Malta clinches landmark EU budget deal

The Maltese government has pulled off the seemingly impossible by having roped in more funds from the next EU budget, €1.128 billion over the next seven years, than it would have received had the country still been considered an Objective 1 Region for the 2014-2020 period, and despite the fact that the overall EU budget has been cut significantly.

Following hard-fought negotiations in Brussels over Thursday and Friday, Prime Minister Lawrence Gonzi and Malta’s negotiating team has obtained up to €1.128 billion for Malta in the next financial period (Multiannual Financial Framework) covering the EU’s budgets from 2014 to 2020.

This includes €20 million more of directly-allocated funds comprised of Cohesion Policy (Heading 1B) and Agriculture (Heading 2) funds than Malta would have obtained if it had remained a Less Developed (Objective 1) country in the 20142020 financing period.

The deal is significant as it is juxtaposed against Europe’s worst economic crisis in decades and a resulting substantial reduction of €33.6 billion in the overall commitment appropriations of the Multiannual Financial Framework (MFF) when compared to the current financial period (2007-2013).

The result is all the more important as Malta’s economic growth over the past few years means that it no longer qualifies for the highest level of benefits from the EU’s Cohesion Policy funds and has been upgraded from being a Less Developed region (previously known as Objective 1) to what is now known as a Transition region.

The agreement is the result of over a year-and-a-half of negotiations following the European Commission’s original proposal in June 2011, on the basis of which Malta would have received a total of €715 million under Cohesion Policy (Heading 1B) and Agriculture (Heading 2).

As negotiations proceeded, the Cyprus Presidency proposed a cut to the EU budget proposal, which would have reduced Malta’s allocation in these policies to €656 million. Over the months, the Prime Minister held discussions with the President of the European Council, the President of the European Commission and fellow heads of government in Brussels, Malta and other capital cities to explain the effects that such dramatic cuts would have on Malta.

The proposal by the President of the European Council that emerged following the bilateral meeting held on 22 November 2012 included an additional top-up of €200 million for Malta’s Cohesion Policy allocation, bringing its allocation for Cohesion Policy (Heading 1B) and Agriculture (Heading 2) to €879 million. Nevertheless, the summit concluded without agreement and the Prime Minister emphasised that Malta would continue to push for the best possible deal for the coun- try. It should be recalled that the standard practice in such negotiations is that nothing is agreed until everything is agreed.

Heading into Friday’s final talks, Dr Gonzi stressed Malta’s consistent position that it should not be penalised for its economic progress after just one full financing period (2007-2013), emphasising that he would defend the result obtained in November and continue working to improve Malta’s position even further.

He also reiterated that any result that saw further cuts in Cohesion Policy would not be acceptable to Malta, as Cohesion Policy funds are an important way of spurring economic recovery in the EU through a sustained level of EU programmes and funding.

The deal at the European Council means that Malta has secured a total of €914 million in funds under Cohesion Policy (Heading 1B) and Agriculture (Heading 2). Had Malta retained its Convergence (Objective 1) status under the 2014-2020 financial period, it would have received €892 million under these two headings. The deal will therefore actually be a slight increase (€22 million) in these policy areas than would have been the case had it remained a Less Developed (Objective 1) region. Moreover, there is recognition of the permanent handicaps of Island Member States in the Conclusions, in line with the Lisbon Treaty.

The indicative overall funds that Malta will receive under the 20142020 Multiannual Financial Framework (the figures in the other Headings are indicative at this stage and are based on Commission estimates and past performance) is estimated to be €1,128 billion.

This compares well with the €1,115 billion which Malta was allocated during the current 2007-2013 period. It also sees an increase of €109 million for Malta over the original Commission proposal of June 2011 before this was cut by €85 billion overall in commitment appropriations. Not only is Malta expected to benefit more in terms of allocations, but it is also expected to pay less to the EU over the next seven years when compared to the Commission Proposal.

It is estimated that Malta’s net position (after its contribution to the EU budget) will be €627 million. This compares with an estimated €478 million net benefit under the original Commission proposal (which would have seen a net position of €149 million less).

The government has decided that a good part of the additional allocation under Heading 2 (Agriculture) will be earmarked for Gozo. This will ensure that Gozo receives more funds than it currently has ringfenced under the 2007-2013 financing period. For the 2014-2020 period, apart from the 10 per cent under Cohesion Policy (€78 million), a further €32 million (23 per cent of Malta’s agricultural allocation) will be ring-fenced for Gozo to bring the minimum total allocation for Gozo (Cohesion and Agriculture) to €110 million.

In addition to the funds, Malta will benefit from a number of horizontal measures which will facilitate absorption and reduce unnecessary pressures on the national budget. These include the extension of the period available for the implementation of committed projects from three to four years, allowing Malta more time to complete these projects, thus ensuring that funds will not be lost. There was also an agreement to make non-reimbursable VAT on these projects eligible for funding.

Dr Gonzi described the agreement as a landmark result and a major success for Malta. He said that the outcome was excellent for Malta in view of the various challenges facing the EU’s economy, the overall budget reduction and the entrenched positions of other member states.

He thanked all those involved in the months of complicated negotiations coordinated by Malta’s former ambassador to the EU Richard Cachia Caruana, which led to Malta’s final package, emphasising that the outcome ensures sustained funding and investment in Malta’s economy and people.