A frightening lack of knowledge about EU funding

On March 2, Joseph Muscat raised the subject of EU funds in Parliament. He repeated his claim that Malta had become a net contributor to the EU budget, this time adding sarcastically that the person whose responsibility it is to ensure that EU funds are received is more interested in the hole beneath St John's Co-Cathedral.

The next day, due to a happy coincidence, the figures I had provided to The Times at their request a week before were published in a front-page article. These figures showed that, no matter what was claimed by the Opposition Leader, Malta is not and has never been a net contributor to the EU. On the contrary, in less than five years of membership, Malta has made a net gain of over €200 million. Even if one only takes the figures for 2007 and 2008, which were the first two years of the 2007-2013 programming period and the least profitable for new recipient member states, Malta still made a net gain of over €26 million.

The Prime Minister naturally pointed out this fact to Dr Muscat, in the strongest terms, that evening in Parliament. Dr Muscat replied that he would check his figures and the Prime Minister said he hoped the Labour Party (PL) would admit the error in the same manner that it had accused the government of not doing its job.

There was silence from the PL on Wednesday and Thursday. Then, on Friday, during my two-hour appearance before Parliament's Standing Committee on Foreign and European Affairs, Leo Brincat asked me whether the figures I had forwarded to The Times to show that Malta had not been a net contributor to the EU budget included European Commission funds that had not yet been transferred to the Maltese government. I explained to Mr Brincat that this was certainly not the case, that the €46 million advanced to Malta were Maltese government funds and that they were deposited in a Central Bank of Malta account belonging to the Maltese government.

My clarification was broadcast live on radio and was available on Parliament's website, yet the following day, shadow finance minister Charles Mangion had an article published in The Times under the title How RCC Got It All Wrong. He ignored my answer to Mr Brincat and repeated the misinformation that these €46 million are "actually funds held by the European Commission in an account at the Central Bank of Malta", adding: "If one follows Mr Cachia Caruana's ludicrous logic, it would be as if the government considered all the money deposited by private commercial banks in their accounts held at the Central Bank as its property!"

As if to support his thesis that these were European Commission funds, Dr Mangion let forth a string of insults which he felt would strengthen his case: "lack of competence", "freshly baked offering", "government within a government" and "his own brand of accounting standards". Gratuitous insult is no substitute for facts. Those facts are that the money deposited in the Central Bank belongs to the Maltese government and that Malta continued to be a net recipient of EU funds even in 2007 and 2008.

Dr Mangion defended Dr Muscat's claim that Malta was a net contributor to the EU by saying that this claim was based exclusively on the Financial Estimates presented by the government in Parliament last November. The Financial Estimates do not include the advance payments by the Commission because the Ministry of Finance classifies them as cash inflow to the Central Bank and not as actual revenue. This is a Finance Ministry accounting procedure, which does not in any way change the fact that the Commission has made payments to the Maltese Treasury Department and that this department has deposited them in an account in the name of the Government of Malta.

These advance payments were a difficult part of the negotiations on the Financial Perspectives 2007-2013. Dr Muscat and his shadow finance minister should have known about them. As part of the final agreement reached in December 2005, the new member states were to receive advance payments for the Structural Funds and Cohesion Fund - equivalent to two per cent of the total allocation for Structural Funds in 2007, three per cent in 2008 and two per cent in 2009 plus 2.5 per cent of the Cohesion Fund allocation in 2007, four per cent in 2008 and four per cent in 2009.

Malta has already received advance payments totalling €46 million - €18 million for 2007 and €28 million for 2008. By the end of May, Malta will receive a further payment of €22 million, to which will be added €11 million (an additional two per cent of the Structural Funds) proposed by the Commission as part of the European Economic Recovery Plan.

Dr Mangion made a number of other assertions ... January data show a miserly €0.3 million in inflows from the EU... Even if one were to accept Mr Cachia Caruana's figures as correct, over the past two years (2007 and 2008) Malta netted an average of only €13 million per annum, with inflows embarking on a steadily downward path. ... The "lack of competence" to tap a significant portion of Malta's allocation of EU funds has left Malta relatively worse off...

Dr Mangion can only have concluded that there is a "lack of competence" by confusing EU budgetary allocations with EU payments. EU budgetary rules are complicated but they are very well defined. They include "decommitment" provisions that give member states a certain period of time over which to spend the money allocated for a particular year.

Invoices for projects to be paid out of funds allocated for the years 2007, 2008, 2009 and 2010 may be submitted for EU payment within four years (N+3) of their allocation; invoices for projects to be paid out of funds allocated for the years 2011, 2012 and 2013 may be submitted for EU payment within three years (N+2) of their allocation. To use actual figures, for the 2007-2013 programming period, Malta was allocated a total of €855 million in Structural and Cohesion Funds, of which €112 million were allocated for 2007 and €115 million for 2008. Malta has until the end of 2010 to spend and submit invoices for the payment of the €112 million allocated for 2007 and until the end of 2011 to spend and submit invoices for the payment of the €115 million allocated for 2008.

Because it takes time for projects to be identified, permits to be applied for and tenders to be issued and awarded, EU payments are low in the first years but increase throughout the programming period as projects are completed. This is why Malta and other states negotiated higher advance payments in the current financial perspectives: to ensure that we would receive substantial EU funds also in the first years of the new programming period and to allow us to have liquidity in hand to kick-start the implementation of projects.

Trying to split a seven-year allocation - which can be spent over nine years - into a basic book-keeping exercise based on single years, and now even single months, as Dr Mangion has done, betrays a frightening lack of knowledge about EU funding.

Whoever advised Dr Mangion in the writing of that piece was extremely poorly informed, hence his sentence: "The figures that the Permanent Representative provided The Times demonstrating that Malta netted €66 million contradicts an article that was published a month earlier in the same paper which reported that Malta netted €50 million worth of EU funds in 2008."

He refers to a report on a press conference published in this newspaper on February 5 and the following excerpt: "Last year, Malta received about €50 million from EU coffers for various ongoing projects covering budgetary periods 2000-2006 and 2007-2013". The news conference was given by EU Commissioner Danuta Hubner and the subject was the management by member states of Structural and Cohesion Funds. It is also clear from the figures which I had given to this newspaper that the €50 million are what Malta received as EU payments in 2008 from Structural Funds and the Cohesion Fund (2004-2006 programme) and the 2008 advance payment for Structural Funds and the Cohesion Fund (2007-2013 programme).

Besides Structural and Cohesion Funds, Malta also received in 2008 about €16 million for the transition facility, travel expenses and participation in EU programmes. I hope that even Dr Mangion can accept that €50 million plus €16 million still totals €66 million.

The author is the Permanent Representative of Malta to the European Union.