Almost €1bn expected to be proposed for Malta as part of EU recovery plan

(source: European Central Bank)

Updated on

Malta is expected to receive close to €1bn in grants and loans as part of an EU recovery plan from Covid-19, EU sources told The Malta Business Weekly.

The funds would be part of a €750 billion COVID-19 rescue package for the EU.

On 23 April 2020 the European Council decided to work towards establishing a recovery fund to respond to the socio-economic consequences of the COVID-19 crisis.

It tasked the Commission to analyse the exact needs and to urgently come up with a proposal that is commensurate with the challenge we are facing. Yesterday, 27 May 2020, the European Commission issued its proposal on a Recovery Fund and the Multiannual Financial Framework.

“The European Commission has put forward its proposal for a major recovery plan. To ensure the recovery is sustainable, even, inclusive and fair for all Member States, the European Commission is proposing to create a new recovery instrument, Next Generation EU, embedded within a powerful, modern and revamped long-term EU budget. The Commission has also unveiled its adjusted Work Programme for 2020, which will prioritise the actions needed to propel Europe’s recovery and resilience,” a European Commission statement read.

It said that to protect lives and livelihoods, repair the Single Market, as well as to build a lasting and prosperous recovery, the European Commission is proposing to harness the full potential of the EU budget. “Next Generation EU of €750 billion as well as targeted reinforcements to the long-term EU budget for 2021-2027 will bring the total financial firepower of the EU budget to €1.85 trillion.”

Next Generation EU will raise money by temporarily lifting the own resources ceiling to 2% of EU Gross National Income, allowing the Commission to use its strong credit rating to borrow €750 billion on the financial markets, the Commission said. This additional funding will be channelled through EU programmes and repaid over a long period of time throughout future EU budgets – not before 2028 and not after 2058.

The money raised for Next Generation EU will be invested across three pillars: support to Member States with investments and reforms, kick-starting the EU economy by incentivising private investments, and addressing the lessons of the crisis.

European Commission President Ursula von der Leyen said: “The recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalization will boost jobs and growth, the resilience of our societies and the health of our environment. This is Europe’s moment. Our willingness to act must live up to the challenges we are all facing. With Next Generation EU we are providing an ambitious answer.”

EU Council President Charles Michel hailed the announcement as “an important step in the decision making process. It will help target support towards the sectors and regions most affected by the COVID19 pandemic.”

The analysis and assessment of the Commission’s Recovery Fund and MFF proposal will start immediately in the bodies of the Council. In parallel, the President of the European Council and his cabinet will consult with Member States.

Minister for Finance Edward Scicluna addresses a press conference regarding the European Commission ‘Autumn 2017 Economic Forecast Report

Finance Minister Edward Scicluna, speaking in Parliament yesterday, described the EU rescue package as “a fruit that can be a prickly pear.”

Scicluna warned that “one has to look into how the money will be given as aid for the post-pandemic. We need to analyse the money that will be given and what will be given in loans.”

He said that “we need to know who will eventually pay for the debt as we cannot be in a situation where we borrow more to pay off the loan.”

Scicluna explained that the aid package given by the Maltese government addresses the needs of businesses and workers while the European Union will lend money to those countries that have not found a lender.

The European Commission wants to introduce climate change taxes on airlines and ships, however this might negatively affect a country like Malta, he said. Therefore, “one should not simply look at the size of the funding package but what it truly consists of.”

The International Monetary Fund, the European Union and even the international credit agencies were realistic in claiming that our country can properly manage the economic impact of the pandemic, he said.

When contacted the Head of the PN Delegation in the European Parliament, MEP Roberta Metsola, said: “This could be a watershed moment for Europe and for Malta. We have managed to ensure that Malta and Gozo are eligible for a good recovery package in grants and loans that we can use to transform our post COVID-19 economy into truly a circular, sustainable, one. These loans and grants are essential to protect jobs, to rescue industries and save livelihoods.”

PN MEP David Casa, in a tweet, said: “Malta will benefit greatly from the proposed EU Recovery Instrument that totals €750 billion. This support will address present challenges while keeping future ambitions in mind.”