Unlike the last two years, this year’s budget came at the beginning of the third week of October. Inevitably, it competes with, and distracts from, the attention given to the second anniversary of Daphne Caruana Galizia’s assassination. Even if it’s all a coincidence, however, the budget needs to be read in the light of the assassination.
The quaint days of giving budgets names (like ‘the Rainbow Budget’) have long been over. But the assassination’s economic impact cannot be disregarded, either in the short or longer terms. We have to evaluate the budget not just on its own terms but also with an eye to whether it takes any steps to address the economic issues raised or impacted by that bomb blast two years ago.
That day, it wasn’t just Maltese democracy that was attacked. So were the foundations of our economy.
First, in the immediate term, there is the reputational factor. It has been directly mentioned in public by the leading players in the financial services sector, but it is also alluded to privately by leaders in other economic areas. At the beginning of this year, Transparency International pointed to the assassination as one of the key factors explaining Malta’s tumble down its rankings.
Bringing the mastermind to justice will bring some closure and respite for all the industries for which reputation is a vital asset not to be underestimated. But it cannot bring complete closure.
For it is not only the assassination itself that has damaged Malta’s reputation. It’s also the background issues which have come under much closer international scrutiny as a result.
Caruana Galizia’s critics like to characterise her as a political attack dog and tabloid gossip. But if that’s all she had been, all she would have had would have been a devoted core group of followers. However, she was also a forensic journalist, investigating money and corruption, and most of the stories she broke turned out to be true.
Whether she was popular as a person is to be kept distinct from the popularity of her blog. The latter was a runaway success because of Caruana Galizia’s general credibility as an anti-corruption journalist.
Her assassination has given her anti-corruption stories more credibility. Why else would there have been a professional, expensive hit job?
She [Daphne Caruana Galizia] was also a forensic journalist, investigating money and corruption, and most of the stories she broke turned out to be true
So there is a corruption narrative, beyond the assassination itself, that is a reputational matter.
The Corruption Perceptions Index, maintained by Transparency International, has seen Malta register the sharpest decline, together with Hungary, over the last three years. Its standing at the beginning of this year was the lowest it has ever been – despite the fact that we’ve been sliding down since 2004. Our latest decline by six points is significant enough that Transparency’s report points to Malta as one of the five major decliners in the world.
Transparency International attributes the downward slide to Caruana Galizia’s assassination, Pilatus Bank and passport sales – and the latter two were both investigated by Caruana Galizia, of course. So far, the impact of the 17 Black revelations haven’t been factored in, yet. Shudders yet to come.
What does all this have to do with the budget? For one thing, Transparency’s index shows a clear correlation: countries that score badly on corruption have troubled economies. Malta might seem an exception but it’s not.
Corrupt countries, like Turkey and Hungary today, can perform well in the short term. But the consensus is that they are missing opportunities to perform better as well as running huge risks in the medium to long term. Things can collapse quickly.
In other words, a budget like this year’s – which rightly has measures aimed at the longer-term future – may have its plans built on sand if it doesn’t protect the industries that permit its largesse. What’s the point of higher social spending if crumbling institutions are followed by a deteriorating economy – a scenario seen in so many other cases.
Other cases? A closer look at Malta itself would suggest that we are already witnessing the beginning of the dire consequences that follow deregulation and the loosening of good governance.
Caruana Galizia’s assassination, collapsing buildings, the withdrawal of correspondent banks, the uncertain future of HSBC in Malta: are these simply unrelated events? Or are they the symptoms of crumbling institutions that no longer function as they should in their given areas?
Good governance is a long-term budgetary issue too. It affects our global competitiveness, where our scores have been held back by the decline in scores on the reliability of the police and judicial independence.
None of this has been helped by the Prime Minister telling the press that he’s not really concerned with asking his chief of staff anything to do with his connection to the secret company, 17 Black. Yes, that nonchalance about alleged money-laundering should really see the country’s reputation bounce back.
There’s more. Corruption, of course, comes with its own real price. As Opposition leader, Joseph Muscat liked to say that corruption is a hidden tax paid by ordinary people. He was right. But here’s the thing. At the end of last year, a study commissioned by the European Greens found that corruption in Malta was costing the economy €725 million a year.
In last year’s terms, Jurgen Balzan for The Shift calculated that that’s two-thirds of the entire social expenditure budget. It’s almost the entire budget for the elderly. It’s 45 times the housing budget and seven times the sickness and disability budget.
It’s a tax of €1,671 on every citizen. Put that alongside the “what’s in it for you” calculations for this year’s budget.
So yes, let’s discuss the long-term vision of this budget. As long as we remember that Caruana Galizia’s assassination needs to be factored in – given its impact on our short-term reputation and what it reveals about our long-term prospects.