Malta’s aim in the negotiations over the next EU budget will be to remain a net financial beneficiary and seek to avoid becoming a net contributor, Finance Minister Tonio Fenech said yesterday.
The second scenario is possible due to the recent entry into the bloc of poor member states Bulgaria and Romania, which have lowered the EU’s GDP average, the benchmark used to determine funding levels for member states.
In the current budgetary period (2007-2013) Malta is considered to be a “convergence country”, better known as “Objective 1”, meaning the island receives much more EU funds than it contributes to the EU’s coffers. In fact, Malta is expected to have received some €1 billion by the end of the seven-year period but will only contribute half as much.
This is possible because the island is among those countries with a GDP of less than 75 per cent of the EU average, making it eligible to the highest level of funding. However, Malta’s GDP last year stood at 83 per cent.
Malta will argue that its position has been affected by the 2007 accession of Bulgaria and Romania, whose low GDP boosted its ranking in relation to the EU average. Mr Fenech called this a “statistical imbalance” that needed to be corrected.
A Commission source in Brussels yesterday told The Times that Malta might be able to fight its corner as “the statistical effect is a reality”.
However, it will not be a straightforward issue, the source said: Several countries, such as the UK, France, Germany, the Netherlands and Finland, are not likely to lower their expectations of being joined by some of the new member states, including Malta, as net contributors.
“It will be an uphill struggle for Malta,” the source remarked.
The minister yesterday welcomed the proposed increase in the overall budget although he expressed scepticism about the way the Commission was proposing to raise money, particularly through direct taxes including an EU VAT.
The increase “augurs well for Malta to retain its position as a net beneficiary by the end of the financial framework (2020). However we are sceptical as to how much support there will be among member states on direct taxation, as is being proposed. We prefer using the current method of national contributions into the EU budget.”
He stressed that Malta’s detailed position was still to be finalised and was open to modifications once Brussels elaborated on its proposals.
The Commission wants to start collecting its own takes through a system whereby one per cent of VAT will go directly into the EU’s coffers as well as through a financial transaction tax on banking activities or even on all financial services. The latter proposal aims to boost the EU budget by some €41 billion a year.
However, many member states are already making it clear they will oppose such tax measures and the UK is expected to lead the charge. Taxation has so far always fallen under national competence.
The EU budget will also funnel less funds to agriculture and more towards research and innovation.
Negotiations are now expected to re-start after the summer break and will go on until the end of 2012. All member states and the European Parliament will have to be on board for the seven-year budget to be approved. Negotiations are traditionally acrimonious and go to the wire.