Malta slashes state-aid but still tops EU list

Malta managed to cut state aid to various sectors of the economy by €25 million (Lm11 million) over the past year but still has a long way to go.

The latest EU scoreboard issued by the European Commission shows that Malta granted the highest level of state aid as a percentage of its gross domestic product (GDP).

Last year, Malta paid €134 million (Lm58 million), or 2.71 per cent of its GDP, in grants, particularly towards the ship repair industry. Although this is estimated to be still much higher than the trend in the other EU member states, the Commission reported that Malta made satisfactory progress and managed to lower significantly the amount of public funds given towards activities of a commercial nature.

Just a year before, the Commission reported that Malta granted a total of €159 million (Lm69 million) in state aid, or 3.86 per cent of its GDP.

The only two sectors given state aid last year were the manufacturing (mainly Malta Shipyards) and the agricultural sector. Malta grants no state aid to the services industry, including tourism.

Commenting about the state aid situation last year across the EU, the Commission said the total amount of state aid granted by the 25 member states was estimated at some €62 billion last year (0.60 per cent of the EU's GDP).

While some member states have reduced their overall level of aid, for the Union as a whole the Lisbon objective of less aid has not yet been met.

On the other hand, most member states appear to be targeting their aid measures towards horizontal objectives, in particular the environment. By sector, about €40 billion in aid was earmarked for manufacturing and services, €15 billion for agriculture and fisheries, €5.5 billion for coal and a little over €1 billion for transport (excluding railways).

Competition Commissioner Neelie Kroes said that while the Commission recognises the efforts of some member states in tackling the Lisbon goals of less and better targeted aid, she was disappointed that the overall level of aid in the EU has not fallen.

"One of the best ways to reduce state aid is clearly to make better use of alternative instruments such as general and regulatory measures that distort competition as little as possible or none at all."

EU rules do not permit any state aid which can infringe its internal market rules and strive to reduce government grants to the minimum.