What was the outcome of negotiations on Gozo?

The main outcome of negotiations was an agreement on a "Declaration on the island region of Gozo" that will be attached to Malta's accession treaty. This declaration spells out that Gozo has specific circumstances that are different to Malta and that it should therefore be treated in a different manner as may be necessary.

The declaration is mostly intended to ensure that in any event that Gozo's level of economic development continues to lag behind that of Malta at any point in future, then it should still qualify for continued EU support.

The agreement on the Gozo declaration was endorsed during the Copenhagen Summit, in the final stages of negotiations.

According to the declaration, before the EU decides on any new budget - and therefore before it decides on a new allocation of EU funding - Malta will request the Commission to report on the economic and social situation of Gozo.

The report will be drawn up by the EU Commission. It will focus on the differences in the social and economic development levels between Gozo and Malta. The Commission will be asked to propose ways, whether through EU funding or other measures, to ensure that the disparities between Gozo and Malta will continue to be reduced and that Gozo will continue to integrate into the internal market on fair conditions.

The first Gozo report will be carried out before the next EU budget that will be adopted in 2006. Another report would be due before the subsequent EU budget at around 2012... and so on.

The declaration also provides for the situation that may arise if, at any time in future, Malta as a whole, loses its eligibility to the highest level of EU funding, whereas Gozo on its own would still lag behind. It was agreed that in such a case, the Commission report on Gozo would assess whether the specific economic situation of Gozo justifies its continued eligibility and the conditions under which it should be eligible.

During negotiations it was also agreed that Gozo will be classified as a separate region from Malta for statistical purposes. This territorial classification is known as "Nomenclature of Territorial Statistical Units" or "Nuts" classification. The largest Nuts classification is level one. Smaller territorial units that are sub-sectors comprised within the Nut 1 territory would usually be considered at Nut 2, Nut 3 and so on. The Nuts classification determines the territorial level at which statistics are collected. In return, statistics have an impact on policy-making (even at EU level) that affect that territory.

Malta and Gozo as an entire country will be classified as one unit at the levels of Nut 1 and 2. On the other hand, Malta and Gozo will be considered as separate regions at Nut 3 level.

As a result of this classification, Malta and Gozo will be considered as separate regions for statistical purposes. Separate statistics will be collected for Gozo and this will give a clearer picture of Gozo's specific circumstances - and its special needs. In fact, the first GDP statistics for Gozo revealed that, in 2000, it stood at just 71.7 per cent of Malta's national average. It is on the basis of such statistics that specific policy measures can be devised for Gozo.

As such, the Nuts classification does not directly affect Malta or Gozo's eligibility for EU funding because upon membership the entire country will, in any case, be eligible for the highest level of EU funding (known as objective one). However, in the event that in the longer-term Malta, as a whole, no longer remains eligible, then the provisions of the declaration would come into play in order to ensure that Gozo's specific needs would continue to be addressed.

During negotiations, Malta also obtained another two arrangements specific to Gozo.

The first is a transition period of five years to continue granting state aid for the transport of agricultural goods between Malta and Gozo. This aid must be phased out after five years and, if anything, replaced by a type of assistance that is not operating aid.

The second arrangement relates to the retention of VAT exemption on inter-island passenger transport. This means that all passengers using the Gozo ferry will continue to remain exempt from VAT on the ferry tariff.

In addition, it must be noted that EU law allows the payment of subsidies for ferry transport to Gozitans. Subsidies are allowed so long as Gozitans benefit directly. Subsidies to the ferry company itself are also allowed to the extent that they cover the additional costs incurred by the company to provide a public service for Gozitans, such as night trips, even if this is not commercially viable.

Malta-EU Information Centre: Tel: 25909192; Fax: 21227580; E-mail address: euinfo.mic@magnet.mt; Website: www.mic.org.mt

Readers wishing to put questions to Dr Busuttil may do so directly with the centre or through The Times.

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