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How Political Corruption Weakens Democracy and Economic Growth in Cyprus and Malta


Today, the European Union has to take the role to protect and preserve democracy while authoritarianism is felt everyday by the state during the Covid-19 flu and in a lot of cases measures are unjustified. The COVID-19 crisis has offered corrupt and authoritarian leaders a dangerous combination of public distraction and reduced oversight.

This new authoritarianism made more obvious the problem of corruption in some weak democracies. To analyze the corruption problem and how it can destroy all the country’s system i’m taking as an example two small countries in the European bloc, Cyprus and Malta where the implications of corruption and political clientelism in these two countries is obvious in all country’s structures and has already done a lot of damage.

The two countries used to issue “Golden Passports” during the previous years, something that skyrocketed the rent prices while salaries remained very low. Corruption weakens democracy to produce a vicious cycle, where corruption undermines democratic institutions and, in turn, weak institutions are less able to control corruption

Why High Corruption Index hurts Democracy

The term corruption is defined as the misuse of public office for private gains which costs every country a large amount of financial, political and social resources every year. Research on the causes, consequences and combat strategies of corruption are manifold and very revealing. Worldwide studies indicate, for example, that well-established democracies show lower levels of corruption than authoritarian regimes or young democracies . At the same time, high levels of corruption undermine democracy. By diverting rare resources from disadvantaged people, it damages the rule of law, social justice and lowers the trust of citizens in political institutions and processes.

Economies that are afflicted by a high level of corruption, which involves the misuse of power in the form of money or authority to achieve certain goals in illegal, dishonest, or unfair ways, are not capable of prospering as fully as those with a low level of corruption. Corrupted economies are not able to function properly because corruption prevents the natural laws of the economy from functioning freely. As a result, corruption in a nation’s political and economic operations causes its entire society to suffer.

Political competitors in younger democracies have had less chance to develop policy reputations with voters and their political parties are likely to be less well-established as vehicles for conveying credible
policy stances. As a consequence, they should be more susceptible to reliance on patrons as a means to establish credible bonds with voters. This implies that the policy choices of young democracies should resemble most closely those predicted by the foregoing arguments: lower levels of public good provision, high levels of private, targeted goods, and high rent-seeking. More systematic empirical evidence comes to support this claim.

Looking now at the profiles of Ministers and politicians, in these two countries, we can take as common measures the rent-seeking tendencies, measures of bureaucratic quality, the rule of law, secondary school enrollment and government ownership of newspapers. The misuse of these measures affect directly the democratic system and there are disadvantages for the middle class and the poor.

Studies tend to conclude that political competitors in young democracies are less credible, more reliant on patrons, and more likely to focus public policy on transfers and rent-seeking than broad public good provision finds substantial implicit support in the case study literature. Various contributors in Malloy and Seligson (1987), looking at countries experiencing the transition from authoritarian to democratic government, repeatedly note the reliance of new political competitors on narrow benefits to targeted constituencies.

Corruption can lead to an uneven distribution of wealth as small businesses face unfair competition from large companies that have established illegal connections with government officials. In a corrupt economy, resources are inefficiently allocated and companies that otherwise would not be qualified to win government contracts are often awarded projects as a result of bribery or kickbacks. Moreover, the quality of education and healthcare also deteriorates under a corrupt economy, leading to an overall lower standard of living for the country’s citizens.

Uneven Distribution of Wealth

Corrupted economies are characterized by a disproportionately small middle class and significant divergence between the living standards of the upper class and lower class. Because most of the country’s capital is aggregated in the hands of oligarchs or persons who back corrupted public officials, most of the created wealth also flows to these individuals.

In a corrupt economy, small businesses are not widely spread and are usually discouraged because they face unfair competition and illegal pressures by large companies that are connected with government officials. Certain industries are more prone to corruption than others, making small businesses in these sectors even more vulnerable to unethical business practices.

Corruption in the way deals are made, contracts are awarded, or economic operations are carried out, leads to monopolies or oligopolies in the economy. Those business owners who can use their connections or money to bribe government officials can manipulate policies and market mechanisms to ensure they are the sole provider of goods or services in the market.

Small businesses in corrupt countries tend to avoid having their businesses officially registered with tax authorities to avoid taxation. As a result, the income generated by many businesses exists outside the official economy, and thus are not subject to state taxation or included in the calculation of the country’s GDP.

Another negative of shadow businesses is they usually pay their employees decreased wages, lower than the minimum amount designated by the government. Also, they do not provide acceptable working conditions, including appropriate health insurance benefits for employees.

Press Freedom and Corruption

Press Freedom is at risk in these two countries. This factor leaves a window open to more and more corruption of the country’s system. In Malta, Daphne Caruana Galizia, a prominent investigative journalist, was murdered in 2017 after writing about alleged money laundering by powerful officials, as well as the business dealings of the prime minister’s wife. The investigations and public demonstrations that followed her death eventually led to the resignation of the prime minister, Joseph Muscat, and to the arrest of his chief of staff, Keith Schembri.

On the other hand, although press freedom in the Republic of Cyprus is guaranteed by the constitution, political parties, the Orthodox Church and commercial interests have a great deal of influence over the media. In both sides of the island (greek and turkish) according to Reporters without Borders , journalism is also hampered by certain bans on the use of geographical names not accepted by the state; on the denial of crimes against humanity, and war crimes not recognised by the state.

The Golden Passport Scheme and its links to Corruption Risk

Last October, in a plenary debate with Justice Commissioner Didier Reynders, MEPs stressed the inherent risks that these programmes give rise to, namely money laundering, tax evasion and corruption. They insisted that Europe must not have “a fast-track entrance for criminals”.

The Cyprus Papers – a series by Al Jazeera’s Investigative Unit – shows that the European Union (EU) is currently defenceless against the haphazard sale of EU citizenship and residency to criminals and the corrupt.

On October 20, the European Commission launched an infringement procedure against Cyprus and Malta over so-called “golden passport” schemes, in which individuals can get a fast track to citizenship after investing between € 1 and 2.5 million in the countries’ economies.  

This practice has been lucrative for both governments. Since 2013, Cyprus raised € 4.8 billion, amounting to 5% of its GDP, by selling thousands of passports to foreign investors. Malta gained about € 718 million in this manner in foreign direct investment since 2014. 

This in turn undermines the integrity of the status of EU citizenship and is incompatible with the principle of sincere cooperation between the EU and member states.  In addition, journalists revealed that high-profile criminals were able to obtain Cypriot passports. The Commission argues that this represents a security threat for the EU as a whole, and increases the risk of money laundering, tax evasion and corruption. 

Without ensuring individuals applying for citizenship have a  genuine connection to their countries – an internationally recognized legal standard for citizenship – they have been taking risks for the EU as a whole.  Corruption in any country, however small, affects the EU as a whole. Every country has a veto over some crucial policies, such as the EU budget. Each country also gets a turn at chairing the EU and shaping its agenda. A passport from any EU country confers the right to live and work anywhere in the EU27.

For example, many of the new owners of a Cypriot passport sought to evade criminal prosecution in their home countries. Mykola Zlochevsky, the owner of the Burisma energy company who is wanted in Ukraine, obtained his passport in 2017. At the time, he was already under investigation in Ukraine for corruption where he offered prosecutors a $ 6 million bribe in cash. 

The government of Cyprus was also accused of issuing passports to foreign criminals and the relatives of despots such as Syria’s Bashar al-Assad and Cambodia’s Hun Sen.

Not only were the lax requirements to “buy” citizenship in Cyprus and Malta legally and morally questionable, in practice, these schemes were also a harbour of corruption. Anyone willing to pay for it could get a passport with no difficulty. The most direct result of this is to give access to the EU to wealthy people evading criminal charges at home. 

Thank you for your time!

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