EU recovery plan may see Malta become net contributor to EU funds

Edward Scicluna participating in a video conference meeting of the EU's finance and economy ministers, flanked by the ministry's permanent secretary Alfred Camilleri.

Malta could become a net contributor to EU funds – instead of a net beneficiary – based on the way the proposed EU Recovery Plan is structured, Finance Minister Edward Scicluna said today.

Scicluna was participating in a video conference of the Economic and Financial Affairs Council (ECOFIN), which brings together the economics and finance ministers of all member states.

As one might expect, the meeting focused on the plan which was presented by the European Commission on 27 May. The package consists of €750 billion in grants and loans, of which around €1 billion have been allocated to Malta.

But Scicluna’s own initial reaction to the plan had been lukewarm at best. The minister pointed out that while Malta may avail itself of the loans made available should they be advantageous, it never had a problem with obtaining financing, as the Maltese were always ready to purchase government bonds, whoever the party in government may be. He also warned that European efforts to bring about tax harmonisation may be boosted as a result of the package, putting Malta’s low-tax regime at risk.

And in his contribution to ECOFIN, the minister continued to highlight his reservations about the plan.

Allocation criteria put Malta at a disadvantage

Scicluna questioned the criteria used to allocate funds to EU member states, stating that these should focus on elements which better capture the Covid-19 economic shock, rather than consider the situation before the pandemic.

He particularly questioned the reliance on unemployment rates as the only indicator, which is to Malta’s disadvantage, since it entered the pandemic with one of the EU’s lowest jobless rate.

“Such an indicator is not sophisticated enough to catch the peculiarities of countries where there are some sectors which survive the ravishes of the pandemic while having one important economic sector, devastated – as is the case with tourism. We expect the Commission to come up with better indicators,” the minister said.

Malta pushes for ‘modest’ grants

Scicluna argued that in the spirit of solidarity, Malta found modest volumes of grants to be acceptable, but he criticised the levels proposed.

“We cannot say the same for the ratio of grants to loans as allocated to some countries. The way the present grants to loans ratio is structured, it will turn a number of member states, including Malta, from net beneficiaries to net contributors and having a multiplier effect which is difficult to understand let alone explain to others,” Scicluna said.

ECOFIN ministers also discussed own resources – the EU budget’s sources of revenue.

Scicluna said that Malta’s suggestion was to opt for taxes on non-recyclable plastics and similar products, “and not introduce controversial taxes which may stall our progress to an agreement, and this at a time when we want to obtain quick solutions.”

He reiterated Malta’s opposition to the proposal to extend the Emission Trading System into the taxation of air and sea travel. This, the government has argued, would unfairly burden Malta, due to its heavy reliance on tourism and its island nation status.

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