Late last night Malta managed to conclude a deal aimed at giving small member states more favourable conditions on their contribution towards a permanent eurozone rescue fund aimed at helping those countries which will find it difficult in the future to raise finances from the international markets.
Amid speculation that Portugal will soon follow Greece and Ireland asking the EU and the IMF for financial help, Malta, together with Estonia, Slovakia and Slovenia last night managed to pull-off a final deal following tough negotiations with the other eurozone members, obtaining special conditions on their contributions.
At the end of the first day of summit discussions in Brussels, Prime Minister Lawrence Gonzi announced that “a deal has been reached to Malta’s liking”.
The four small member states insisted on a change in the formula to be used to determine their contribution towards a €700 billion European Stability Mechanism (ESM), which will be a permanent bailout mechanism taking effect from mid-2013 onwards.
Originally, the same mathematical formula was proposed for the 17-eurozone member states and worked out on a 75:25 weighting based on population and GDP. However, this formula was deemed to disadvantage small member states like Malta as they would have been required to contribute more on a per capita basis when compared to bigger and economically stronger member states.
Government sources said that, according to the new deal, Malta and the other small member states will now contribute less than originally calculated as the population weighting was reduced while more emphasis was put on GDP.
“The deal negotiated by Malta comprises that the population weighting will go down to just 12.5 per cent and the rest, 87.5 per cent will be tied to GDP. Malta also negotiated better conditions for those member states with a lower GDP than the EU’s average,” the sources said.
The EU summit – which was supposed to close months of negotiations on new rules underpinning the euro – was dominated by Portugal’s financial woes which have led to a political crisis.
Despite resigning after loosing a crucial Parliamentary vote on Wednesday, Prime Minister José Socrates still attended the summit meeting in Brussels.
Although resisting the speculation of an immediate bailout, it is almost sure that Lisbon will soon need some €70 to €80 billion of funds in order to avoid a financial collapse.
The latest ongoing crisis in Libya was also on the summit’s agenda with leaders agreeing on new conclusions.
While reiterating their call for Muammar Gaddafi to step down and “relinquish his power immediately”, the 27 leaders agreed that the EU “will intensify its efforts to find a solution to the crisis which responds to the legitimate demands of the Libyan people”.
Of direct interest to Malta in case the island suffers from an influx of Libyan refugees, the agreed conclusions state that “the EU and its member states stand ready to demonstrate their concrete solidarity to member states most directly concerned by migratory movements and provide the necessary support as the situation evolves.”
The summit is scheduled to end today.