Malta risks losing 45% EU funding

Malta faces a sharp 45 per cent drop in EU funding unless the Prime Minister manages to convince the other member states that such a move would result in an “enormous shock” for the island’s economy.

The latest figures placed on the negotiation table see Malta’s funding reduced to €480 million, a figure described by the Prime Minister as “absolutely unacceptable”.

The European Commission had originally proposed to reduce Malta’s seven-year funding to €534 million, down from the €855 million it received from the EU in the last seven-year budget.

Lawrence Gonzi yesterday joined other leaders in Brussels to start a painstaking process of negotiation on the EU’s next budget, covering the period 2014-2020.

While bigger countries like the UK are threatening to veto the outcome unless there is a significant drop in the overall budget, Malta must make its case to be given considerably more than outlined in the latest proposals.

With the funding it received in the last seven-year budget, Malta has bolstered its infrastructure and boosted its human resources training, which has helped to lift it out of the so-called Objective One group of countries, awarded to regions with low levels of GDP in relation to the rest of the EU.

Now, Malta’s relatively vibrant economy as well as the accession of Romania and Bulgaria, which lowered the EU’s average income, could translate into a drastic cut in EU funding.

Malta is especially worried about losing around half of its share of the structural and cohesion funds, which are aimed at helping the poorer member states invest in areas like transport and energy in order to catch up with the more developed nations.

The Prime Minister is arguing halving Malta’s EU funding would render it unable to attain the “critical mass” needed to consolidate its position and maintain growth.

According to sources, he will have to leverage on the impact that the economies of Romania and Bulgaria have had on the EU average and on Malta’s economic status in relation to that standard.

Malta understood its progress over the past seven years made it difficult to demand a funding increase and that some drop was unavoidable, the sources said. But until the EU offered Malta an acceptable settlement, the Government would stand its ground.

“You cannot take a country like ours and cut its funding so drastically because the result will be exactly the opposite of what the EU is trying to achieve,” one source said.

Dr Gonzi held high-level meetings yesterday to explain Malta’s position and his arguments were said to have been appreciated. Malta is expecting to see a more acceptable figure on the table.

Though Malta’s negotiators are keeping their cards close to their chests, the sources said the Government was hoping for a significant increase from the €534 million figure first offered.

Speaking to the press yesterday evening, Dr Gonzi said Malta was arguing it needed a “transition period” and cutting funds so drastically would be an enormous shock for the country’s economy.

“We are not expecting what we had before but we will keep doing our best to get the best deal for our country,” he said before entering round table discussions.

But as the wrangling begins in Brussels, and EU leaders attending the Council summit prepare to negotiate late into the night, many are predicting that this week will end inconclusively.

What was meant to be a two-day summit is expected to spill over into Saturday but cannot stretch any further, even if no unanimous agreement is reached, meaning the issue could remain unresolved and Brussels bureaucrats must go back to the drawing board.

Council President Herman Van Rompuy wanted to hammer out a deal by the end of 2012 but this means all 27 countries must give their seal of approval.

British Prime Minister David Cameron, who is expected to bring the toughest stand to the summit due to increasing pressure back home, made an early appearance at the summit yesterday morning, showing willingness to hammer out an agreement.

The UK’s position has already set the tone of the summit. The European Commission’s initial proposal in June 2011 to increase the overall budget from €976 billion to €1.025 trillion has already been tamed. Mr Van Rompuy tabled a €950 billion proposal, €75 billion less than first recommended.

But as the UK demands cuts to reflect domestic austerity measures, other countries are asking for increases, including bigger countries whose economies stand to gain if poorer countries are given more money to spend on their infrastructure and expertise.

Meanwhile, Dr Gonzi said the chapter had been closed on Tonio Borg’s appointment as EU Commissioner.

His Deputy Prime Minister had earned a “convincing” vote and the next step was for the Council to officially approve him. Then, Dr Borg would resign officially as Foreign Minister.

Dr Borg will give his last parliamentary speech next week, Dr Gonzi confirmed.

“The next step is that next week we will dedicate it to the Budget in Malta and then we will take all necessary decisions,” he said, when asked who will replace Dr Borg as Foreign Minister.

Asked whether Dr Borg’s nomination had been risky, Dr Gonzi said the choice was good and the vote was categorical in Dr Borg’s favour even though people had reservations on issues that were irrelevant and not about Dr Borg’s competence or integrity.

“We should be proud and satisfied,” he said, stressing that Dr Borg gave an excellent showing at his hearing and was praised by all.