An unholy alliance

News that the Nationalist Party’s connections with the DB Group ran deeper than Mario de Marco’s legal commitments with that company might not have surprised everybody equally. For too long now it has been an open secret that political parties depend on financial support from leading entrepreneurs; for too long it has been suspected that this unsavoury symbiosis was behind a number of very controversial policies and decisions. 

DB’s claims of having directly financed the salaries of top PN executives – the secretary-general and the CEO of Medialink, the PN’s communications arm – are however a lot more direct than many previously imagined. Perhaps most damning of all is the claim that requests for such donations continued until very recently. PN leader Simon Busuttil has variously stated that he had managed to rid his party of its dependence on big business; now he has admitted to receiving at least a small donation from the DB Group... which alleges that it paid a lot more than that, and has even publicly asked for the money to be refunded.

On a superficial level, this is embarrassing for a political leader who claims he wants to clean up the country, and offers good governance as his party’s main selling-point.

But that is a small part of the weighty ramifications. 

Busuttil’s haste in publicly denouncing the SMS he received from the CEO of DB Group could, with hindsight, be viewed as reckless and politically unwise. His belated denial of the salaries claim was likewise awkward and incoherent. On one hand he denied the allegations, on the other he admitted that all his party’s payroll is financed directly by undisclosed donations.

It is a messy affair, and politically very sticky for the PN. But to concentrate only on the partisan fallout would be to miss the bigger picture.

At face value, the controversy has exposed, for all to see, the unholy alliance between big parties and big business. Though its existence was long suspected, we now have a much clearer picture of the extent of the rot.

From this perspective it ceases to be a Nationalist problem, and becomes a national one. The Prime Minister is unwise to try to make capital out of it: though the links may be different, the Labour Party is equally enthralled to the same rotten system.

It has long been known that big parties struggle to bankroll their costly operations. The two parties employ hundreds, run media empires and organise expensive political campaigns. We’re talking millions every year. The money must come from somewhere and it certainly does not come from small donations.

But it works both ways. Big businesses depend on parties to survive, too. Malta Developers Association chief Sandro Chetcuti once compared the Nationalist and Labour parties to “two big shops”, giving them the opportunity to choose “from whom to buy” the best policies. We now know he wasn’t exaggerating.

It’s an insurance policy which has served big businesses well for decades. But the effects on the country as a whole have been severe. All the same, it is not an easy problem to solve… especially since the laws, checks and balances needed to ensure greater transparency and accountability must be enacted by the two parties themselves, which have a stranglehold on parliament and other state institutions.

The party financing law, while a step forward from the free-for-all situation we had before, is imperfect. One major flaw is that the Electoral Commission has been appointed as regulator, when the commission is entirely composed of representatives of the two parties it will supposedly regulate. The political parties are expected to act as a watchdog on their own finances.

Secondly, the commission does not have the tools and right to investigate and scrutinise the parties’ finances. Will the commission investigate the DB donations? Will it fine Labour for failing to be eligible to even register as a party, despite a law which came into force more than 14 months ago?

Thirdly, the law has many loopholes and does not cover the commercial entities owned by the parties. Like the broadcasting and electoral laws, it is clearly designed to favour the big parties to the detriment of smaller parties.

This once again underlines the need for state funding. The German model is far from perfect, but it may serve as a useful model for Malta. In Germany, the State and party-membership dues pay for the bulk of the parties’ finances, while corporate and individual donations cannot make up more than one-third of their income.

For this to work in practice, the parties must publish their accounts and be fully open to scrutiny.

However, the structural problems do not end with party financing. Maltese MPs are part-timers and depend on private practice. Most MPs have conflicts of interest, especially those who provide services to the private sector. A full-time parliament would not only give MPs an opportunity to clean up their act, but also give them the tools to fully focus on legislating.

Sunday’s revelations could potentially be a watershed moment in Maltese politics, a mini-Tangentopoli... even though it is highly unlikely to rattle a system so heavily skewed in favour of the two parties.