The European Commission’s action over Malta’s golden passport scheme damages the country’s reputation but also puts into question the sustainability of its economic model should the scheme be lost, an economist has warned.
The Individual Investor Programme (IIP) had contributed in no small way to the country’s finances and losing it will result in a big blow, Stephanie Fabri said.
The government on Tuesday insisted it will use all possible legal measures to defend what it called as its national interest and sovereignty while Deputy Prime Minister Chris Fearne insisted the infringement proceedings will be fought with a robust argument.
Fabri, an economist focused on public policy, said should such a scheme cease, questions need to be raised on the impact of public finances and the economy.
“This was especially the case since the government highlighted that our response to COVID-19 and the fiscal space we had in this area was largely due to such proceeds.
“So, one has to question the current sustainability of the economic model given such an important role this scheme played,” she added.
The European Commission on Tuesday launched infringement procedures against Malta by issuing letters of formal notice regarding its passport scheme. Similar action was also taken against Cyprus.
Malta’s scheme generated more than €800 million for the government between its launch in 2014 and last July and has been credited with helping the country stay afloat during the coronavirus crisis.
The commission said that by selling EU passports, Malta departs from the common basic understanding that nationality is the expression of a special relationship of allegiance, solidarity and a genuine link between the state and its people.
The commission said the granting of nationality – and thereby EU citizenship – in exchange for a pre-determined payment or investment and without a genuine link with the member states concerned, is not compatible with the principle of sincere cooperation enshrined in the EU treaty and undermines the essence of EU citizenship.
Our regulations go way beyond what many other EU states do
European Commission president Ursula Von der Leyen referred to passport sales during her State of the European Union speech in September, insisting “European values are not for sale”.
The government recently announced an overhaul of the scheme in which individuals can no longer apply for citizenship without first being residents here for at least a year.
The plan is for 400 applications to be approved per year. The new scheme is capped at 1,500 successful applicants.
In a tweet announcing the action, European Commission vice president Věra Jourová said the action was launched “because there cannot be a weak link in EU efforts to curb corruption and money laundering. EU passports cannot be for sale.”
Cyprus said last week it would scrap its programme, which has brought the island some €7 billion, after an undercover TV investigation exposed abuse.
Fabri said that Malta’s programme was under the spotlight by the European Commission even though its schemes were approved by the same commission.
“The fact that legal proceedings are now going to be opened casts a spotlight on Malta and this might damage our reputation given that such schemes were subject of abuse in the past in other countries,” she said.
She added it was “critical” for the country to strengthen its institutional and governance structures as these were crucial for Malta’s investment attractiveness, mentioning the MoneyVal and Venice Commission reports as examples.
Nationalist Party MP Karol Aquilina said the opposition had been vindicated with its position on the scheme from the very beginning, adding that the government bragging that the scheme had been endorsed by the European Commission was “a big fat lie”.
“Not only did it not have endorsements as former prime minister Joseph Muscat and Prime Minister Robert Abela have been saying, but the EU always drew our attention to the fact that the sale was illegal.
“Now, the opposition has been vindicated because we’ve been saying this for years,” he said, when contacted.
Aquilina said the opposition was ready to sit with government and help come up with a scheme that would replace the IIP by removing the price tag on citizenship. He said Malta previously had residency programmes that brought money into its coffers but these never put it in a bad light with the EU.
“We could come up with a scheme that rewards people by honouring them with citizenship if they invested here but we cannot have a price tag on our citizenship.
“When we introduced the IIP we just showed how desperate we were. The PN is against the sale of citizenship,” he said.
On Monday, Abela told journalists: “We will be defending Malta. Had it not been for the contributions from that programme, which we are in the process of winding down, we would probably not have been in a position to present a budget of this scale.”
The parliamentary secretariat for citizenship and communities on Tuesday said the government reiterates that citizenship is a member state competence, whereby every European country decides on its own the individuals it believes should receive citizenship.
“There are over 600,000 individuals who become European citizens each year with very minimal screening,” he said.
“As evidenced by Malta’s recent unprecedented commitment to reform laws to uphold European values, Malta is implementing regulations which go way beyond what many other European member states do to scrutinise citizenship applicants.”
The statement also said the government will formally reply to the letter of formal notice in due course.
Labour MEPs Alex Agius Saliba and Josianne Cutajar also said on Tuesday that Brussels has no jurisdiction over matters related to nationality and citizenship.
They were speaking in a news conference organised by the European Parliament Office in Malta.