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Matthew Vella
For months in the pre-accession period, the electorate was promised that millions of euros would be siphoned to Malta from Brussels on membership. But there were clear warnings Malta could in a very short time lose its eligibility for structural funds. Now the European Commission has indicated its intention to cut Malta’s eligibility for Objective 1 status, the EU’s most generous of structural funds, as Malta’s gross domestic product has exceeded the eligibility threshold of 75 per cent of the EU’s average gross domestic product (GDP).
Indeed the latest EU statistics show Malta’s GDP at 75.9 per cent of the EU average, meaning it will not be eligible for the funds which are so essential for investments in infrastructure that would be impossible to be financed by Malta alone. If Malta loses its Objective 1 status it could lead to serious political repercussions.
Speaking yesterday in his first press briefing this year, the prime minister clearly signalled government’s opposition to the EU’s assessment: “I’ll be meeting Commission President Barroso and Regional Policy Commissioner Hubner next week to make this clear – we don’t accept that Malta’s GDP is over 75 per cent of the EU average. I’ll be having high-level meetings, very high level meetings, including with Belgian Prime Minister Guy Verhofstadt, to put forward our arguments.”
Asked whether he was prepared to veto the EU’s budget if his claims are not accepted by the union, the prime minister said: “This is our red line… I’ll make it clear that this is crucial for us and we hope the arguments that we’ve been making to the EU are accepted.”
Not a year has passed since Malta’s accession into the European Union, and Prime Minister Lawrence Gonzi is already battling to keep intact an electoral promise which had sealed the victorious EU referendum – funds.
The government is deeming it “unacceptable” for Malta not to be an Objective 1 country during the forthcoming budget, which covers the period from 2007 to 2013.
Earlier this week Malta officially objected to the Commission’s proposals, declaring it will not approve the budget if it is not considered an Objective 1 region. The EU budget can only be agreed by unanimity and a no vote by Malta would stall talks on the financial package.
Malta is arguing that if GDP is calculated on the basis of Purchasing Power Parity (PPP) – the idea that exchange rates should move to equalise the prices of a basket of goods and services across different countries – Malta’s relative GDP for the period 2001 to 2003 stands at 74.8 per cent of the EU-25, marginally scraping within the Objective 1 threshold.
According to Foreign Minister Michael Frendo, the allocation of structural and cohesion funds has a slant in favour of regions with a population density below average. Malta’s above-average population density makes it 11.6 times higher than the EU average.
Malta could however be considered for a new segment of Objective 1 funding, for regions with GDP above 75 per cent of the EU-25 average but below 75 per cent of the EU-15 average.
The Commission will however use the average GDP for the last three available years to reach its decision on Malta’s funding eligibility.
It appears that in 2000 Malta’s GDP was found to have been grossly under-declared by 18 per cent, when revised Eurostat figures elevated Malta’s presumed 53 per cent of the EU average GDP to 71 per cent, fuelling speculation that at the time, Malta’s comparative wealth was being calculated in such a way as to show a below average value in a bid to qualify for as much funds as possible during negotiations.
It was former Foreign Minister Guido de Marco who had first sounded the money bell when lamenting at a PN rally that Malta had forgone Lm100 million in EU funds by choosing to freeze its EU membership election upon Labour re-election.
Since then, the cry for EU funds turned out to be Malta’s clarion call for membership, fuelling hopes for a shower of millions that would rid the island of its fiscal nightmares.
In the end it was not to be: Malta managed to wrangle Lm26 million from the EU for every year up to 2006, a far cry from de Marco’s promises but a clear victory for the Maltese islands, after a 2002 Commission working document had presented preliminary calculations showing Malta becoming a net contributor as early as 2004.
Then shadow foreign minister, Labour MP George Vella had expressed doubts about Malta’s future financial package come 2007, surmising that Malta would end up paying millions in contributions to the EU budget. “There’s no pouring rain of millions,” he prophetically told The Malta Financial and Business Times in 2002. “If Malta will be a net beneficiary, it certainly won’t last long. Who still says that accession funds are the reason for which Malta should enter the EU has just been proved wrong”.
On a more upbeat mood, then Foreign Minister Joe Borg, today EU Commissioner for Fisheries, had said that after 2006, Malta would be on the same footing as all the other Member States and “on the basis of its relative GDP per capita is sure to benefit from a considerable flow of financial assistance from the EU.”
Funds in fact represented the pro-EU camp’s most solid guarantee for the membership cause. Right up to the general elections that sealed the Nationalist’s EU victory, Joe Borg himself told MaltaToday in an April 2003 interview that Malta’s future had indeed been paved:
“In our case we have Lm90 million and another Lm30 million from the Italian protocol for the first three years, and after that we will certainly be an ‘objective one’ country and continue to get the highest level of assistance for member states.”
According to the Malta-EU Information Centre’s FAQs, Malta’s pre-membership financial assistance totalled some Euro38 million (around Lm15 million) for the years 2000 to 2004. According to the MIC, Malta was expected to remain a net beneficiary of EU funds even after 2006, considering that the allocation of funds for the 2006 budget would have to be taken by unanimity.
matthew@newsworksltd.com
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