Malta facing hefty cut in EU funding

Malta facing hefty cut in EU funding

Downside of prosperity is there is no more need for cohesion funds

Updated at 8.20pm: adds PM's comments

Malta risks losing hundreds of millions of euros in EU funds after 2020 if fresh proposals by Brussels for the upcoming seven-year budget materialise, the Times of Malta is informed.

EU leaders, including Prime Minister Joseph Muscat, meet informally in the Belgian capital on Friday to discuss what is technically known as the Multi-annual Financial Framework.

Observers said Malta was likely to face an uphill struggle to retain its present favourable position in terms of EU financing.

“It is almost a given that Malta will not be able to keep its current level of EU funding for many reasons,” European Union diplomats said.

“Since the last agreement on the EU budget (2014-2020), Malta's economy has continued to prosper and, thus, the island cannot really continue to argue it needs more cohesion funds to catch up with the rest of the member states,” they added.

The diplomats felt Malta was not making enough noise in Brussels on the matter which could, eventually, work against it when it came to negotiations.

Since its accession to the EU in 2004, Malta has always been treated as a net beneficiary, receiving more funds than it contributed to the budget. However, according to the latest proposals communicated by the Commission, Malta is expected to lose this status post-2020.

The island cannot really continue to argue it needs more cohesion funds to catch up with the rest of the member states

In two of three different scenarios for the next EU budget presented by the EU executive, cohesion funds will be limited to countries whose standard of living and general regional economic activity remains very low when considering the EU average. In both eventualities, Malta's funds would be radically slashed.

The third scenario contemplates a situation whereby cohesion funds will be maintained for all member states and regions. However, even if this option were adopted - which, according to diplomats is highly unlikely - Malta still stood to lose as it would have to contribute more to the EU budget due to a €13 billion annual financial hole left by the UK’s departure.

Questions sent to the Office of the Prime Minister on Malta’s stand on the proposals and on how the government planned to tackle the problem remained unanswered at the time of writing.

The Commission is expected to make known its official position in May.

In February 2013, when negotiations on the 2014-2020 budget were concluded, Malta managed to clinch a very favourable deal amounting to €1.12 billion, including about €800 million in cohesion funds. Such money is earmarked for large infrastructural projects, support to industry and general improvement to the economy.

At the time, the island’s GDP had already surpassed the 75 per cent mark of the EU average, which, technically, did not qualify it for such funding. However, the government had argued that the island was still in a transition period and needed more funds to catch up.

Brussels is pushing for a budget increase, reflecting the positive economic scenario across member states. However, net contributors are not so enthusiastic about the idea.

PM's comments

Discussions are underway with the European Commission and stakeholders on Malta’s financial package which starts from 2020, Prime Minister Joseph Muscat said.

He was speaking during an informal summit with European Union leaders in Brussels.

He said that although EU rules established that a member state should be given more assistance when it needed it most, even though Malta had, in the past years Malta achieved a record economic growth, proposals were still being put forward to make good for the Maltese situation.

Asked about criticism that Malta was not doing enough noise regarding the financial package for the next seven years, he said it was strategy and results that counted.

The Prime Minister said that the discussion was still at the beginning and all countries, including Malta, had started to listen and explore the initial proposals.

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