Issue link: https://maltatoday.uberflip.com/i/1262267
PHOTO BY JAMES BIANCHI 8 maltatoday | SUNDAY • 21 JUNE 2020 INTERVIEW You recently warned that the EU's proposed 750 billon recov- ery fund 'could end up being more detrimental than bene- ficial to Malta'. How much of this concern is motivated by the source of funding (i.e. tax- ation), or by the fact that much of the money will take the form of loans? The EU COVID-19 recovery budget is an important opportu- nity for Malta at a critical time where we need a capital injec- tion to counter the pandemic's impact. Deployment of EU mon- ey can however only be judged in the full context of the medium to longer-term impact on our economy and, most importantly, on our competitiveness in Eu- rope and the world. I heartily welcome the 750b package announced by the Com- mission last week. It is a concrete expression of European solidari- ty and empowerment. This is why we joined Europe. On the other hand, howev- er, when I read the small print I realised the ineffectiveness of the Maltese government in ne- gotiating the criteria used to fi- nance this package which sees an increasing role for EU taxes with potential negative impact for Malta. EU money has to come from somewhere; we need to make sure that the EU budget supply side is also compatible with Mal- ta's economic model and com- petitive advantages. Regarding your point that 'Mal- ta may become a net contribu- tor'... isn't that also a reflection of the robustness of the Maltese economy? EU budget calculations change with every exercise. It is a mat- ter of being in command of that change. Besides, Malta's econo- my is still considered below EU average, as is our income per capita; not to mention the na- tional minimum wage for our workers. Europe is founded on a princi- ple of cohesion among its peo- ples. In this context, Malta being an archipelago without a land link makes us naturally placed for EU investment to enable us to fully exploit the Union's free- doms irrespective of the raw fig- ures on the balance sheet. The fund would be financed us- ing three taxes, two of which - financial transaction taxes and digital taxes - could be 'harmful to Malta'. Given that the EU has been pressuring Malta on this front for years: is this a case of the EU utilising the proposed fund to intensify this pressure? Our counterparts in the Eu- ropean family all have their in- terests and objectives to push through the EU agenda. That is natural and legitimate. There is no EU design to 'pressure Malta', but there might be cases of a lack of Maltese design to influence the general direction of Europe- an policies. Yet both Nationalist and Labour parties have consistently, to date, resisted European efforts towards tax harmonisation. So does ceding the EU power to impose direct taxes mean that this battle has been lost? Europe should never be about losers and winners, but about pitching Malta's case, making it the European case. Malta cannot abstain from the European debate on how to fi- nance our common European ambitions, but lead that process by giving the discussion an im- perative competitiveness dimen- sion tailored to small economies with natural handicaps like Malta. In my view, for instance, blanket tax harmonisation for financial services is odious in so far as it targets countries which strive to make a competitive ad- vantage out of their handicaps of size and wider economic power. Another issue where there was cross-party consensus concerned the new European transport regulations, which Maltese companies say will 'punish island economies like Malta the most'. The EP reject- ed amendments put forward by Nationalist and Labour MEPs: doesn't this suggest that Malta is at an automatic disadvantage at European level? We are definitely at a disadvan- tage if we intervene three years late, once all negotiations are sealed after tens of working level meetings where we kept mum. Let me make this clear. The MEPs did their effort on this one, but they were mobilised too late. The Minister intervened in Brussels in February 2020 when the deal was already sealed with a compromise agreement in De- cember 2019. Malta needs to be part of com- promises; not try to unravel them after they are reached. It lies squarely on government's shoulders to scout and alert on EU developments like this, well in advance of negotiations. This is a text book case of how not to work in Europe. While agreeing with Finance Minister Edward Scicluna's de- scription of the fund as a 'prick- ly pear', you suggested that government should 'push for these funds to come for taxes such as those on plastic, car- bon, cement, diesel and so on, which can help EU countries reach their environmental ob- jectives'. But surely that would also place an additional tax burden on Malta... resulting in the same danger of becoming a net contributor? Unfortunately, the present gov- ernment has not taken EU envi- ronmental standards seriously, There may be more to the EU's COVID-19 recovery package than meets the eye. PETER AGIUS – former MEP candidate and president of the EP Office – argues that Malta needs to make its case more forcefully at European level Peeling the 'prickly pear' Raphael Vassallo rvassallo@mediatoday.com.mt