The Malta Independent 23 July 2019, Tuesday

Malta better off financially with European Union membership – Deutsche Bank

Sunday, 15 February 2015, 08:42 Last update: about 5 years ago

Over a decade since the great EU accession debate, Deutsche Bank this week weighed in with its verdict that Malta is better off, at least in financial terms, as a member of the bloc as opposed to being outside.

In a report published this week, which looked into the prospects of certain regions going it alone and abandoning the nations of which they form part, the leading German bank found that “access to the single European market and the option of eurozone membership reduce some of the fundamental disadvantages that would otherwise be faced by countries such as Luxembourg, Malta, Cyprus and the Baltic states”.

But while these smaller states have buffered themselves against their “fundamental disadvantages”, some regions in the EU, the bank found, would be better off were they to gain independence from the countries of which they form part of, and identified regions in Spain, Italy, Belgium, and even the UK that could potentially benefit from independence.

Relatively rich parts of these countries have been required to prop up their less prosperous peers, according to the report, with the prospect of lower tax burdens fuelling an appetite for autonomy.

As separatist movements across Europe have been given a boost by non-binding polls in Spain’s Catalonia and Italy’s Veneto last year, pushes to splinter across the continent have gained traction.

These regions, along with the Basque country and Navarre in Spain, Flanders in Belgium, South Tyrol in Italy, and Scotland were also identified as potential candidates for greater autonomy.

All but one of the seven regions named in the report boast per capita incomes higher than their nation’s respective averages.

Only output in Scotland fail to match the national average, at 92.9pc of the typical level. Yet when Deutsche accounted for oil deposits based on their location, Scottish production rose to 115pc of the UK average.

“Nearly all the regions are among the wealthiest in their respective countries,” said Barbara Boettcher, an economist at Deutsche Bank. “The patently unequal treatment of regions appears detrimental to the general acceptance of the current system.”

Catalonia’s relative economic strength provides its population with an incentive to forge its own path, as they are burdened by contributions to the rest of Spain equivalent to 4.35pc of the area’s GDP.

Other regions such as Navarre and the Basque Country benefit from special autonomy status, and are exempt from redistributive transfers, yet independence retains strong popular appeal. The populations of these regions share a cultural heritage, with a common Basque identity which has propelled a drive for separation from Spain.

While separation into smaller states may seem appealing, the bank warned that “secession from an existing state structure harbours huge economics risks”.

The government of smaller countries, such as Austria, tend to pay punitive amounts to borrow from financial markets. “Even though Austria has a higher per capita GDP and lower sovereign debt [than Germany] … the risk premium on Austrian bonds is higher,” Deutsche Bank said.

The bank also noted that setting up a new administration, including separate defence and diplomatic spending, “naturally comes at a price”.

 

“However these risks [of going it alone] have decreased for smaller countries; paradoxically, this is especially due to European integration,” it added.

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