Thomas Bajada warns of ‘difficult’ EU budget negotiations ahead, urges shift away from GDP-based funding model

Malta’s ability to secure EU funding risks being undermined under proposed changes to the bloc’s next long-term budget, according to MEP Thomas Bajada, who has warned that upcoming negotiations will be “difficult” and politically sensitive.

In comments to BusinessNow.mt, Dr Bajada outlined concerns that the European Commission’s plans for the next Multiannual Financial Framework (MFF) could significantly reshape how funds are allocated, potentially disadvantaging island states like Malta.

The MFF is the EU budget over the next 7 years. The current cycle ends next year, and the cycle after that would be for 2028-2034.

At the centre of the debate is a proposed overhaul of the EU’s funding architecture through National and Regional Partnership Plans (NRPPs), which would merge cohesion, agriculture, fisheries and migration funding into a single framework.

Dr Bajada said his priority is to ensure that the new model does not weaken support for territories facing structural disadvantages.

“Negotiations on the next budgetary framework will be difficult, given the scale of the proposed reforms and the number of competing interests involved.”

Pushback against lower co-financing rate

One of the key issues raised is the proposed reduction in Malta’s co-financing rate – the share of project funding covered by the EU.

Under current rules, Malta benefits from a 60 per cent co-financing rate. However, under the Commission’s proposal, the country would be classified as a ‘developed region’, lowering this rate to 40 per cent.

Dr Bajada described this shift as problematic, arguing that it fails to account for the structural realities of island economies.

“The aim is to correct a framework which, if left unchanged, would insufficiently account for the permanent effects of insularity and would place a disproportionate burden on island territories in accessing EU support.”

He is instead pushing for a preferential minimum co-financing rate of 75 per cent for islands, alongside other mechanisms that better reflect the challenges faced by geographically constrained regions.

‘GDP does not capture island realities’

A central pillar of Dr Bajada’s argument is that the EU’s reliance on GDP-based classifications does not adequately reflect the pressures faced by islands.

He stressed that insularity affects multiple sectors simultaneously – from connectivity and housing to energy and food security – meaning a single economic indicator cannot capture the full picture.

“A funding model based predominantly on GDP indicators does not adequately capture these structural constraints.”

According to Dr Bajada, funding principles should apply broadly across investment areas, including infrastructure, digital transition, energy, water security and economic competitiveness.

His position draws on Article 174 of the Treaty on the Functioning of the European Union, which explicitly calls for special attention to regions suffering from “severe and permanent geographical handicaps”, including islands.

This principle was also emphasised in a letter he sent to European Commission officials, where he called for targeted funding mechanisms, improved connectivity guarantees and stronger recognition of insularity in EU policymaking .

Building alliances across island states

Dr Bajada noted that while there is “clear openness” at EU level to the argument for differentiated treatment, discussions remain at an early stage.

He is currently engaging with policymakers from other Member States with similar constraints, including Cyprus, Italy, France, Ireland, Croatia and Spain, in an effort to build a coalition around island-specific concerns.

The broader aim, he said, is to ensure that island regions are no longer treated as an afterthought in EU policy design.

ETS concerns add pressure on island economies

The debate over EU funding comes alongside growing concern about the impact of climate legislation on island states.

The Malta Maritime Forum recently welcomed a joint initiative by Dr Bajada and PN MEP Peter Agius calling for an “island clause” in the EU’s Emissions Trading System (ETS), which was extended last year to cover maritime emissions.

Industry bodies have warned that the ETS effectively acts as a tax on island economies that depend heavily on maritime transport.

The Association of Tractor and Trailer Operators (ATTO) has estimated that a single round trip between the Port of Genoa and Malta now incurs an additional €734 charge in ETS costs alone – expenses that are likely to be passed on to consumers.

In his correspondence with the European Commission, Dr Bajada argued that the ETS disproportionately affects islands due to their reliance on both aviation and maritime connectivity, calling for exemptions or adjustments in the upcoming review.

‘Not an afterthought’

Ultimately, Dr Bajada said the next EU budget must reflect the structural realities of island regions, rather than treating them under the same framework as mainland economies.

“If Europe is serious about fairness and cohesion, it must recognise that islands start from a different reality.”

With negotiations set to intensify in the coming months, the outcome will determine whether Malta and other island states can secure funding models that better reflect their long-standing structural challenges.