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23.07.2020 7 EDITORIAL BusinessToday is published every Thursday. The newspaper is a MediaToday publication and is distributed to all leading stationers, business and financial institutions and banks. MANAGING EDITOR: SAVIOUR BALZAN EDITOR: PAUL COCKS CONTRIBUTING JOURNALIST: MASSIMO COSTA BusinessToday, MediaToday, Vjal ir-Rihan, San Gwann SGN9016, Malta Newsroom email: bt@mediatoday.com.mt Advertising: afarrugia@mediatoday.com.mt Telephone: 00356 21 382741 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 lead- ers agreed on a recovery fund composed of €390 bil- lion 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. e 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. "e magic of the European project works," Michel later told journalists as he attributed the successful outcome of talks to "respect and cooperation". ese are lofty words indeed, which diplomats ban- dy 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 clamour- ing for more cash without the burden of loan repay- ments; 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 gen- erous 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 over- all package of €2.25 billion, including €327 million in grants from the COVID recovery package. e 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 mil- lion. is 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 Of- fice, an EU agency based in Malta, the country would still remain a net beneficiary and in a much better po- sition than two years ago. e deal is good. However, the key now lies with spending the money diligently and on projects that have long-lasting ef- fects on the economy and people's lives. e next round of EU funds must be used to trans- form the country into a cleaner, healthier and greener place. e final package does not include tax harmonisa- tion or EU-wide taxes but there are proposals to start exploring ways by which the EU can raise more of its own funds. is is a field Malta will have to carefully watch over the coming years. Taxation must remain a national competency, espe- cially for small countries and those on the periphery, where fiscal policy plays a determining role to encour- age 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 gov- ernment 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 sweet- ness of the prickly pear is not spoilt by the sting of its skin. A good deal

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