News • 01 DECEMBER 2002

Minister tight-lipped on size of EU financial package as countdown to Copenhagen begins

COPENHAGEN - It’s going to be a nail-biting week for Maltese negotiators in Brussels as pressure mounts for them to conclude the outstanding issues with the EU Commission before the Copenhagen summit in 12 days’ time.

Unless all outstanding issues are concluded before the Copenhagen summit, accession countries risk missing out on enlargement.

The size of the financial package remains the largest bone of contention for all accession states. And Malta is no exception.

Speaking to MaltaToday after meeting the Danish Foreign Minister on Friday, Foreign Minister Joe Borg confirmed that the Danish presidency’s proposed financial package was "an improvement" on the starting position initially proposed by the Commission.

The ‘starting position’ was that all accession states, during their first year of membership, should not be in a financial position that is worse than the previous year.

Dr Borg was tight-lipped on the size of the financial package. Nobody from the government side is saying anything and the negotiations are being conducted in strict confidentiality. However, the Minister did say that the Danish presidency increased the package across the board for all applicant states. Minister Borg anticipated that the negotiations on the financial package would be carried over to the Copenhagen summit. He insisted that the Maltese negotiators were doing their utmost to achieve a meaningful package.

The Foreign Minister was confident that the agriculture chapter could be wrapped up later on this week, possibly by Thursday, as significant progress was registered on Malta’s requests.

However, Dr Borg was less confident that Malta could obtain a special arrangement on VAT beyond the transitional period already achieved by Cyprus. Malta is requesting to retain zero rating for medicine and food on the premise that both the UK and Ireland have similar arrangements. Originally, Cyprus had also made a similar request. However, Cypriot negotiators dropped their request and settled for a five-year transitional period after which they would introduce a five per cent VAT rate on medicine and food.

It is widely acknowledged that Cyprus’ decision to settle down for a transitional period has weakened Malta’s position.

On Friday Dr Borg said that government was requesting a transitional period for five years with the right to ask for an extension if the UK and Ireland retain their zero rating. But with the Commission insisting that it did not want to create more exceptions that could hinder VAT harmonisation in the future Malta’s request looks rather bleak.