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Malta: EU recovery fund could be very dangerous

Christian Fernsby ▼ | May 29, 2020
Funds from the EU meant to help member states recover from coronavirus effects could end up being more detrimental that beneficial to Malta, EU expert Peter Agius has warned.
Malta street
Recovery   Malta street
While the individual allocations for each member states under the package, dubbed Next Generation EU, have not been finalised, EU sources told that Malta could receive €992 million.

Topics: Malta

Agius, however, said that due to the nature of the recovery packages, which would sit on top of the EU's budgetary framework for the 2021-2027 period, Malta might pay more into the coronavirus pot than it actually receives.

Next Generation EU's funds would be different from those normally granted through the Union's Multiannual Financial Framework (MFF), the former PN MEP candidate said.

While the MFF budget is financed through payments from VAT collections and Gross National Income (GNI) contributions in member states, the coronavirus package's funds would come from Europe's "own resources", essentially meaning the money would have to be raised through direct taxation.

"The European Commission is proposing that this money should be paid not from Gross National Income contributions but from European direct taxes. This may seem like a small technicality but according to Agius it may make all the difference for Malta," Agius said.

Agius told MaltaToday that Next Generation EU's grants and loans would be financed using three taxes, two of which financial transaction taxes and digital taxes could be increased to the detriment of Malta. "This can be very dangerous for Malta," he said.

"So, while it's true that Malta could get up to a €1 billion, we need to discuss where this will come from."

"If we do not succeed in negotiating different sources for fresh EU funding, we will end up paying them ourselves from the taxes that are imposed on Malta-based companies," he said.

The Finance Minister sounded the warning in parliament when asked about the rescue package being discussed at EU level as part of the coronavvirus recovery.

“This is not just about the percentage of EU funds that will be distributed as grants or on loan but we must beware the fruit that can turn out to be a prickly pear,” Scicluna said.

He urged MPs to look beyond the size of the funding package.

“We have to know who will eventually pay for the debt and this is where we have to uphold the national interest because there are dangers for Malta in some of the proposals made to fund the package,” he added.

Scicluna said one of the proposals was the introduction of a climate tax on airline and ship travel, something that will bite countries like Malta.

“Such a tax will hit southern European member states bad… this is why I urge MPs not to simply look at the size of the package but what it could entail,” he cautioned.