Business as usual after Panamagate?

Every news item has a cycle and the Prime Minister is banking on Panamagate becoming yesterday’s news.

For how long can the media, civil society and the opposition harp on this issue without sounding obsessive or when new national issues such as revising the minimum wage or the impact of high-rise keep taking centre-stage?

The perverse truth in this logic is that Joseph Muscat has taken his decisions in full awareness of the political fallout he was bound to face. Surveys keep confirming he is trusted more than the Opposition leader (a 7-point lead in MT's latest survey). He may think the worst is over even after having kept his closest aides in office.

But he has seen his party’s advantage evaporate, down to a single point in MaltaToday’s survey, which is why he will bank on a presidential contest pitting him against Simon Busuttil, who has made some inroads among Labour voters but faces an uphill struggle to convince ‘switchers’ that he is more trustworthy. Voters are used to 10-year cycles of power, where opposition parties are voted back in power after two defeats. Clearly the PN has a long way to go to present itself as a party of government.

Muscat banks on riding on the general disillusionment with Maltese politics. If voters think both parties are fundamentally dishonest, they will either disengage from politics or base their vote on other factors like the economy and civil liberties, on which Muscat expects to be rewarded and win re-election despite his failures in governance. Perhaps next time round, more voters will be tempted to vote for a third party. But Labour tends to have a more solid bloc that is historically more immune to shifts to smaller parties than the PN. Much will depend on how third parties project themselves.

But there is a major flaw in the logic that Panamagate will simply wither away. A majority of voters expected Muscat to sack Konrad Mizzi and Keith Schembri after learning that they had opened offshore companies in Panama while in office. Retaining them in office has ensured that Panamagate will remain a factor in the next general election.

Middle-of-the-road voters and floaters may balk at Muscat’s effrontery, making these voters unforgiving. Panamagate is akin to Lawrence Gonzi’s decision to vote against divorce after the referendum and his decision to increase ministers’ salaries behind people’s backs. The fallout could even be worse because of the international dimension of the scandal.  Moreover, it’s a scandal that has hit the government’s central nervous system. The two persons involved are still working at Castille with Muscat as if nothing has ever happened, retaining key positions of power.  Moreover, all subsequent revelations on the nature of Mizzi's and Schembri's offshore companies, including details of obscure financial and banking transactions, will weigh heavily on Muscat simply because it was he who kept them in office.

So while Muscat remains an asset among a category of voters whom he still charms, his association with Mizzi and Schembri may have weakened his hold on Labour voters who feel betrayed by his failure to sack them.  Moreover Muscat's decision has reinforced the perception of a cabal in Castille which operates independently of government.

When another scandal emerges, Muscat may have well disabled himself for he now lacks any moral authority to expect anyone caught in wrongdoing to resign from office. The message to the Cabinet is that from now on, everyone is indispensible. For if not, Muscat would reinforce the perception that some animals are more equal than others.

Even party stalwarts have rebelled over Panamagate, keen on asserting the party’s autonomy while privately questioning Muscat’s judgement and rectitude. Ministers may rightly feel it’s their daily work in office that keeps the government afloat, despite the scandals involving Muscat’s two closest allies. And truly, some Labour ministers have outperformed their Nationalist predecessors on various counts. 

Even finance minister Edward Scicluna has become more assertive in distinguishing himself from the prevailing dogmas. In contrast to Muscat’s pandering to developers, Scicluna has commented on the “supermarket” of large-scale projects developers “irrespective of demand”. Alfred Sant warned that “the economy is now doing well, even though I believe we are doing it dangerously, with over-reliance on services. Things will turn out really badly for an economy built this way when the downturn happens”. Surely their criticism is rooted in the economic direction taken by successive governments, but it can’t be denied that Muscat has pressed the accelerator on construction.

Muscat is a believer in wealth creation as a forerunner to wealth redistribution and that it’s only thanks to wealth creation that he can afford to start a discussion on the revision of the minimum wage. But this does not address doubts on the sustainability of the kind of economic growth experienced in the past years. He also makes social reforms conditional on growth that is fuelled by land speculation.

In many ways Muscat is weaker in asserting his brand of ‘pro business Labour’ within his own party and parliamentary group, even if his political authority is not being questioned. It is his moral authority which has been weakened, and this makes it harder for him to fight a presidential battle even while remaining a much better communicator than Busuttil.

But constantly belittling Busuttil may backfire especially in a situation where Muscat’s moral leadership is in question. Ultimately Muscat may have to change his ideological bearings to win back the hearts and minds of voters, even though Panamagate will stand as a reminder of Muscat’s tolerance of capitalism’s ugly face, represented by public officials who open offshore companies while in office.

As things stand, chances are that he will win again. But a year is a long time in politics, let alone two. What is sure is that Panamagate has weakened partisan loyalties and may well have unleashed unpredictable dynamics.