The PN’s financial woes – 2

Following my article last week, former PN secretary-general Joe Saliba contacted me to categorically deny that there is a connection between the PN’s current financial woes and the rebuilding of the PN headquarters carried out under his watch (see box).

According to Joe Saliba, when he left his post after Lawrence Gonzi’s electoral victory with less than 2,000 votes in 2008, the PN’s debt was less than half the €32 million indicated by Bernard Grech as the current level of debt.

The plot thickens. Something happened during Gonzi’s second administration. The PN not only lost a large number of votes but also lost a lot of money. Simon Busuttil, in fact, inherited a financial mess and his efforts at stemming the haemhorrage included the famous ‘ċedoli’ scheme that transferred some of the PN’s debts from the banks to individual PN supporters.

Many had pooh-poohed the idea but it is obvious that it was meant to avoid – or decrease – bank loans. This was an important step. Theoretically, according to law, no one can charge interest that over the years exceeds the value of the original sum loaned. So, interest on long-term loans is limited to the value of the original sum loaned.

Banks go round this legal hurdle by making contracts loaning money for a number of years. When whoever loans money defaults on the agreed repayment schedule and the years of the loan elapse, the bank insists on making another contract; this time considering the total amount of money due (i.e. including accumulated interest) as the ‘new’ capital being loaned. So, the interest due on the original sum is absorbed by the new sum being loaned.

I don’t know how much of the debt indicated by Bernard Grech is actually interest turned into capital by banks, but that could explain part of the doubling of the PN’s debt in five years.

I understand that subsequently efforts were made to reduce the debt, but they were hardly successful, with NET TV losing some €1 million annually – although there were years when it even lost more.

Originally the PN was not keen to have its own television station, precisely because it would be a financial burden that the party could not afford. Then Alfred Sant’s electoral victory in 1998 was falsely attributed to the power of ONE TV and the PN rushed into setting up NET TV within a few months.

Many PN insiders claim that NET TV is the main reason the party’s debt keeps on ballooning, but to get some ideas about the real situation is very difficult. PN personalities arguing about political issues, unnecessarily publicising internal disagreements on political strategies, have become a common phenomenon. But all mouths are shut when the subject of the PN’s debt is raised up.

It had to be Bernard Grech to put the subject in the public arena – but this act alone raised more questions than it divulged explanations.

JOE SALIBA DENIAL

In a telephone conversation with Michael Falzon, Joe Saliba strongly denied that there is any connection between the rebuilding of the PN headquarters carried out on his watch and the party’s current financial woes, as was implied in last week’s opinion piece.

Saliba referred to a Keith Micallef interview published in The Times on 16 February 2020, in which Francis Zammit Dimech, then PN secretary-general, had clearly said that Joe Saliba had left the party in a better financial state than it was when he was appointed secretary-general.

Saliba insisted again that this is the factual situation.

And now they are two

Many were surprised to learn from a report in Illum that Labour’s media arm also has mounting debts to the tune of around €10 million or thereabouts.

One Productions chairman Jason Micallef refuted the claims but did not deny that the debt ran into the millions. According to the report, most of the debt was owed to the government, with Jason Micallef stating that there was a repayment agreement with various entities.

Most of the debt amounts to unpaid VAT, stamp duty, and water and electricity bills. MaltaToday had revealed that One Productions, owed ARMS a total of €1.25 million in pending dues, and that Media.Link, the PN’s media company, owed ARMS €3.5 million.

Illum had also revealed that PN owed €12 million in stamp duty, VAT and water and electricity bills. This means that between them, the two parties owe the government more than €20 million.

Labour’s debt is much less than the PN’s but there seems to be no doubt that the two media companies are proving to be the proverbial millstone round the two parties’ necks.

Compare the running of the two political stations with the running of TVM, that depends on government subsidy, and one can easily conclude that both parties cannot really afford to have a television station.

The legal position of these two stations is now being challenged in Court by Lovin Malta, who filed a court case against the State Advocate seeking to annul a proviso in the Broadcasting Act that allows the Broadcasting Authority to consider the two political stations as balancing each other out, rather than as ignoring the impartiality requested by the Constitution.

Lovin Malta is arguing that the proviso goes contrary to the Constitution as it grants discretion to the Broadcasting Authority when ensuring impartiality across broadcasting services. In its Court application it said that the Constitution of Malta speaks about rightful impartiality among broadcasting services provided in Malta, not on balance.

This means that the Constitution, unequivocally, calls for any station transmitting issues of political or industrial controversy, or that refers to current public policy, ought to be impartial, whether the station is public or private.

Undoubtedly the argument is not a spurious one.

Will it be the Constitutional Court – rather than the mounting debts – that spells the death knell of the two politicl party television stations?

The situation where political parties have their own TV stations is unique in the EU and resulted as a reaction to the blatant abuse of state broadcasting by governments of the day – mostly Labour governments before 1987.