Interview by Giselle Scicluna
James Grech is a banker by profession. He has occupied various roles in his long standing career in one of Malta’s leading banks, were he is presently the person responsible for the bank’s international relationships. Apart from his executive role, James is also a director of the bank. James is married to Fiona Grech and is the proud father of Thomas and Thea.
– You are relatively new to the local political scene. What motivated you to submit your candidature?
Although this is my first time standing as a candidate, I have been involved in politics for quite a number of years. Up till now, my involvement was pretty much away from the limelight, focusing predominantly on party strategy and voter engagement. During the last years, however, my professional role has put me in a front-line position to recognise the damage that was being inflicted on Malta’s financial sector by some of our own MEPs. I believe that my experience and expertise in the field of international financial relations equips me with the tools required to restore the reputation of our jurisdiction at a European level.
– As a director of leading local bank, a member of the European Banking Federation Correspondent Banking Task Force with years of experience in the banking sector, how do you view the EU’s financial institutions? Do you believe that they are fulfilling their scope?
Compared to other jurisdictions, for instance the United States, the EU’s financial institutions operate in an uncomfortable scenario as they need to cater for the financial needs of a bloc made up of twenty eight very different member states, with very different economies and legislative frameworks. These differences make it difficult for these institutions to execute their mandate. To complicate matters further, with the banking union, the nineteen members of the Eurozone are subject to deeper integration in their banking system, involving a single supervisory mechanism and a single resolution mechanism. In addition, building up and executing a consensual approach, even among the Euro Area countries, is usually a painstaking and slow moving process which usually has an impact on the effectiveness of decision making in these fora.
– In which areas do you believe that these institutions are most lacking and conversely how do they benefit the bloc?
The banking union should result in a safer financial sector within the Euro Zone and thus, hopefully avoid financial crisis like the one we faced in 2008/9. The ECB is monitoring developments in the banking sectors and in other financial sectors more closely, so that any risks to the European financial system can be identified and addressed earlier. It is also adopting a more European wide perspective, rather than the previous national approach, which is important given the integrated financial system in the European single market. Furthermore, various macroprudential policies have been put in place to prevent excessive build-up of financial risks, to increase the resilience of the financial system and to have a smoother financial cycle (rather than a ‘boom, bust’ cycle). However, the banking union remains incomplete as agreement on a European deposit insurance scheme remains elusive.
Moreover, whilst securing financial stability is essential, it is also important that the banking sector and other financial sectors continue to support economic development in the European Union. In particular, we must ensure access to finance for SMEs, which constitute the backbone of most European economies, including Malta. In this regard, the Juncker plan is a case in point; many European SMEs have benefited from the pool of €300 billion euros made available through guarantees from the European Fund for Strategic Investments. This supports economic and social development, however, the speed of execution leaves much to be desired. Indeed it took quite a number of years since the 2008 financial crisis for the EU to come up with such a plan. Meanwhile unemployment in many European countries soared, which together with the policy of austerity led to a general disillusionment with EU institutions and giving rise to euro-scepticism across several member states.
– The European Commission has recently proposed an end to the veto power EU member states have over EU tax matters; what would this mean in tangible terms for our country?
This proposal is not acceptable for a small country like Malta and national sovereignty in tax matters is something which we need to safeguard. Given our small size, we face constraints in what we can offer to investors and as a country located in the periphery of the EU, we also face considerable disadvantages. One of the few available means of attracting investment is thus through tax policy. Let me be clear on this, every country competes for foreign investment by proposing advantages to investors so as attract business. Last year an EU member state clinched a massive €240 million investment from a Chinese lithium battery manufacturer by offering CATL to build a huge factory the size of roughly 70 football grounds. Can you imagine our tiny island trying to compete for these sort of investments? We cannot offer large physical spaces or close and easy access to European markets and hence we need flexibility in the use of tax policy to be able to continue to attract investment in targeted sectors.
– If a more harmonised tax policy does come into effect, what would be the way forward for Malta?
This is a hypothetical scenario and discussions on this issue, whilst being on the table for a number of years now, are still far from conclusion. The EU member states have the freedom to legislate on their respective domestic tax issues. This is clear and unequivocal. The EU cannot simply decide on such issues unilaterally. Furthermore, Malta is not alone – there are other member states that share our view. I believe that with these countries, we could form a common bloc against a one-size-fits-all policy on tax harmonisation.
Moreover, whilst taxation is an essential aspect of the competitiveness of the Maltese economy, there are other important factors which we need to develop further, including an English-speaking and skilled workforce and a sound and developed regulatory framework, for instance in financial services and e-gaming, whilst we should continue to identify and develop new niche sectors.
– Let’s talk Brexit… what in your view would be the long-term impact on the EU when the UK finally leaves the Union?
Brexit is indeed a big blow to the entire European Project. Envisaging such a scenario was unthinkable only some few years ago. However, perhaps oddly enough, I tend to believe that on a strictly political level, Brexit might actually be beneficial to the long-term cohesion of the union. I think that following an actual exit, the political class in Brussels is finally realising that member states can actively consider leaving unless they are happy with the club rules. This might actually support more openness and the acceptance of the diversity amongst member states which would in turn ensure more unity within the union itself. On the other hand, Brexit will surely have negative economic effects on the EU (as well as on the UK), in particular as regards trade and commerce, flows of investment as well as movement of workers. There will be other effects resulting from exchange rate developments as well as repercussions on the EU budget, amongst others.
– Any pressing issues you believe the EU should tackle to ensure its survival especially given the current rise of far-right sentiment?
In my opinion the EU should be closer to the citizens and focus more on policies which affect the bread and butter issues which have a real impact on the daily lives of Europeans. Unemployment is a case in point: latest data shows that one third of youths in Spain and Italy are jobless. Stronger EU policies and targeted EU funds are called for and the EU should allow members states more fiscal freedom when it comes to curbing chronic unemployment particularly amongst the younger generation. Yet the impression is that the EU is more sensitive to some small percentage differences in the budget deficits of these countries. Another issue which constitutes a concern in many southern EU member states is migration. Here, true solidarity is still lacking. We need a European solution to this common challenge rather than leaving countries at the periphery to continue to deal with these challenges on their own or adopting short-term ad hoc solutions. Addressing these important issues is critical given that the far-right has historically flourished during periods of high immigration and youth unemployment.
– As a MEP what do you believe you can bring to the table? In other words, as a candidate what issues will you be focusing on?
First and foremost, what I intend to substantiate is my defence of our financial jurisdiction. I think that the risks that the country is facing from these unsubstantiated attacks is huge and should be counteracted in all EU institutions. I also intend to push forward the agenda of solidarity on immigration issues with Malta and our southern neighbours. I will be vociferous against one-size-fits-all policies, especially tax harmonisation, in major EU institutions, since these neglect the needs of small member states like ours. Other areas which I also intend to focus on is the promotion of environment friendly initiatives and financial support for our micro and small enterprises.
– With less than four months to go to the EP elections, what is your message to the electorate?
The European parliament is that one institution where the electorate’s voice can be directly represented. So, I encourage the electorate not to miss this opportunity and to vote on the 25th May, for those candidates who put Malta’s interests as their main priority. As a country, we really cannot afford not to have a common front in this institution. On my part, my commitment will be towards the prosperity of my country, its people and future generations.