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MT 24 April 2016

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maltatoday, SUNDAY, 24 APRIL 2016 6 News MATTHEW VELLA MALTA is nowhere close to ob- taining any of the funds needed for an ambitious monorail project, mooted in submissions to the Eu- ropean Investment Bank's fund for strategic investments. A Transport Malta spokesperson confirmed that the billion-euro project that had been presented for financing through the Juncker Investment Plan, was not being actively considered for the time be- ing, and that preparatory studies were yet to be made. The 79-km project was said to have been spearheaded by Trans- port Malta, and that technical, socio-economic and financial fea- sibility studies were underway and expected to be completed by June 2015. Even a start-time for early 2017 was earmarked if financing was in place. But Malta remains one of the few member states for which no cash from the 'Juncker Investment Plan' has yet been earmarked. The European Fund for Strate- gic Investments (EFSI) has so far released €11.2 billion in cash for a multiplier of €82 billion in invest- ments, or 26% of the total €315 billion targeted by the European Commission. Over 220 transactions in 25 out of 28 member states have been carried out, but Malta, Cyprus and Bulgaria are not among those re- cipients. The ministry for European Af- fairs, which is led by deputy prime minister Louis Grech, has told Mal- taToday that the list of projects that had proposed the ambitious mono- rail project "concerned only poten- tial public sector investments". "It was indicative, as detailed technical and financial studies still needed to be conducted. There is nothing hard and fast about the list, which may be amended at any time depending on the outcome of the said studies," a spokesperson for Grech said. "The government is very much aware of market failures in Malta, which make it difficult for SMEs to obtain financing through normal banking channels. It is similarly aware that private banks may be averse to riskier projects or to big infrastructural projects that in- crease their large exposure limits. That is why the Malta Develop- ment Bank is being set up to ad- dress these market failures." Grech announced a development bank to be set up so that EFSI funds can be easily accessible to Maltese companies by "marrying Maltese financing culture" to Eu- ropean Investment Bank require- ments. Around 56% of projects so far approved by EFSI in other mem- ber states have been submitted by private companies. The other 44% are almost equally split between PPPs, public projects, and EU- wide funds which will in turn invest in projects, potentially also Maltese projects. EFSI money is intended to fund projects that are both commercial- ly feasible but could be high-risk or have a long gestation period – a market gap that prevents compa- nies from finding immediate pri- vate financing. "The ministry is promoting the implementation of EFSI but any- body who has commercially-feasi- ble projects that require financing can apply to EFSI directly via its online portal. This includes an ad- visory hub that can help applicants develop their business case and the documentation required to apply." Under the original proposal, Al- fred Mifsud's task force had pro- posed the monorail as the "ultimate solution" for urban mobility. "This will bring a cataclysmic change to the daily commute, making pub- lic transport the preferred means of urban transport, generating ef- ficiency and economic growth as people will spend less time wasted in traffic congestions." The proposal included using rails and tunnels of the old train ser- vice from Valletta to Mdina which started in 1882 and was mothballed in 1931 when private car transport rendered the train service superflu- ous. Malta is the country with the highest population density in the EU, with a population density av- erage of 1,325 persons per sq. km. compared to the EU average 117 persons per sq. km. In the northern harbour area density shoots up to 5,015 persons per sq. km. NOTICE EXECUTIVE COUNCIL MEETING The Executive Council of the Planning Authority will meet on Monday 25 th April 2016 at 17:00 hours at the main boardroom, St Francis Ravelin Floriana to discuss the following: DETERMINATION OF PLANNING CONTROL APPLICATION: PC 0025/15: Site at Sqaq Sannat, Marsa Proposed change in building alignment. *Please be informed that the proposed PC application may be viewed on www.pa.org.mt/info-participation-pc Subject to the maximum seating capacity, seats can be reserved on request for the applicant and registered objectors. Remaining seating is filled on a first come first served basis. For reservations kindly call 2290 2018. PLANNING AUTHORITY www.pa.org.mt EB public hearing.indd 1 19/04/2016 10:49:37 Monorail on backburner as Malta remains without EIB financing Emphatic 'no' to ECB plan on government bonds European Central Bank wants to reduce banks' exposure to government stocks MATTHEW VELLA MALTA is "completely against" a proposal by the European Central Bank to reduce risk from banks buying government bonds, a move that could have significant impli- cations for European lenders, par- ticularly Malta and its southern European neighbours. Under international rules, banks don't need to hold any capital to compensate for any possible losses on sovereign debt holdings because of the historically low chances of a government default. And unlike other types of as- sets, lenders like governments face no limits on their holdings of this debt. This has encouraged banks, particularly in Italy, Spain and Por- tugal, to buy a lot of government bonds. "Malta is completely against this idea of sovereign debt exposure, for the simple reason that Europe is seemingly aiming at creating problems where there have not even been during the worst of the financial crisis, and there aren't today," finance minister Edward Scicluna told the press on Friday in Amsterdam, where EU finance ministers met. "Just because academically you could create a new risk, just like you could create potential risks everywhere… like for example, what about if tourism were to fall by 10%, then you start to try to forecast this and that… it would get you nowhere," Scicluna said. Resident banks in Malta hold 43% of all sovereign debt, accord- ing to the Central Bank of Malta. Over the past five years, banks' to- tal assets invested in government stocks have decreased from 11.1% in 2011 to 8.8% in 2015 according to The Times Business. The minister said it was to Mal- ta's advantage especially during the financial crisis, that government debt was taken up by local institu- tions and citizens. "There was no speculation at all, and we had no outside exposure, unlike Italy and others, where just speculation was undermining the sustainability of the debt for that particular coun- try… "Malta was in a beneficial situa- tion where it didn't have that prob- lem. So now are we saying that we are going to turn it into a problem? We need to be convinced why." Scicluna said the European Com- mission has asked the Internation- al Monetary Fund for advice on the matter. "When somebody on a technical or an academic level starts creating such a risk… I look back and see how during these past eight years, even during the worst of the crisis, such a risk did not come about," Scicluna said. According to a 2014 analysis from Fitch Ratings, major euro- zone banks would have to shed around €1.1 trillion of government bonds if they were required to re- duce their holdings to 25% of capi- tal. If exposure were capped at 50% of capital, the selloff could reach €800 billion. North-South divide As usual, EU officials are going to be split across regional levels, with governments who depended on sovereign debt to retain liquid- ity and service debt, opposing the ideas. Germany and other fiscally hawkish states say governments should reduce their holdings of sovereign debt to sever the toxic link between banks and their gov- ernments and to prevent future bailouts. They say they want new rules to reduce the risk on banks' balance sheets, and minimize the chances of taxpayer-funded bailouts. But countries like Malta, and Italy, warn that changing the way government bond holdings are treated could hurt both lenders and governments. Italy's Prime Minister, Matteo Renzi, has already told senators that his government "will veto any attempt to place a cap on sov- ereign bonds' holdings in banks' portfolios."

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