Editorial | A good deal

The package is an improvement on the prospects Malta faced two years ago when negotiations on the seven-year budget kicked off in earnest


The deal reached between European leaders on the EU’s next budget and a recovery package could not have come too soon.

With economies across Europe battered by the COVID-19 pandemic, reaching an agreement now was crucial, especially for the hardest-hit countries like Italy and Spain.

After marathon talks, European Council President Charles Michel triumphantly tweeted “Deal!” as leaders agreed on a recovery fund composed of €390 billion in grants and €360 million in loans, and a new seven-year budget worth more than €1 trillion.

Reaching the deal was never going to be easy. The EU-27 had to contend with a budget shortfall of €75 billion as a result of Britain’s departure from the union and a pandemic that has laid bare the economic and social disparities across the bloc.

“The magic of the European project works,” Michel later told journalists as he attributed the successful outcome of talks to “respect and cooperation”.

These are lofty words indeed, which diplomats bandy about to pat themselves on the back.

However, it will take more than that to mend the evident divisions that led to the protracted talks. We witnessed relatively small, rich countries led by the Netherlands – referred to as the frugal four – oppose direct grants; we had large economies brought to their

knees by the pandemic, like Italy and Spain clamouring for more cash without the burden of loan repayments; there were also eastern European countries led by Hungary that objected to stricter governance conditions for fund disbursements.

The final deal may not have been the most generous and ambitious to give the EU the necessary injection to overcome the economic malaise caused by the pandemic and reposition the bloc for the future. But borrowing Labour MEP Alfred Sant’s words, in the circumstances, a deal is much better than no deal.

On the domestic front, Malta has secured an overall package of €2.25 billion, including €327 million in grants from the COVID recovery package.

The package is an improvement on the prospects Malta faced two years ago when negotiations on the seven-year budget kicked off in earnest. Back then, the net balance in favour of Malta stood at €242 million. This has now risen to more than €1 billion.

If one were to completely remove the €386 million in funds allocated to the European Asylum Support Office, an EU agency based in Malta, the country would still remain a net beneficiary and in a much better position than two years ago.

The deal is good.

However, the key now lies with spending the money diligently and on projects that have long-lasting effects on the economy and people’s lives.

The next round of EU funds must be used to transform the country into a cleaner, healthier and greener place.

The final package does not include tax harmonisation or EU-wide taxes but there are proposals to start exploring ways by which the EU can raise more of its own funds. This is a field Malta will have to carefully watch over the coming years.

Taxation must remain a national competency, especially for small countries and those on the periphery, where fiscal policy plays a determining role to encourage foreign direct investment.

Tax harmonisation will be detrimental to Malta and it must continue to oppose any such drive.

However, any notion of EU-wide levies or digital tax- es has to be studied carefully so as not to disadvantage small economies.

Malta must remain vigilant in this regard and government must set up a dedicated task force with input from industry stakeholders to analyse any proposal put forward by the European Commission.

In this way, the country can ensure that the sweetness of the prickly pear is not spoilt by the sting of its skin.

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