Malta is unhappy with a European Commission plan to base the allocation of COVID-19 recovery funds on unemployment rates in each member state and is also pushing for a larger share of funds to be granted as loans rather than grants. 

Finance Minister Edward Scicluna expressed those concerns and others about EU plans to tax air and sea travel during a meeting of EU finance ministers on Tuesday. 

The ECOFIN meeting, which was held by videoconference, saw finance ministers discuss Commission plans to distribute €750 billion across the 27 member states, to boost their post-pandemic recovery. Almost €500 billion of that would be distributed in the form of grants. 

The Commission plan would see Malta allocated roughly €1 billion in funding, with €350 million as grants and the rest in the form of loans. 

EU member states have been locked in a disagreement over funding for months, with countries facing financial difficulties pushing for grants while countries in better economic health, led by the ‘frugal four’ of  Austria, Denmark, Sweden and the Netherlands insisting on money being paid back.

Finance Minister Edward Scicluna (right) and permanent secretary Alfred Camilleri (left) during the ECOFIN video conference. Photo: Finance Ministry

Malta has leaned closer to this latter group, although it has said that it is not opposed to financial grants to countries which are struggling. 

Disagreement has also stemmed from the European Commission’s plans on how to allocate the funding. An initial plan to base funding on each country’s GDP, GDP per capita and the average unemployment rate over the previous five years was criticised by some countries for being unrelated to the effects of the coronavirus pandemic in each nation. 

Speaking in late May, Scicluna had expressed a measure of scepticism about the EU’s €750 billion plans, likened the funding to a “prickly pear” and asking just how the EU intended on having money paid back. 

During Tuesday’s ECOFIN meeting, Scicluna gave fellow countries further insight into Malta’s position. 

He argued that funding should be based on the economic shock COVID-19 had in each member state, not on countries’ pre-COVID economic situation. Using unemployment rates as the sole criteria for measuring impact would be wrong, he said. 

“Such an indicator is not sophisticated enough to catch the peculiarities of countries where there are some sectors which survive the ravishes of the pandemic while having one important economic sector, devastated – as is the case with tourism. We expect the Commission to come up with better indicators,” Scicluna said. 

Scicluna said that Malta would not oppose grants given in “modest volumes” but was less happy with the ratio of grants to loans allocated to some countries. This would turn some member states, including Malta, into net contributors to the fund rather than net beneficiaries, he said. 

Policymakers in the European Union have suggested introducing a raft of new taxes to help the EU finance the recovery package. Tax proposals range from allowing the EU to collect corporate taxes – a massive bone of contention for Malta – to talk of a digital tax for US tech giants such as Google or Facebook and a carbon tax on air or sea travel. 

Scicluna highlighted Malta’s concerns about the latter, saying that extending the Emission Trading System into air and sea travel taxes would disproportionately hurt countries like Malta which rely heavily on tourism. 

Rather than trying to introduce controversial taxes which could stall talks, Scicluna said, the EU should focus on introducing taxes on non-recyclable plastics and similar products, which would prove to be less contentious.