Will we ever learn? – Paul Bonello

Guest post by financial services practitioner Paul Bonello

Earlier this week Malta was once more in the news.  Combined with a renewed state of war between the two (or is it three now?) superpowers, the issue of member states of the European Union raking money out of the sale of passports was on the international political agenda.

In fact, the question of golden passports or so-called citizenship for investment schemes was debated in the European Parliament at the same time that a bipartisan Bill was presented to the US Congress on the same topic.

On Wednesday, the European Parliament voted overwhelmingly in favour of a resolution calling for a ban on these schemes.  While 595 members voted in favour of the resolution, only 12 members voted against it.  What the European Parliament had in mind, as so many of those who spoke in the debate revealed, is clearly that Malta is considered the worst offender.

Among the 12 votes against the EU resolution, there were those of our four Labour MEPs.  Clearly, the Labour Party – which was vehemently against Malta joining the EU but changed its stance over time – has not really converted to the higher political aspirations of a common European home.

This Labour government’s interest in the European Union is primarily concerned with the economic benefits that Malta could derive from this association, particularly the allocation of funds under so many EU economic programmes.

There is otherwise much underlying grassroots dissent with frequent accusations of interference in local affairs on many occasions that we are made to adhere to EU legislation enforcing standards in the political, economic and social sphere.

The government only pays lip service to the higher political aspirations of the Union of achieving economic development by ensuring enduring peace in our continent.

Malta’s vocation and tradition for wheeling and dealing pushed to the extreme its attempts to derive further indirect economic benefit by leveraging its EU membership.  This was done by the sale of Maltese citizenship and passports, and hence EU Passports, in much the same way that Caribbean or Pacific island states such as Nevis and St Kitts do.

The applicants under such scheme are high net worth individuals in Russia, China and the Middle East with absolutely no connection or genuine link with Malta, whether by ethnicity, language, religion, birth, descent, proven residence or the sharing of common values.

In exchange for money or some form of property investment or subscription of government bond, the applicants acquire access to travelling visa-free by virtue of their newly acquired EU passport through Maltese citizenship.

There is as yet no express provision in European law that outlaws the commercialisation of golden passports to individuals from outside the Union who have no legitimate nexus to the EU member state.  In all probability, such abus de droit was not considered to require anti-abuse legislation, much in the expectation that all EU members would respect the foundation stone of good international relations.

This is based on the reciprocal underlying trust between member states that each of them would not only respect the letter of their legal rights and obligations but, more importantly, their spirit and intention.

The European Union Parliament is right to insist on the outlawing of such programmes as these go diametrically against the spirit of community law, including the Schengen Agreement, which meant to give visa-free travel and freedom of movement to bona fide EU citizens of those countries.

A good number of these new Maltese “citizens” have been a cause for disrepute for Malta through their criminal conduct elsewhere in the world.

Whatever good use the proceeds of our scheme is put to by the government for the benefit of Maltese citizens can never justify the selling of our passports. The end does not justify the means.

If we only prize our statehood, our Malta and EU citizenship has an intrinsic priceless value and that value cannot be converted to a selling price.  To sell our citizenship for money is nothing other than state prostitution.

At about the same time as the EU parliamentary resolution, in the United States, representatives of the US Congress from both Republicans and Democrats proposed bipartisan legislation that serves to revoke a country’s right to the US Visa Waiver Programme if such country allows citizenship by investment schemes.  The rationale for such a measure is the US wanting to protect itself from the risk of unwanted visitors gaining access to the US unvetted through the visa-free travel enjoyed by such countries.

More specifically – demonstrating that the US has Malta in mind – the proposed US legislation specifies that measures will be taken jointly with the EU in order to eliminate visa-free travel to and from the Schengen area for Schengen passports issued by countries selling passports.

Malta is one of the countries in the EU that benefits from such a programme that allows Maltese citizens to travel to the US without having to obtain a visa as long as they stay there for less than 90 days.

If such US legislation is enacted, bona fide Maltese nationals will have to apply for a visa to travel to the US.

Currently, Bulgaria, Cyprus and Malta are the only EU member states that have schemes to issue golden passports.  Bulgaria and Cyprus have already intimated the cessation of such schemes.  On the other hand, in the wake of the Russian invasion of Ukraine, Malta only reluctantly and belatedly agreed to suspend the scheme for Russian applicants.

Notwithstanding EU infringement proceedings that have already started against Malta, we continue to insist on the continuation of the scheme for others.  The Maltese government, due to its hard-headedness, or rather pig-headedness, does not realise that Malta is becoming increasingly isolated, as this week’s vote in the European Parliament demonstrates.

Now that Russia has become the pariah state of the world, we need to be careful that Malta does not become the pariah state of the European Union.

An unwelcome development occurred these last days also with the ambiguity posed by the Nationalist Party Leader. Although the PN has always criticised the scheme, it is now engaging in doublespeak.  On the eve of the general elections it is now saying that a PN government will have no problem in scrapping the golden passports scheme “if it is politically expedient” to stop selling passports, clearly demonstrating the lack of moral conviction but rather a mere stance of pragmatism and, permit me, hypocrisy.

While the PN MEPs voted in favour of scrapping all such schemes, the Party leadership is telling its national audience that it will reform this cash cow in order to continue to generate as much government revenue as possible.  Perhaps this is a direct consequence of the Nationalist Party going overboard in its electoral manifesto and promising everything to everyone in a pledges extravaganza in a bid to narrow the gap with the Labour Party.

Indeed both parties have engaged in a bidding contest promising what is clearly economically unachievable even by the wealthiest countries in the world.  Worse than that, both parties are promising very substantial reduced taxation.  And this in a rapidly deteriorating political and economic situation with record national debt, increased public deficit, and newfound fears of runaway inflation and renewed recession in the international sphere.

So many economically unsustainable electoral pledges are nothing more than irresponsible political posturing by both parties. When will we ever learn?