15.03.2013 | The Tide Turns in Malta

On Monday, Malta’s new Prime Minister, Joseph Muscat pledged his support for Malta’s place in Europe. This is perhaps a surprising stance from a former virulently Euro-sceptic journalist who campaigned against Malta’s EU accession.

A radical change of government in a Eurozone member state would usually dominate the international headlines, particularly if it happened in the Eurozone’s second-best performing economy.  This week’s landslide victory by the Maltese Labour Party (Partit Laburista) in national elections has gone largely unnoticed, however.  This is perhaps not surprising, as Malta is the smallest EU member state, with a population of just 400,000.  Malta is an intensely politicised country, with much of the population divided fiercely along party lines.  Previous changes of government have precipitated the wholesale replacement of government officials and those in top jobs with those of the appropriate political hue. 

With the exception of a brief interlude between 1996 and 1998, Malta has since 1987 been governed by the Nationalist Party (Partit Nazzjonalista).  1987 is viewed as a turning point by many, a step toward the EU and a watershed departure from the post-Independence socialist Labour governments of the 1970s and 1980s.  Under the leadership of radical Labour Prime Minister Dom Mintoff, Malta’s governments had been staunchly socialist, nationalising industry, severing military and political ties with the UK and the US and pursuing relationships with the USSR, China and Colonel Gaddafi’s Libya.  Subsequent Labour leaders, including the most recent former party leader Alfred Sant (who envisaged Malta as a Switzerland in the Mediterranean and once threatened to cut out the tongue of EU Enlargement Commissioner Gunther Verheugen) remained committed to Malta’s non-alignment and opposed EU membership.   Although Mr Sant is now tipped as Joseph Muscat’s choice to be Malta’s next EU Commissioner, Mr Muscat is likely to pursue a conciliatory line on the EU while in office, in part due to his own four years as an MEP in Brussels and Strasbourg, but mainly because Malta has benefitted so indisputably from EU membership. 

Mr Muscat has also pledged to tackle corruption, an issue that plagued the outgoing Nationalist government of Prime Minister Lawrence Gonzi, who presided over several high profile political scandals.  Many observers suggest that a degree of patronage and ‘familism’ is inevitable in a country so small.  Others suggest that Malta has long benefited from turning a blind eye - to sanctions busting and smuggling through its Freeport, including to neighbouring Libya; abuse of its shipping registry, including Maltese-flagged Iranian oil tankers; and possible money laundering through a myriad of brass plaque front companies and nominees.  Malta has recently seen a boom in new asset management companies, hedge funds and SPVs, originating from places such as Russia, China, India, Italy and the Middle East, seeking to benefit from low taxes, friendly regulation and EU ‘passporting’, which grants local firms direct access to markets elsewhere in the EEA under the single market directive.  These new arrivals, longstanding vested interests and EU partners alike will all now be watching closely to see whether Mr Muscat will rock the boat or continue business as usual.