The €800 billion Next Generation Fund is the EU’s investment in its future as an economic superpower. It is an opportunity for EU member states to emerge stronger from the pandemic, transform their economies and create opportunities and jobs.

Many EU member states have suffered from slow economic growth much earlier than the onset of the COVID pandemic. Some states have other challenges as their lack of respect for EU values on civil liberties, good governance and the rule of law create increasing operational friction in the Union’s institutions.

The government has announced its plans that it hopes will give it access to €320 million from the Recovery and Resilience Facility, the centrepiece of the Next Generation Fund. The projects will be in the areas defined by the EU: the circular economy, decarbonisation, digital investment, educational initiatives, social policy spending and investment to upgrade Malta’s institutions.

All these areas call for significant structural reforms to achieve the standards expected by the EU. Malta’s small size and relatively large population have meant that the environmental agenda has failed to deliver the quality of life that many desire. For instance, the multitude of cars on the islands’ limited road network has increased air and noise pollution to levels that affect people’s physical and mental health.

But the biggest challenge that the government will face and the EU will police is how projects are implemented. Recent experiences on how public money has been spent raise serious doubts on the integrity of the public procurement process that has often been corrupted with serious mismanagement. 

Projects like the St Vincent de Paul Residence upgrade, the privatisation of the management of three public hospitals, the Electrogas project and the ineffective contract for the training of unemployed workers are evidence that the public has often not been given good value for its money. EU institutions like the European Commission and the European Public Prosecutor’s Office will undoubtedly be insisting on strict scrutiny on how contracts are awarded and implemented. 

As a condition for taking the money, all national plans have to satisfy the European Commission and European Council that the funds would be used to further bloc-wide goals like digitalisation and cutting carbon emissions. Moreover, all grants will contain conditions in the form of commitments of member states for far-reaching reforms.

It is reported that the European Commission has been in intensive discussion with Malta not just to ensure that the plan meets green and digital criteria but also challenges identified in the commission’s relevant country-specific recommendations for 2019 and 2020.

Put simply, the commission might want to resort to some arm twisting by demanding a quid pro quo for disbursing the promised grants. Malta’s taxation system will undoubtedly be a bone of contention as the EU, in its 2020 recommendation, argued that Malta needs “to step up action to address features of the tax system that facilitate aggressive tax planning by individuals and multinationals”.

The decision-making process in the EU is relatively slow and often arcane. But, ultimately, it aims to ensure that the Union’s objective has the best chance of being achieved. The primary aim will always be that of stimulating sustainable economic growth, especially after years of stagnation.

The more formidable challenge for individual member states, including Malta, is to commit to spending EU grants and loans to promote structural economic and governance reforms to meet EU standards.