ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(79)658
Vol.1979/0222

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(79)658 final
Brussels -23November 1979
COMMISSION COMMUNICATION
TOTHE COUNCIL
ONCOMMUNITY RELATIONS WITH MALTA
^..il
t-' %vv'>\V ■
V ...
COM (79)658 final

COMMISSION ,COMMUNICATION TOTHECOUNCIL
^_COM^I^_I^ATICNS_WITH MALTA
1.Attheendof1978/beginning1979»"theCommunityreviewedits
relationswithMalta.Thisexamination wasprompted "bycertain
problemswhichhadarisenparticularly inconnectionwithtextiles
andimplementation oftheFinancialProtocol."Atthesametime,
theCommunitywasfacedwithurgentrequestsfromtheMaltese %
authoritiestoconcludeasecondfinancialprotocol.
TheCommission informedtheCounoilaboutthestateofrelations
withMalta(l)andofitsapproachfordefusingthecrisiswhich
hadincreasingly markedtheserelations,particularly sincethe
autumnof1978*
2.Atwo-stageapproachwasthenadopted.Initially,theCommunity
wastodealwiththreespecifiomatters:measurestocombatswinefever
exceptional aidintheformofpigmeatbecauseoftheswine
fever(and,pendingitsentryintoforce,thesaleofmeatonfa­
vourableterms)andthegrantingofaidtoMaltaunderthe
1979Communityprogramme.Secondly,intheframeworkofeicploratoiy
talkswiththeMalteseauthorities ,theCommissionwastoexamine
alltheproblemsoutstandinginthepresentrelationsandMalta's
viewsonthedevelopment oftheAssociation.»
ItwasagreedthattheCommissionwouldthenreporttotheCouncil
*
onthecontentofitsexploratorytalks.
Specialmeasures
3.Withregardtothespecificmeasuresenvisagedundertheinitial
stage,inMay1979theCommunitygrantedMaltaaidamountingto
5millionu.a.fortheeradicationofswinefever.Then,inorderto
helpMaltacopewiththedifficulties ofsecuringsuppliesofmeat,
•••/•••
(l)SeeCommissionCimmunicationtotheCouncilof30.11.197°
(s/2094/78(M24)(COM1^326)of7.12.1978).

itsupplied 2*&JQ tofpigmeat between April andOctober 1979 »invol­
ving refunds totalling approximately 900*000 u.a.,.pending adecision
regarding theexceptional food aid.Atthebeginning ofOctober 1979 >
the Council decided togrant Malta exceptional aidintheform ,ofa
donation ,of2.500 tofpigmeat ,worth 4*2million u.a.
Lastly ,,theGommunity granted Malta food aidcomprising 500 t
ofcommon wheat and200tofmilk powder(300.000 u.a*),inMay-1979 »
deliveries ofwhich started inSeptember 1979 *
/
Exploratory talks -
4.In .thesecond stage ,oftheapproach recommended bytheCommunity
regarding outstanding problems inrelations with Malta ,theCommission
hadaseries ofexploratory talks ,which began bycontacts with the
Maltese authorities on15and 16March 1979 inValletta andcontinued
on6April andfrom 26to28June inBrussels .
During tliese discussions theCommission ,together with the
Maltese Government ,tried tofind solutions totheimmediate problems
intheir relations with each other both inthe trade sector and inthe
field offinancial cooperatiQn ,andthen recorded Valletta 'sopinion
onthe development oftheAssociation .
5.Textiles were the :main concern inthefield _cf_trade eAnarrange­
mentwasfinally initialled on29June 1979 ?itwassigned onthe
31st October 1979 andentered into force immediately *
Inthe .field ^fmf^nan£ial_c£operati on»theCommunity andthe .
European Investment Bank continued their efforts tofind procedures
inaccordance with Maltese legislation forfinancing projects .
On29May1979 8million u.a.loan contract wassigned forenlarging
theGrand Harbour inValletta (5million uBa»inspecial loans at
aninterest rate of1^and3million insubsidised 3loans ):»
Aninitial ,payment of3adllion tua,taraemade atthe "beginning of
June 197?«.

TheMalteseGovernmenthasadoptedthefollowingpositionasregards
the"balanceoftheFinancialProtocol,namely13millionu.a.inEIB
loansand4*5millionu.a.ingrants*
Theremainderofthegrantsshould "beearmarkedexclusivelyfor
technicalassistanceandtrainingprojects,asMaltawishestoforgo
anyfurthersubsidizingofcapitalprojects.Forthe13millionu.a.,
theMalteseauthorities hadsubmittedaprojectinvolvingshipyards.
Sincethisprojecthadnot"beenselectedbytheCommission ,theMalte­
seauthorities ,speakingofbehalfoftheGovernment,announcedthat
theywouldforgothebalance,becauseofthdlegislativeconstraints
regardingtheinterestrate.Thesumof13millionu.a.wouldhence­
forwardbeavailabletoprivateinvestorswhowishedtoapplyfor
unsubsidized EIBloans.
Forthepurposesofimplementing thetechnicalassistanceand
trainingundertheFinancialProtocol,theMalteseGovernmentsub­
mitted23projectsamountingto11.2millionu.a.The.Commission
selected17projectstotalling4millionu.a.andiscurrently .
appraisingthoseprojects.
Lastly,theMalteseGovernmentrequestedthattheCommunity
financethreeprojectsoutsidetheFinancialProtocol:thefirst
concernsthesetting-upofadailyindustry,forwhichaidof5
millionu.a.hasbeenrequested;thesecondprojectinvolvesthe
agricultural developmentoftheislandofComino,tocost1.6million
u.a.;thethirdprojectconcernsunderwaterprospecting ofthe
Maltesecontinentalshelf,tocostsunestimated0.8millionu.a.
6.Withregardtothedevelopmentofthelinksexistingbetween
theCommunityandMaltaundertheAssociation ,theMalteseDelegation
stressedduringtheexploratorytalksitsconcernwiththeconsequen­
cesforMaltaoftheCommunity'senlargementbothintheindustrial
andtheagricultural sectorandtheneedfornegociations forthe
conclusionofasecondfinancialprotocoltobeopenedsoon.

-4-
From the "trade angle ,theMaltese Government isafraid that the
enlargement will harm itsposition ontheCommunity market ,inparti­
cular because oftheprotection measures which theCommunity could
apply toMalta forsensitive products such astextiles .Inorder to
lessen risks ,Malta asked theCommunity towaive application ofthe
safeguard clauses against it9
Onagriculture ,Malta stressed that itsproduction isbydefi~
nition very limited and that consequently its exports could not in
anywaypresent difficulties fortheCommunity .Ittherefore asked
forduty-free admission into the EECforthemajority oftheproducts
covered "bytheAssociation andfortheperiod ofpreference (l)to "be
extended ,forcertain others *Malta also asked forduty-free entry (2)
forsixteen products currently not covered bytheAgreement®
Lastly ,Malta returned tothequestion ofderogations from the
rules oforigin forpreserved meat ,chocolate ,intermediate –frequency
transformers ,transistors and ta .ps-recorders ,thepreviously existing
derogations having come toanendduring 1978o Malta also wanted
cumulation ofthrrules oforigin with other Mediterranean countries
along thelines ofthe system theCommunity has granted tothree
Maghreb countries®
7.Maltese requests concerning asecond financial protocol (see
annex )fortheperiod I.98O to1982 areaimed atobtaining aidfrom
theCommunity tocover part ofitsfinancing requirements over those
three years estimated at320million u»a 0-Therequested sumof68
million u0a„would consist of8million u»a 0ingrants fortechnical
assistance andlong-term 2loans totalling 60million u„a .
These funds areintended forinvestment inthe public sector and the
terms proposed byMalta take into account theconstraints ofMaltese
legislation ,which prohibits theGovernment from subscribing to
loans involving aninterest rate ofmore than 3
(1)Newpotatoes ,onions ,cutflowers andflower buds ,other live plants .
(2)Notably flower seeds ,other seeds ,grape juice .

Commission assessment
8.TheCommissionfeelsthat,"bymeansofthevariousspecificmeasu­
reswhichtheCommunityhasimplementedinfavourofMaltathisyear
outsidetheFinancialProtocol,theCommunityhasdemonstrated in
practicaltermsthattheCommunityiskeentostrengthen'itslinks
withMaltaandhelpittocopewithitseconomicproblems.
Concurrently withthesesupportmeasures,theCommunityhassucceeded
inimplementing theFinancialProtocol,atleastforthecapital
projectsandtechnicalassistanceandtrainingprojectssubmitted
"byMalta,whichhaveabsorbedhalftheamount "budgeted.Lastly,the
discussions onthedevelopment oftheAssociation haveenableboth
sidestounderstandeachother'spositionbetterandtopinpointthe.
0
problems.
ThefirststageoftheAssociation Agreementgoverningtradearrangements
withMaltaexpiresattheendof19^0,andsodoestheFinancialProto­
col.Duringthecomingyear,negociationswilltakeplacetodetermine
thetermsofthetradearrangementstobeappliedasfrom1981between
theCommunityandMalta.Atthesametime,theCommunityshouldgive
Maltaananswertoitsrequestregardingasecondfinanoialprotocol.
9.TheCommissionfeelsthattherequestsformulatedbytheMaltese
Governmentontrademattersshouldbeansweredin198Ointheoverall
frameworkoftherelationsenvisagedandinthelightofthesolution
adoptedfortheperiodstarting1JanuaryI98I.
*
TheCommissionwilltransmittheproposalsonthissubjecttothe
Councilduringthefirsthalfofnextyear.
•••/•••

10.ItshouldbestressedthattheMalteseGovernmentattachescapi­
talimportancetothequestionofcontinuation offinancialcooperation
andregardsitasmuchanurgentmatterthattheCommunityshouldgive
itsreply,atleastinprinciple,atthebeginningofnextyear.
TheCommissionfeelsthattheCommunitycouldnotremaininsensi­
tivetotheproblemswhichMaltawillbefacingintheyearsahead.
Theseinvolvefirstofalltheneedtorestructuretheeconomywhich
hastraditionally beenbasedonservices,andtoreachthedegreeof/
industrialization whichwouldprovideemploymentfortheisland's
populationandthereforeensureMalta'seconomicsurvival.Theanalyses
carriedouttoassesstheforeseeable consequences ofenlargementfor
theco-contracting Mediterranean countrieshaveshownthatMaltais
oneofthecountrieswhichwillbemostaffected. '
Lastly,thecontinuation offinancialcooperation withMaltawill
enabletheCommunitytomaintainthemomentumofitsrelationswith
thatcountryundertheAssociation.

Annex .
ν
Malta :Themedium-terro .economic problem
Anadditional Memorandum
The discussions which took place inBrussels onthe
26th and the 28th June 1979 between the Commission and
theMaltese delegation served toput into perspective
the economic difficulties which Malta will befacing during
the next five years .Itwas explained that Malta 's
economic problems would begreatly eased byafurther
financial protocol on-terms and conditions which can be
borne bytheMaltese Exchequer .
The Memorandum presented tothe Commission inApril 1979
outlined the main difficulties which beset Malta inits
task torestructure the economy and toabsorb both the
direct loss ofabout 28million units ofaccount per
year totheGovernment budget asrental payment forthe
British base inMalta aswell asthe additional loss of
* ■
afurther 20million units ofaccount per year which
V *
represented adirect contribution totheMaltese economy
out ofthe British war expenditure inMalta .
*
The Memorandum indicated that Malta requires heavy ■
investment inproductive enterprises inorder toabsorb
available manpower .Inorder toundertake the required "
massive investment programme inindustrial enterprises ,
Malta isactively seeking toestablish astrong

y
/'2.
industrial base especially byattracting joint venture
partners topush forward itsindustrialization programme .-
Inthis way Malta will ,by1985 ,earn adequate levels
offoreign currency toreplace the financial inputs
which have been lost following the closure ofthe
British military base inMarch 1979 . ^
The investment requirements which are needed tosupport
Malta rsindustrialization programme areexpected tocome
mainly from three sources –equity shareholding byforeign
investors ,local investors and theMaltese banking system .
l
Until these projects mature and provide the required
number ofjobs the Government ofMalta has nooption but
tocontinue absorbing surplus manpower inthe labour corps
bydeploying them onessential infra structural projects .v
«- • 'Ithas been estimated that in'order topush forward
this programme ofdevelopment projects atotal amount
ofaround 320million u.a .must befound forpublic
investment ineconomic and social infrastructure aswell
asindirectly productive activities between 1980 and
1985 . '
Itisobvious tha,t given themagnitude oftheproblem
andMalta Tscomplete lack ofresources ,Malta has noother
option but toresort inthemedium term toforeign
1 '•'
■Ψ·/···

assistance ,.Malta isaccordingly requesting -the
Community development assistance under asupplementary
financial protocol making available 68million'u.a .■.
This request isatthe same -time being supplemented by
other efforts tosecure additional finance from other
countries ,especially those which benefitted most
from Malta 'snew status ofneutrality ,inthe cause of
peace . ;
The funds requested from theCommunity will bemainly
utilised toimplement the public sector investment
programme which includes thebuilding offactories for
newmanufacturing enterprises ;the provision ofnew -
port .facilities required topromote Malta as'atrade .
centre ;the conservation and development ofwater '
resources tomeet the agricultural ,domestic and
tourist needs ;and the further expansion ofthe
electricity generation and telecommunications systems
which are both vital factors ifMalta 'sprocess of
economic growth istogo -onunabated .
Itisnow widely accepted that Malta isnot faced
with the normal development problems experienced by ;
other developing countries ,,Indeed ,Malta 'sproblems
are unique and call for a .different solution :thus ,for
instance ,,due tothe substantial loss ofincome from­
- ■ '
theMilitary base and other factors peculiar toMalta -

'i
/■'4.
I
the'Maltese budget isunable tobear loans oncommercial
terais .For these reasons theGovernment isprecluded
bylaw from borrowing atcommercial rates .
Given Malta *speculiar development problems ,further
~assistance bytheCommunity should -nottherefore follow
the normal pattern offinancial aid consisting ofa
'/* ■ '.mix ofsoft and hard loans .Further financial assistance
toMalta should therefore beaimed atand tailored to
theMaltese economy 'sspecial conditions and'
circumstances . '
For this purpose ,itisrequested that agrant of8million
units ofaccount bemade available for technical
assistance requirements while along-term loan of60
million units ofaccount ataninterest rate of2per
cent beprovided during thenext three crucial years
sothat Malta will not only beable toavoid afall in
living standards but also fulfill the set economic and
social development objectives within the shortest
possible time . *
• '· - ' .-*/
• I Y
July 1979
« *