EU funds

Which EU funds will Malta and Gozo be eligible to if we join the EU?

Malta and Gozo will be eligible for funding from all EU funds. These are known as the structural and cohesion funds and consist of five main funds divided into four structural funds and the cohesion fund.

Between 2000 and 2006, a budget of E195 billion (Lm81 billion) was allocated to the structural funds, whereas a further E18 billion (Lm8 billion) were allocated to the cohesion fund.

If enlargement takes place as scheduled in 2004, the new countries, including Malta, will immediately be eligible for funding from these funds. By the end of negotiations, Malta will also know what amount of funding it can expect to get under these funds for the years 2004, 2005 and 2006.

Funding for subsequent years will be decided in 2006 by the countries that would have joined by then.

The structural funds are the European regional development fund (ERDF), the European social fund (ESF), the European agricultural guidance and guarantee fund (EAGGF) and the financial instrument for fisheries guidance (FIFG). A fifth and separate fund is known as the cohesion fund.

The cohesion fund finances specific infrastructural projects relating to transport and the environment in countries with a level of wealth below (90 per cent of) the EU average. Currently the fund is only available to four countries - Spain, Portugal, Greece and Ireland. But Ireland, for one, is expected to lose its entitlement after 2006 because, far from being poor, it is now one of the richest countries of the EU. All new EU countries, including Malta, will qualify for cohesion funding.

To take some examples of cohesion fund projects, in Greece, a second terminal and a ring road were built at the port of Piraeus. The total cost of the project was €97.5 million of which the EU paid €45 million through the cohesion fund.

In Spain, a desalination plant was built in Majorca to help address the lack of water supply. The total cost was €38 million, of which the EU contribution amounted to €32.5 million.

Note that although EU funds are grants, not loans, the EU never pays the full costs of the project. It part-finances and the beneficiary country is expected to fork out the rest. The largest EU contribution is normally paid in cohesion fund projects (as much as 85 per cent of the costs). In other cases, the EU contribution is lower, depending on the needs of the recipient country or region.

The European regional development fund (ERDF) is the most important fund in financial terms. It promotes regional development such as productive investment to create and safeguard sustainable jobs; investment in infrastructure (such as transport, industry and environment); measures which support small businesses and investment in education and health.

Examples of ERDF projects include the building of a general hospital in Rhodes (a Greek island). The total cost of the project was €29 million with the EU contribution being of €22.2 million.

As the name implies, the European social fund (ESF) focuses on social issues and promotes the return of the unemployed and disadvantaged groups to the work force, mainly by financing training. It is the most important EU financial instrument to help combat unemployment, although clearly, on its own, it is far from enough.

The European agricultural guidance and guarantee fund (EAGGF) is devoted to agriculture. The guidance section of the EAGGF finances rural development measures and aid to farmers whereas the guarantee section of this fund supports the common agricultural policy. This policy is now the subject of a controversial reform to cut the link (decouple) between subsidies and production. Under current conditions, Malta is expected to benefit more from rural development funds than from production subsidies.

The financial instrument for fisheries guidance (FIFG) helps the fishing industry through projects such as the modernisation of fishing vessels and fishing port facilities, processing and marketing of fishery products and aquaculture. Examples of FIFG projects include the modernisation of the Peniche fishing port in Portugal. The total cost of the project was €513,762, with the EU contributing €256,881.

Funds are allocated according to the needs of each country and region. Clearly, the poorest regions get the highest level of funding, whereas the richest regions may get nothing at all. This is why countries and regions are put in different categories according to their needs. There are three categories: Objectives One, Two and Three.

Objective One areas are the poorest in the EU with a GDP level that is less than 75 per cent of the EU average. Countries or regions under this objective get the largest chunk - 70 per cent - of all EU funding in order to help them catch up. Twenty-two per cent of the EU population live in Objective One areas.

Objective Two areas are industrial, rural, urban or fisheries-dependent areas that face structural difficulties. They get 11.5 per cent of total funding and represent 18 per cent of the EU population.

Finally, Objective Three supports the modernisation of training and the promotion of employment. This objective gets 12.3 per cent of total funding.

Countries such as Malta, which will be Objective One countries, will, of course, not be eligible for funding under the second and third objectives since their needs would already be addressed under Objective One.

Malta-EU Information Centre:
Tel: 25909192; Fax: 21227580;
E-mail address: euinfo.mic@magnet.mt;
Website: www.mic.org.mt

Readers wishing to put questions to Dr Busuttil may do so directly with the centre or through The Times.