pushed for the support of the creation of European anti-money laundering bodies which will take over important functions from national bodies, because many member states have failures.

So you can rest assured: I’m as brutal in Germany as I am in Malta. I don’t make any distinctions. And I would appreciate it if, in Malta, such questions were de-nationalised. If European actors push for strong rules, it is not ‘against Malta’ or the Maltese identity; as it is not against German, French or Italian identity or structures.

It is in favour of common European values, and in this we are all together. The fight against financial crime is a European issue.
But the problem with Malta was that… nowhere else in Europe did we have members of the government revealed to have offshore accounts, and who were allowed to stay in office.

This is unprecedented. And this is why, at that point, Malta attracted a lot of attention, despite being a much smaller financial centre than others.

In past missions, you also came to Malta to learn about its role in international tax avoidance policies. As you know these are schemes employed in various countries of the EU. Is a small country like Malta justified in acting as a financial centre to raise money and finance government spending, when it suffers so greatly from a lack of resources and imbalance in international trade?

If countries are on the periphery of a common market, I would say they have a good argument in favour of lower tax-rates on profits made in those jurisdictions: compared with the tax-rates of other, longer established and better-positioned jurisdictions.

But there is never a justification for devising a tax system whereby money that has been earned elsewhere is shifted to your own location, using loopholes in European legislation, which allow to create a more attractive tax regime.

Malta has done just this: it has designed its tax system in such a way that transnational companies can shift their profits to Malta, using European legislation which can only be changed through consensus. This is just a modern way of stealing money from others. I say that very openly.

I can see justification for tax attractiveness when it comes to value-added earned in Malta; and equally in Ireland, and so on. But I see no moral justification is shifting transnational profits to one’s own jurisdiction.
In particular, I value that moral debates, in Malta, are serious debates.

Part of the Maltese identity can be seen to be very strong on morals; but then, read what the Vatican has written about such tax structures and tax havens. It’s very clear. This, too, is part of the double-standards.

I think that should also be a reason to rethink the imputation system for corporate profits.

The European Parliament has been scathing about Malta’s IIP scheme, yet at Commission level nothing has been done about it. Do you think the EU will ever come down hard on the sale of citizenship schemes like Malta’s IIP or Portugal’s Golden Visa?

The problem with Malta’s scheme is that it does not respect the agreement with the EU that all those who get a passport must have a genuine link with the country. And a ‘genuine link’ doesn’t mean ‘to pay money’. It means living or working in the country, being integrated, and so on.

All this is not respected by the Maltese government. Therefore, the question is: will Europe, under the new commission, continue to accept this? What I hope is that [new Commission President] Ursula von der Leyen will adopt a more pro-active approach than Mr Juncker before her.

Mr Juncker and Mr Timmermans were not ready to really act on any of the systemic rule of law problems in Malta. This now has to change; in fact, it’s a test-case for the new Commission.

It is not yet decided what the outcome will be; but of course, I think the European Commission should open an infringement case, because of the violation of the obligation of loyal cooperation – as laid down in the treaties – with those countries which misuse their passport and Golden Visa schemes. So I hope that the new commission is ready to do something about it.

You criticised von der Leyen in recent comments, suggesting that she was weak, not just with Malta but also with Poland and Hungary. Isn’t there a danger that Malta will become – as you yourself put it – a ‘test-case’, that will rally together all the EP’s opposition to the New Commission?

First of all, we made progress with regard to Poland: an Article 7 procedure has been opened; and the EP has called on the Commission to do the same with Hungary. You can see that we are not playing this as a national question, where we only look at certain countries.

Also, we Greens don’t care which party is in government. The rule of law shouldn’t have a party colour, either. Now, of course, with all the facts in the public domain concerning Malta, this is naturally a test-case for the Commission. But rest assured that this doesn’t earn them any credit from any other country.

We want our common values to be applied everywhere. We will criticise Germany, if it ignores the environmental standard for its car industry. And we will criticise Malta if it is weak on corruption; or Hungary, if there are problems with media freedom.

This is often unfortunately portrayed in this country as us being ‘against Malta’, as the EU’s smallest state. No. The rule of law is to be defended everywhere.