Malta still tops EU state aid list

Malta is still topping the charts when it comes to subsidies and state aid despite the closure of Malta Shipyards last year, according to the latest scoreboard published by the European Commission is Brussels.

The scoreboard shows that, in 2009, Malta was the most generous member state out of the 27 in granting aid to industry and services out of taxpayers’ money.

The amount of state aid, excluding transport and agriculture, last year reached 1.7 per cent of GDP, or about €100 million. Hungary came a close second with one per cent of GDP.

The EU average stood at 0.5 per cent of GDP, a third of the aid granted by Malta.

A close look at Malta’s state aid last year shows the largest proportion, more than half, was granted in the form of tax relief measures under the Business Promotion Act.

Manufacturing firms, mostly foreign owned, are usually the main beneficiaries of this aid, which is seen as the backbone for enticing foreign industries to set up shop on the island.

Although Malta is still considered to be giving above-average state aid, it has still managed to make progress since joining the EU in 2004.

The amount of public funds pumped directly into the economy as aid dropped by 1.14 per cent of GDP since then.

Malta was also one of a handful of member states which did not need to dip into its pockets to help failing banks during the financial crisis.

The Commission’s report shows that while 22 member states granted billions of euros worth of aid to their banks, Malta did not fork out a cent as its banks remained resilient during the storm. Bulgaria, Romania, the Czech Republic and Estonia too did not give money to banks.

On a general level, the scoreboard shows that, excluding the crisis-related support, “traditional” aid remained stable at €73.2 billion, or 0.62 per cent of GDP. Aid to industry and services amounted to €58.1 billion, or 0.49 per cent of GDP.

The scoreboard shows member states are on track in their efforts to redirect aid towards horizontal objectives of common interest rather than directly to industry and services.

Most notably, the Commission observed a greater focus on regional aid, environmental protection, energy-saving and aid for research, development and innovation.

Such objectives are not only less distortive of competition but also contribute towards reaching the EU 2020 strategic objectives of smart, sustainable and inclusive growth.

In contrast, Malta’s state aid is still focused on direct aid with the amount of horizontal aid limited to just 23 per cent.