It’s hard to imagine how 2020 could live up to the political turbulence of 2019 but the next 12 months could be all about the economic consequences. Keith Micallef gazes into the crystal ball to see what could be in store.

The post-Muscat transition period

The start of this year marks the midpoint of the legislature, at which stage the change of the guard at the helm of the government will be taking place with Chris Fearne or Robert Abela taking over the reins from Joseph Muscat.

While Mr Fearne started as the frontrunner among the Labour Party members who for the first time ever will be voting to elect the leader, Dr Abela is believed to have made inroads in recent days.

On one hand, Dr Abela is building his campaign on the understanding that he will not be rocking the boat; on the other, Mr Fearne is portraying himself as the agent of change.

Joseph Muscat’s successor will enjoy an unprecedented healthy lead in the polls for a government in its second term, but recent surveys suggest that Labour’s decline could be on the horizon.

While it is still early days, history suggests that, more often than not, a transition of power for a party in government never bodes well. It is the time when there is a tendency for the wheels to come off, and the start of internal unrest within the party. 

From Dom Mintoff to Karmenu Mifsud Bonnici in 1984, Eddie Fenech Adami to Lawrence Gonzi in 2004 and in the UK with the transition from Tony Blair to Gordon Brown in 2007, there seems to be a very worrying trend which coincides with the end of a political cycle.

The perils of an untested Prime Minister

While there is not enough evidence on the ground suggesting Malta’s next prime minister is in for a bumpy ride, the fact remains that winning over the trust of the Labour Party members is a different ball game to facing the electorate in a general election. That could be the Prime Minister’s Achilles’ heel as being at the helm without ever being tested might dent his credentials to show his mettle within the parliamentary group in times of crisis.

Dr Muscat’s historic electoral triumphs gave him political licence to do what he pleased, meaning that any form of internal dissent was almost unthinkable. His successor, however, will not enjoy such standing for the simple reason that his leadership will be untested.

Assuming there will be no early election, the ultimate objective for the new prime minister will be all about consolidating support and winning over the sceptics.

Arguably the most challenging task will be restoring the country’s reputation with respect to the fight against money laundering, corruption and to implement crucial good governance reforms. As contradictory as it might sound for the neutrals, should Dr Muscat’s successor do his utmost to clamp down on certain elements of corruption and wrongdoing, he is very likely to ruffle some feathers.

Will action be taken at once to replace the police commissioner? Will the controversial passport scheme be retained? Who will feature in the new Cabinet? These are the answers which will shape the verdict of Malta’s next prime minister.

Will Muscat stay or go?

From the moment Joseph Muscat gave notice of his decision to resign, speculation was rife on his political future. Dr Muscat is yet to announce whether he would be staying on as an MP for the rest of the legislature, given he has already ruled out contesting the next general election.

Though there have been suggestions he could follow the route of his predecessor, Alfred Sant, and again seek election as an MEP, there are some stark differences.

Having already been an MEP before taking the reins of the party between 2004 and 2008, it might be perceived as a step backward. The timing of such an exit route could also be a bit problematic as the MEP elections are four years away.

Will he take a step back and remain a backbencher for what is left of Labour’s second term? This is probably the most plausible thing to expect, though he would have to tread very carefully as one step too many might overshadow his successor.

Rumours have been rife over possible job alternatives overseas for Dr Muscat, though the overwhelming bad publicity surrounding the Daphne Caruana Galizia murder probe is likely to have limited his employment options.

The economy

Once the dust of the ongoing political turmoil starts to settle, the emphasis could shift on the economy, amid concerns that a global recession could be looming on the horizon, and signs of a slowdown from the real estate and construction industry.

While it could be early days, the Malta Developers’ Association, the Federation of Building and Civil Engineering Contractors and the Federation of Estate Agents have already warned that prolonged economic uncertainty could result in layoffs. Such a scenario could have devastating effects in view of the ripple effects on ancillary sectors like the manufacturing and services industry.

Other major economic drivers which are going through a turbulent period are the financial services and the gaming sectors. Amid a growing list of scandals, corruption claims and money laundering allegations which have penetrated the highest echelons of power, the resilience of this industry is being stretched to the limit.

Any further blows to Malta’s international reputation, like the ones which dealt with the Pilatus Bank saga and Satabank, or allegations of kickbacks involving senior government officials could prove devastating.

The EU budget

Another crucial source of revenue, EU funds, could take a hit as the final agreement on the seven-year budget between 2021 and 2027 is expected to be wrapped up in the first half of the year.

In this respect, Malta could be a victim of its own success in the wake of the record low unemployment and robust economic growth registered since 2013. Against such a background, Maltese negotiators are facing an uphill task to persuade other EU leaders to maintain the same level of funding. Former Prime Minister Lawrence Gonzi had negotiated an EU budget in favour of Malta to the tune of €1.12 billion in his final days in office.

Under proposals rolled out by the European Commission in May 2018, Malta is set to lose at least €200 million in view of the fact that the island has considerably narrowed the gap in terms of standard of living with the EU average.

Has the PN turned a corner?

Not having the right credentials to present itself as an alternative government in the current scenario says a lot about the state of the Nationalist Party. Under normal circumstances, a party in Opposition would be expected to pounce at the opportunity posed by a government in complete crisis.

Yet, the PN still fails to inspire the electorate, be it due to internal rifts, lack of talent, and lingering questions hovering around its leader Adrian Delia (pictured above) over allegations of having been involved in a Soho prostitution racket prior to his venture in politics, claims which had been made by Daphne Caruana Galizia weeks before she was assassinated in 2017.

Though the political fallout from the investigations into Ms Caruana Galizia’s murder might have shifted the focus on the government side, the feeling is that Dr Delia’s fate has already been decided. Speculation continues over who should succeed him.

A renewal process rolled out last summer in the aftermath of the party’s double drubbing in the European and council elections should be coming to fruition at the end of January. Presided by party stalwart Louis Galea, this process was meant to make the party electable, be it through a root and branch reform of the PN’s structures or even a realignment of its conservative values. 

Many believe the move will fail to bring to the fold party critics who left in their droves when Dr Delia was elected leader in 2017. These elements, some of whom are now very active in civil society organisations like Repubblika and Occupy Justice, still perceive the PN leader as a liability in terms of the fight against corruption.

The next 12 months will tell if the PN has finally turned a corner and start to emerge from its worst post-Independence period or if its ‘reform’ was just an attempt to paper over the cracks.

The elusive Constitutional Convention

2019 was supposed to be the year for the breakthrough in the much-awaited constitutional reform which has been in the pipeline since 2013. Instead, recent events only served to highlight the glaring deficiencies of the country’s institutions, particularly the President’s options to keep the government in check. While there have been various interpretations of what powers are vested to President George Vella (pictured above) under the existing constitution drafted in 1964, the bottom line is that the buck stops with the prime minister and the parliamentary group of the party in government.

While talks within the steering committee comprised by PN and PL representatives and presided by the President, were relegated to the backburner due to political tensions, their resumption in the coming weeks will be in a starkly different scenario. This could be the platform on which the good governance proposals rolled out recently by the PN could take centre stage.

Measures to give more powers to the President in times of crisis when democracy and the rule of law are under threat, stronger safeguards to ensure the proper separation of powers and greater independence to the judiciary should generate unanimous support at least in principle.

2020 will not be the end of the story

In the last months of 2019, the fallout from the Caruana Galizia murder investigation took centre stage. However, there are still three pending inquiries which could have devastating repercussions on the government.

Allegations that Keith Schembri (left) received kickbacks from the sale of passports, claims that the former chief of staff was involved in money laundering activities with former Allied Newspapers managing director Adrian Hillman and another inquiry into the Panama Papers revelations are still pending.

The longer these probes take to be concluded, the bigger the risk their findings could emerge on the eve of the next general election, potentially harming Labour’s campaign.

Another pending question the media will constantly ask is: ‘who owns Macbridge – the Dubai-registered company which alongside 17 Black, owned by Yorgen Fenech, was going to pay $2 million in the offshore companies owned by Mr Schembri and Dr Mizzi?’

While the Labour leadership contenders have repeatedly denied an early election was on the cards, such assurances at times need to be taken with a pinch of salt as circumstances change. Last October, Dr Muscat had assured supporters he still had a lot of work to do and his promised exit would not take place any time soon. The rest is history…