[ANALYSIS] Inglorious attack, inglorious retreat

Joseph Muscat: an inglorious retreat?

The agreement between the government and the European Commission stipulating a year of "effective residence" before the granting of citizenship to rich migrants exposed Muscat's over-confidence in rushing through parliament a defective law which was bound to stir international controversy and cast a shadow on Malta's international reputation. 

The government ended up accepting what it had voted against in parliament in November 2013 when the original law was approved: namely, the abolition of the secrecy clause, linking the scheme to investment, and accepting the principle that residency should precede the award of citizenship.

It exposed a lack of tact, attributable to the inexperience of the new government and an inability to foresee the all-too-predictable reactions in Europe and the rest of the world. In fact, much of the initial outrage in the international press was directed at the poorly thought-out secrecy clause, which was only withdrawn after the bill was approved by parliament. 

Had Muscat proposed a scheme with no secrecy clause and tied to investment and residence, he would have spared Malta a lot of bad press and a specific mention in a European Parliament resolution endorsed by all political families - including Muscat's Socialists and Democrats group.

Even in its latest incarnation, the IIP still defies the non-binding EU parliament resolution, which clearly states that citizenship should not be "tradable commodity". Once again, Muscat has isolated his party from the European left, even though the Commission's acquiescence seems to put paid to its own umbrage.

In the meantime, Muscat manages to display two sides to himself: he is ready to fan the flames of euroscepticism by resorting to hard-talk on the EU and depict opponents of the national scheme as 'traitors', but he is sensible enough to turn things around whenever he faces the risk of legal sanctions which would expose him as an international pariah.

Again this is reminiscent of the aborted pushback of migrants in July, when Muscat back-tracked after being faced by an injunction from by the European Court of Human Rights. Now, faced with the prospect of an infringement procedure no the IP, Muscat played ball with the Commission, securing a favourable compromise. He may be tempted by Mintoffian delusions of grandeur... but unlike his predecessor, he knows where to draw a line.

Ultimately, if the scheme is successful, Muscat will reap the funds before the next election, enabling him to avoid hard fiscal choices like increasing taxation or reducing social expenditure, while retaining the income tax cuts inherited from the last Gonzi administration.  

But the impression that the IIP funds are indispensable for his plans, exposes Muscat's Achilles' heel - something that was noted by the Opposition in its attempt to thwart the scheme. He risks becoming dependent on easy money from a dubious scheme, which would only serve to delay necessary structural and painful reforms the country needs.

On top of all that, he still remains open to the risk of a devastating international scandal if some controversial tycoon manages to slip through the due diligence process.

All eyes are on him. It may win him the next election, but Chavista-style spending from the IIP to fund social spending. His goal may well be that of achieving socialist objectives through neo-liberal measures like selling citizenship. But the flipside is the erosion of the social pact that is based on income redistribution from high-income earners to low-income earners inside the same community. Much depends on the amount of money the scheme will ultimately rake in from the outside.

The new residency clause, allegedly a 12-month period that does not necessarily demand the physical presence of the applicant, is yet to be defined: it could be the result of future bickering with the EC, which has demanded "effective residence", while Muscat claims this won't mean residing here for a full years.

Until it is clarified whether the Commission is looking at the international tax model of 183 days as proof of residency, the agreement remains a legal minefield, and it may reserve further surprises for Muscat if he's been lured into a trap of much more onerous terms. So far, it seems he's equated the one-year residency requirement to the minimum six-month waiting period required for due diligence purposes. 

On this Muscat may have suffered a setback, but he avoid the Opposition's proposition of a five-year residency, designed to deny him the funds he needs before the next election. He may have invited the Opposition into a full-frontal attack which leaves him bruised, but he also rallied his core vote for the European elections.

Ultimately in the zero-sum game between the PN and PL, Muscat loses out on credibility, good governance and ideological coherence. But he scores a major goal in securing his fiscal lifeline and getting a seal of EU approval.

Simon Busuttil: an inglorious attack?

In some ways the Opposition should feel vindicated, because the government has now accepted most of the amendments it had presented in parliament in November: first secrecy, then investment, and now residence. The only notable difference is that while the Opposition had proposed a five-year residency permit, the government has secured an EU mandate for a one-year residency period for prospective applicants.

But by pushing too hard in the past few days, by threatening to deprive citizenship and potentially rendering applicants stateless in an apparent breach of international law, the Opposition has played its part in turning the issue into a zero-sum partisan game with no ideological grounding or principle.

While the citizenship battle cry helped rally their core voter, the PN went overboard among that category of voters which is increasingly disappointed by the PL but which perceives Busuttil to be too tribal in his frontal attacks.

While the Nationalist MEPs were perfectly entitled to criticise the Maltese government in international fora, their intense lobbying to ensure a specific reference for Malta in the European Parliament resolution did not go down well with a segment of the electorate. It smacks of gratuitous anti-government tactics that can be easily misinterpreted as hypocrisy.

Moreover in the past days, through antics like the PN media's hounding of an anonymous Chinese businessman at the airport, allegedly after he came to Malta to apply for naturalisation under the IIP, it became evident that PN's aim was that of scaring off applicants and deprive government of the cash from the scheme.

This became the start of a dangerous game: first because the PN was not clear of whether it was in principle against the sale of Maltese citizenship, or whether it wanted the sale of citizenship on its own terms.

Surely the Opposition is right to be concerned about the potentially corrosive impact of the scheme on Maltese democracy: not only will the money generated by the scheme help win Muscat through pork-barrel politics, but the influx of rich foreigners hailing from countries lacking any notion of good governance also raises concerns on party financing issues.

Instead of eloquently articulating these concerns, the PN went overboard in its attempt to sabotage the scheme. The PN's reputation as spoilsports may return to haunt the party if Muscat manages to reap the funds and translate them into infrastructural projects and social spending that has a positive impact on people's lives.

And following its threat to revoke IIP citizenships, it has now failed in this scare-tactic once Muscat secured a seal of approval for the money-generating scheme from the Commission.

Far from being a matter of principle, the PN was hesitant to attack the discriminatory aspect of the scheme, failing to exploit any disgruntlement on the left-wing of Labour. Essentially the only difference between the two major parties now is that while the PN favours a five-year residence, Labour has accepted a minimal residence period of one year. Of the three parties, only AD expressed concern on the discrimination between rich migrants and other migrants who actually live here but do not have the money to buy citizenship.

And the party's heavy-handed reaction to Kevin Plumpton's declaration that the party should withdraw its threat to revoke citizenships now that Muscat had achieved a Commission deal, was very revealing of the ambiguity of the PN's stance.

For it was never clear whether the party is against the commodification of citizenship or is simply asking for a residency period. Neither has the party pronounced itself on whether buying or renting property is an acceptable form of investment or whether citizenship should be linked to a more long-term investment resulting in actual job creation.

This ambiguity could have been removed had the party presented its own policy blueprint on citizenship-by-investment. In the absence of this, the PN's hardline opposition risks being perceived as a tribal one.

Ultimately in the zero-sum game, Simon Busuttil scored points in affirming himself as a strong leader of an effective Opposition which forced the government to back-track on a number of fronts. But he has lost out in his overzealous battle to ensure a stillborn death for a scheme that can dead-leg its chances for re-election.