Ranking Agencies Improve Malta’s Rating Based on Strict Rule of Law

As an insti­tu­tion, the EU has helped many Euro­pean coun­tries progress. Cer­tain­ly, this also includes Mal­ta, which has been a mem­ber of the Union since 2004. Gen­er­al­ly, I see myself as a cit­i­zen of Europe and wel­come the Euro­pean con­fed­er­a­tion. Still, at the same time, I some­times find myself upset over indi­vid­ual actions tak­en by this Brus­sels-based orga­ni­za­tion. For exam­ple, the rela­tion­ship to indi­vid­ual nation states seems to be increas­ing­ly lack­ing and the EU-Par­lia­ment and its attached insti­tu­tions now appear to be view them­selves less as a part of a con­fed­er­a­tion and more as a sep­a­rate “author­i­ty”. I do not want to por­tray a dark pic­ture here but do wish to raise a few ques­tions based on the treat­ment of EU-mem­ber state Mal­ta.

At the end of last year, the rule of law in Mal­ta was pub­licly drawn into ques­tion.

Here is the fol­low­ing state­ment of the Euro­pean Union regard­ing the rule of law in Mal­ta that can be found on EU’s home­page:

Malta’s rule of law needs close mon­i­tor­ing“

In oth­er words, the rule of law in Mal­ta requires strict scruti­ny. Accord­ing to the state­ment, the island nation must take stronger action against mon­ey laun­der­ing and cor­rup­tion, and the EU-com­mis­sion should secure the free­dom of the press. The back­ground for the report con­cern­ing rule of law in Mal­ta is the mur­der of blog­ger Daphne Caru­a­na Gal­izia, who was killed last Octo­ber by a mafia bomb. She had pub­lished reports of a poten­tial involve­ment of the Prime Minister’s wife in the con­text of the Pana­ma Papers. Undoubt­ed­ly, this crime was a tragedy, and it must be resolved and clar­i­fied 100% with all back­ground issues illu­mi­nat­ed. Still, to ques­tion a country’s entire rule of law is a high­ly ques­tion­able mea­sure in this con­text. The EU appar­ent­ly does not trust Mal­ta with its own inves­ti­ga­tions and demands the involve­ment of Europol. In this con­text, I am par­tic­u­lar­ly dis­turbed by the fol­low­ing pas­sage:

[…]Recent devel­op­ments raise seri­ous con­cerns about Malta’s gov­er­nance, free­doms, and ille­gal activ­i­ties, facil­i­tat­ed by the weak­ness of the sys­tems in place.“

I would not have expect­ed such a harsh assess­ment in this con­text and, giv­en the grav­i­ty of such an act and the result­ing implic­it attack against Mal­tese democ­ra­cy, I would have wished for a more bal­anced eval­u­a­tion.

Ratings Agencies Give Malta Higher Marks for Exceptional Rule of Law

At the end of Feb­ru­ary, rat­ings agency DBRS once again upgrad­ed it eval­u­a­tion of Malta’s cred­it rank­ing.  DRBS now ranks Mal­ta in cat­e­go­ry “A” and sees the country’s future devel­op­ment as sta­ble. Oth­er rat­ing agen­cies have mir­rored that view in their cat­e­go­riza­tions. Stan­dard & Poor and Moody’s also give Mal­ta very high marks. The same applies in the area of future expec­ta­tions, which in regard to Mal­ta both agen­cies see as devel­op­ing pos­i­tive­ly.

Fitch has also con­firmed its excel­lent “A+” rat­ing. When explain­ing its deci­sion, Fitch stat­ed that Mal­ta pos­sess­es a high degree of rule of law. The basis for its eval­u­a­tion includ­ed, among oth­ers, sta­tis­tics for pro­ject­ed growth in gross domes­tic prod­uct, which achieved best val­ues dur­ing the first three quar­ters. In addi­tion, praise was accord­ed to the country’s extreme­ly low unem­ploy­ment rate as well as the low degree of infla­tion in rela­tion to increas­ing per capi­ta income.

Finance Minister Welcomes Improved Ratings

Malta’s Finance Min­is­ter Sci­clu­na has stat­ed he is sat­is­fied with the devel­op­ment of his coun­try. The rat­ings agen­cies have accord­ing­ly hon­ored the efforts made and the results that they have pro­duced. He linked the rat­ings to increas­ing prop­er­ty prices. Where­as real estate prices were increas­ing, the increase was still rea­son­able in com­par­i­son to grow­ing income rates.

Ratings Agencies Conflict with EU

In this arti­cle, I wish to eval­u­ate the appar­ent con­tra­dic­tion between the EU’s view of the sta­tus of the rule of law in Mal­ta and that of the rat­ings agen­cies, which speaks for itself. We all remem­ber the finan­cial and Euro cri­sis of 2008–2009, dur­ing which the rat­ings agen­cies were heav­i­ly crit­i­cized for down­grad­ing the cred­it rat­ing of Greece. What they actu­al­ly did do, how­ev­er, was arrive at a sober com­par­i­son based on giv­en sta­tis­tics. The rat­ings agen­cies are act­ed no dif­fer­ent­ly today. They will take exist­ing data and deter­mine a sta­tis­ti­cal prob­a­bil­i­ty. Medi­um-dri­ven dis­cus­sions and fears of re-elec­tion are exclud­ed from that assess­ment. I will leave it up to our read­ers to form their opin­ions regard­ing the afore­said sub­ject mat­ter.

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