Wolf Richter www.testosteronepit.com [13] www.amazon.com/author/wolfrichter [14]
The huddled masses yearning to breathe free in the European Union drown by the boatload in the Mediterranean. They languish behind bars in detention centers in Greece and elsewhere. They’re maligned, hounded, deported if possible, and sometimes killed. But it’s getting cheaper and easier for the rich.
The path to residency and eventual citizenship has always been paved with money. The more money, the smoother the path. But now in the EU, citizenship (and a passport, one of the most prized in the world) is moving into the realm of not only the super-rich but the run-of-the-mill well-off. EU citizenship has become just another product that strung-out debt-crisis countries can sell in a competitive market by undercutting each other. And Malta just started a price war.
The tiny EU member with a population [15] of 417,000 spread over three islands lies 50 miles south of Sicily, 175 miles east of Tunisia, and a little over 200 miles north of Libya. It’s convenient for foreigners, with English being one of the two official languages.
If you’re from Russia or China or Venezuela or Mali and become a citizen of one of the 28 EU countries, you’ll get a country-specific EU passport, which allows you to establish residency and do business anywhere in the EU. Large international money transfers are less of a hassle. There are all sorts of offshore benefits. And travel around the world is a breeze.
But EU citizenship, though a hot product for those who don’t have it, is not normally considered for sale. You have to invest lots of money in your chosen country. Every country has its own priorities: in Hungary, iffy government bonds; in Ireland, public projects such as education; in Portugal, property. These investments will make you eligible for residency, after which you may or may not be able to get citizenship, similar to programs available in the US.
In Austria, where citizenship is almost impossible to get for normal foreigners, the super-rich are sought after [16]. The government, through paragraph 10, section 6 of the Citizenship Act, can confer citizenship “because of the services already provided by the foreigner and the extraordinary achievements still to be expected of him in the special interest of the Republic.” A Saudi hotel investor and the Russian singer Anna Netrebko reportedly received Austrian citizenship (and passport) in this manner. Few succeed: none in 2012 and only 23 in 2011.
But nowhere in the EU could you actually just go and buy citizenship off the shelf.
Cyprus got close. In 2012, as it was veering toward bankruptcy, it offered citizenship through a “fast-track” scheme [17] to anyone willing to plow at least €10 million in direct investment into the country, which is a lot of money for the average rich guy, just to get a travel document and EU residency. There were also some other onerous criteria, and it wasn’t seen as a good deal.
By April 2013, Cyprus was desperate. Depositors in its collapsed banks were treated to high and tight haircuts. Its offshore financial industry, the mainstay breadwinner, had cratered. Cyprus needed money badly. So President Nikos Anastasiades, in office for only a couple of months, announced that the price of citizenship [18] would be slashed to €3 million, but it would still be tied to investment in Cyprus. It was in part an olive branch he held out to Russians who’d stashed their money in the cesspools of corruption that were the Cypriot banks: they too would be eligible for citizenship if they’d lost at least €3 million.
But that era of tying citizenship to investment and residency is now over in the EU. Malta put it up for sale at 78% off! And you can buy it off the shelf and leave.
The Parliament of Malta passed legislation [19] that set the price for Maltese citizenship at €650,000 for any non-EU applicant. It’s not linked to any residency or investment requirements. People can just come by, jump through some minor hoops, pay, get their citizenship and passport, and then settle in Germany or wherever. Simon Busuttil, leader of the opposition Nationalist Party, warned that Malta could end up being compared to shady tax havens in the Caribbean.
Prime Minister Joseph Muscat admitted that the deal was designed to sell the product. Malta is struggling. It needs the money. He claimed that about 45 people would end up buying citizenship during the first year, for about €30 million in revenues.
No big deal? Henley and Partners, an international consulting group, was awarded the contract to run the program. The firm specializes [20] “in residence and citizenship planning,” for “wealthy individuals and families, as well as their advisors worldwide.” CEO Eric Major claimed that the program would be transparent. But unlike the Prime Minister, Mr. Major estimated that Malta would sell between 200 and 300 citizenships per year. Hence, at the upper range, nearly €200 million in annual revenues – not bad for a little bit of paperwork. And a lot of money for such a small place.
And if the product really takes off? The price point is advantageous, given what Cyprus charges, and there are hundreds of millions of well-to-do but not super-rich Chinese, Indians, and others who would like to establish an escape route. This could be Europe’s next big thing. It could be HUGE!
But it’s competitive out there, as Cyprus found out. The Maltese government said that other EU countries were also considering the outright sale of citizenship. This can mean only one thing: downward pressure on prices.
Will Greece offer citizenship for €599,000 each? Perhaps, no questions asked, to be even more competitive? It’s going to be what the bailout Troika and everyone else have been looking for: a phenomenally profitable export product with minuscule input costs and unlimited potential. If it sold 1 million citizenships over the next three years at this price, it would be able to pay off all its debts, bail out its banks properly, allow politicians and tycoons to syphon off €100 billion for personal gain, and still have some cash left to buy some German tanks and frigates. Debt crisis solved!
Unless Slovakia jumps in and cuts the price to €399,000 a piece....
Despite a miraculous economic “recovery,” EU-wide youth unemployment hit 24%. New records were set in Spain (56.5%), Greece (57.3%), and other countries. The warnings from history are clear: governments that allow youth unemployment to escalate, do so at their own peril. Read.... No Country For Young Men [21]