Malta’s economy has been going through a silent revolution in regard to subsidies, a new report on state aid shows.

Malta, the most successful country among the 27 in slashing subsidies

Six years into Malta’s EU membership, the island has almost halved the amount of money paid out from the state coffers in subsidies to industries and services.

According to the latest state aid scoreboard, published by the European Commission in Brussels, Malta’s state aid in 2010 amounted to €100 million, or 1.12 per cent of GDP.

Although this is still high compared to the average of 0.6 per cent of GDP in the 27 countries of the EU, it is 0.5 per cent of GDP less than in 2009 and a full one per cent of GDP less than in 2004. While between 2008 and 2010 Malta dished out an average of 1.47 per cent of GDP in state aid, between 2005 and 2007 the figure stood at 2.5 per cent.

Calculations show that Malta is currently paying some €90 million a year less in subsidies than it used to just before becoming an EU member, according to an EU official.

“Malta is by far the most successful country among the 27 member states when it comes to slashing subsidies on a year-on-year basis,” the official said.

“Although the island is still forking out more subsidies than the average in the EU considering the size of its economy, the government is clearly making strides forward to reduce the economy’s dependency on state handouts.”

Since Malta’s EU accession, many state subsidies have been reduced or even totally abolished.

One of the biggest annual subsidies, now discontinued, was connected to the shipyards, which despite a massive investment running into hundreds of millions of euro over the years, had to fold.

In fact, it is estimated that about a quarter of the island’s current €4 billion debt bill is related to the state aid given to the shipyards over the years. Other massive subsidies, which have now been heavily reduced or cut altogether, concern Enemalta, Water Services Corporation and public transport. The major state aid expense for Malta in 2010 was related to the rescue aid given to Air Malta, amounting to some €52 million, Brussels said.

This loan will now have to be paid back by the company once the Commission gives its green light to the airline’s restructuring programme.