[ANALYSIS] After Panama leaks: Muscat’s ‘harm reduction’ options

After initially defending his Energy and Health Minister and his Chief of Staff, Muscat succumbed to public pressure by saying that he would decide their fate after an audit investigation, which would determine whether the two had “lied”.  Moreover, after the Panama leaks became an international scandal and details started emerging of Mizzi’s and Schembri’s plans to set up an account for the Panamanian companies in Dubai, Muscat said that his decision would also take account of “public sentiment”.

This recognition coincided with reports of political unease within his own cabinet. Yet instead of ridding his Prime Minister of this poisoned chalice by deciding to bow out (as parliamentary secretary Michael Falzon did while professing his innocence following the publication of the Auditor’s report on the Gaffarena case), party deputy leader Mizzi has thrown the ball back into the Prime Minister’s court after a standing ovation at the party conference which was overshadowed by the fiscal affairs of the deputy leader. So what are Muscat’s options?

Retain Keith and Konrad: ‘They are too precious to lose’

Muscat may well conclude that in a lose-lose situation where a lot of damage has already been done, he will only end up losing more without his precious allies in the cabinet. Muscat may well conclude that with the party largely backing Mizzi, he can stumble to rise up again when the news cycle changes.

He may also bank on having two more years to go in government and plenty of time to recover lost support, especially among disgruntled Labourites. He may also think that Mizzi remains indispensable for completing reforms in the energy and health sectors and that Schembri is indispensable when it comes to political strategy.

He may also consider the fact that sacking Mizzi and Schembri would be seen as a sign of weakness which would strengthen those elements in the cabinet which are exasperated by Muscat’s neoliberal overtures and highly personalised style of leadership. Muscat may be wary of emerging from the crisis as a diminished leader. Moreover he may also be scared of the perception that this government (which has already seen the resignation of Godfrey Farrugia, Manwel Mallia and Michael Falzon) keeps losing domino pieces. Losing his most important minister may well appear as the final nail. Moreover Muscat also has to address a more inward looking party, which expects him not to succumb to the opposition’s demands.

But this option is unlikely in view of “public sentiment”, which for Muscat translates into the feeling of those “switchers” who granted him his massive victory in 2013. So far, despite hesitating, Muscat has never shied away from giving in to public pressure before it became too late.

Yet this stands as one of the cases where events have overtaken Muscat, who was clearly not anticipating the global disgust generated by the Panama leaks. Despite finding himself for the first time in a lose-lose situation, Muscat still knows that he cannot afford to dig deeper. He also knows that this case will not easily die away – with the risk of new revelations coming out – and will persecute him till the next general election.

Konrad Mizzi and Keith Schembri stand as an albatross around his neck. Muscat, who did not hesitate from ditching people such as Jason Micallef, Anglu Farrugia, Manwel Mallia and Michael Falzon, knows this only too well. Not doing the same with Schembri and Mizzi would fuel speculation that he too has something to hide. 

Make Mizzi renounce one of his two roles: ‘We have listened just a bit’

Another option would be to keep Mizzi in either his role as minister or in his role as deputy leader but not in both. He may also remove Mizzi from deputy leader immediately while waiting for the result of the audit to determine whether to retain him as minister.  

This option will buy Muscat more time. Muscat would say that by doing so he is taking account of public sentiment without in any way acknowledging that Mizzi has done anything wrong to merit his removal from any official role. Yet Muscat cannot afford to ignore public sentiment when it comes to determine whether Mizzi should continue serving as minister.

Prime Minister's Chief of staff Keith Schembri

Retaining Schembri while relegating Mizzi to consultant-“We have partly listened.”

Mucat may bank on the fact that Schembri is less visible than Mizzi and he may afford to retain him in his unelected role.  He may also be tempted to keep Mizzi in the loop through a consultancy, which would still see the former Minister calling the shots in energy and health.  This could also tally with Muscat’s belief in the value of unelected technocrats taking the role of unelected ministers.

Yet such a scenario is pregnant with risks.  Schembri has now become a household name and with the media spotlight on him Schembri may still be vulnerable to further revelations connected to his foreign accounts in Panama and the British Virgin Islands.   Moreover the post of chief of staff in itself suggests the highest level of trust in which one is held by the PM.  Retaining someone whose name is associated with accounts in foreign trusts in the most sensitive of positions, may suggest approval of such practices by the PM.

Appointing Mizzi as a consultant in the energy or health sector or both may also fuel the perception that he is indispensable for the PM and that his removal from Minister was a symbolic gesture.  Moreover Mizzi will remain in the media spotlight and any role in future privatisation deals will be probed extensively.  The PM may justify such an appointment as a responsible measure to ensure continuity in two vital sectors like health and energy on reforms initiated by Mizzi.  Mizzi may also project himself as a hard working public servant who is willing to continue his work for the country despite being deprived of a government title.  But this will keep Mizzi in the spotlight and any future Minister appointed in the energy and health sector would surely not like playing second fiddle to someone who is no longer accountable to the cabinet or parliament.

Energy minister Konrad Mizzi

Reshuffling the cabinet and put Mizzi in a new role: ‘We are pretending to listen’

A government reshuffle which could see Mizzi lose one or both his present portfolios, may be another half measure to be considered by Muscat in his bid to assuage public sentiment while keeping Konrad Mizzi as close to him as possible. Yet such an option may not be enough to quell the anger of those who as a point of principle believe that someone who sets a company in Panama and tries to open a bank account in Dubai while serving in office should not serve in the cabinet. Such an option could also further embarrass fellow cabinet ministers irked by the dark shadow cast on them by having someone in their midst who was outed in the Panama leaks. 

Sacking Mizzi and Schembri: ‘I have listened and I have acted’

Muscat may well have realised that he has no other choice but to ditch his two closest collaborators in government. He will certainly still defend their integrity and one can expect a symbolic act to grant them redemption, similar to the “soldier of steel” title bestowed on Cyrus Engerer when his candidature at the MEP elections was withdrawn after a court sentence.

One major dilemma in this case would be whether Muscat would have to find another less visible role for Mizzi and Schembri. Another uncertainty is posed by the fact that Mizzi has also been elected deputy leader, which means that Muscat must find more than one replacement for Mizzi.

Another major dilemma would be whether to present Mizzi again as a candidate at the next election, something which would resurrect the Panama scandal in the general election campaign. Keeping Schembri in the loop may be easier, as his role is less visible, but keeping his distance from a close friend and collaborator may be difficult for Muscat.

Muscat may well use ditching Mizzi and Schembri as an example of his willingness to adjust himself to public sentiment. He may even grab the opportunity to realign himself with party veterans like Evarist Bartolo, Alfred Sant, Leo Brincat and George Vella, yearning for greater sobriety and a return to social democratic values.

Nationalist Party leader Simon Busuttil

In fact, after heeding the warnings of the party’s grandees, Muscat may well adopt a more collegial style of leadership, which may be the safest way to prevent more scandals emerging in the next two years. This may be an effective strategy to win back disgruntled Labourites and switchers, especially those who feel ideologically distant from Muscat’s pro-business approach.

Yet this may come at a cost as Muscat’s clout as leader would be diminished, having succumbed to both external and internal pressure. Therefore he may well be tempted by a half measure which takes account of public sentiment while keeping Schembri and Mizzi in the government’s and party’s “central nervous system”.

The implications for Busuttil: Panama as a lifeline?

Thanks to Muscat’s exasperating seven-week defence of Mizzi and Schembri if the two are removed, opposition leader Simon Busuttil could plausibly claim that Muscat has finally acted thanks to his Nationalist Party’s unrelenting pressure on the government. But if Muscat does remove Mizzi and Schembri from their offices, Busuttil will find himself losing his most valuable weapon so far in his bid to win the next general election.  

The problem for Busuttil would be how to keep people talking about Panama if the two protagonists depart from the scene. This explains why Busuttil has presented a motion of no confidence in Muscat. In this way, he is keeping Panama in the spotlight while questioning the PM’s role in the matter. He is also making it more difficult for Muscat to ditch Mizzi and Schembri. In so doing, he risks appearing as being more motivated by partisan brinkmanship than moral considerations.

Conveniently for the PN leader, by leaving his fate in the hands of Muscat instead of resigning on his own account, Mizzi has reinforced Busuttil’s argument that the buck stops with Muscat. But by expecting Muscat to resign in the absence of hard evidence linking Muscat to Panamagate, Busuttil risks going overboard.  

But any half measure which would keep Mizzi or Schembri with a finger in the pie, may give Busuttil further ammunition to keep talking about Panamagate, especially if new relevations come to the surface.

But Busuttil must be wary of going overdoing it. By presenting a motion of no confidence in Muscat, he is giving the impression that his goal is to topple the government, which still enjoys a democratic mandate. Surely Busuttil is constitutionally right in saying that even if the impossible happens and the motion is approved, Labour can still govern with a new government.  

Still, Busuttil risks sounding divisive. The rowdy scenes in front of the law courts on Wednesday, fully exploited by the Labour media, stand as a warning on the risks of raising the political temperature. Moreover, picking on a criminal libel presented by a former police commissioner, deflected attention from Panamagate itself.  

Surely Busuttil has proved himself as a persevering leader who can put a nine-seat majority in serious difficulty. But Busuttil also needs the next two years to project himself as a future leader people can believe in and who can bring about change – an arduous task for a leader who has still to ditch the perception of continuity with the Gonzi government.

One risk of Panamagate is for the PN to start believing that it can win without renewing itself and presenting itself as a changed party. Not walking its own talk on good governance by skirting around party financing rules is an example of this.