Updated | PN’s debt stands at €34 million

Updated at 7:15pm with PN statement

A debt inheritance of around €34 million accumulated since the Gonzi years has left the Nationalist Party financially obliged to major businesses and all banks.

A former PN official who spoke to MaltaToday on condition of anonymity said the debt has also made it hard for people to come forward and offer their services in key administrative roles.

“Anybody taking up an official post risks culpability if creditors call in their loans and this partly explains the difficulty of finding someone to fill in the role of treasurer,” the source who was privy to internal party matters said.

Last summer the PN could only find one person to contest the post of treasurer and after he resigned in a storm of controversy, nobody else would contest the post. The role was later absorbed by deputy leader Robert Arrigo, who has now also announced his resignation.

Information made available to MaltaToday in 2017 showed that the PN had a debt of around €25 million. The figure was never denied by the party.

“The monthly accounts presented to party officials over the past few years have shown that the debt was more in the region of €34 million with hundreds of thousands in repayments,” the source said.

The figure was confirmed by a second source who no longer militates in the party but is privy to the financial situation.

“In 2019 alone, the party’s media arm lost €2 million and the party has so far been unable to put aside reserves to be able to pay back the loan commitments under the ċedoli scheme when these are due in six to seven years’ time,” the second source said.

The party has no cash to run a campaign if an election were called in the foreseeable future.

Both have laid the blame on the Lawrence Gonzi administration between 2004 and 2012 and his two secretary generals, Joe Saliba and Paul Borg Olivier for the size of the debt.

Former secretary-general Clyde Puli and deputy leader Robert Arrigo called out the financial legacy problems that the Delia administration had to deal with

“The PN’s financial troubles have long been coming and under Simon Busuttil drastic measures had to be taken to avoid banks and creditors from calling in their loans,” the sources said.

Under Busuttil the PN created the ċedoli scheme to loan money from individuals and restructure certain loans and repayments. The party also placed a number of clubs into a trust, which was used as collateral for banks that were becoming jittery.

“It is not just the debt that is a problem but the refinancing programme, which runs into hundreds of thousands. Under Adrian Delia, the PN has honoured its repayment programmes but the debt remains high and finding the cash to keep the party afloat remains a major challenge,” the sources said.

Debt is a constant drag on the party and this created a situation where the party was beholden to big businesses.

“For the PN this also creates a far bigger problem of credibility given its insistence on good governance at a time when it has dues with large businesses,” the former official said.

He said the turmoil the PN faced was the result of deep-seated problems, including the “inflated ego” of some MPs and the financial state of the party.

“Delia has to shoulder responsibility but the size of the debt, which shackles ordinary operations and compromises political direction, is a massive problem any successor will have to contend with,” he said.

But it will not be the only one. “Some MPs have been tripping the party leadership from day one that Delia was elected and I fail to see how any successor will manage to handle the inflated egos of some MPs,” the source added.

In their resignation letters, former secretary-general Clyde Puli and deputy leader Robert Arrigo called out the financial legacy problems the Delia administration had to deal with.

Puli said the party had millions in debt and Arrigo said it was only in the past two years that bills for marble tiles procured before 2008 were settled.

The former party official said the underlying problem is the manner by which political parties are financed, which leaves them at the mercy of donors.

“The system is dangerous and has to change because it creates obligations that can turn out to be politically toxic,” he said.

PN denies debt is as high

The PN has come out denying that the party's debt is €34 million, insisting the figure quoted by MaltaToday is "completely incorrect".

"Whilst the amount due runs into millions, this amount is far less than the amount being quoted," the PN said in a statement on Wednesday evening.

The party did not divulge the amount it owes but insisted that the debt, which accumulated over the years has since been reduced year on year following a refinancing plan.

"To date, all repayments as per agreements are being adhered to and the party has no financial difficulty to continue to meet its financial obligations," the statement said.

With reference to the ċedoli scheme, the party said it had no problems at all in meeting its obligations. "We assure all those who have lent us the money, that the party has no problems at all in meeting its obligations. The ċedoli scheme has been a success since day one and the scheme has continued to gather support," the PN said.

As regards the loss in 2019 for Media.Link, the party's communication arm, the party said this amount was "completely unfounded".

The party said that a restructuring plan for Media.Link is helping the company reduce its losses each year and was "moving fast towards breaking even".

The PN reiterated that the party's assets are "more than sufficient to cover all outstanding liabilities", accusing MaltaToday of wanting to cause damage to the party.

READ ALSO:

PN election campaigns between 2013 and 2017 ‘entirely paid up’, Ann Fenech says

Paul Borg Olivier calls out ‘childish’ shifting of financial woes blame in PN

PN mired in debt: How yesteryear’s marble became today’s millstone