‘Look at the bigger picture’ | Lorenzo Vella

Newly-appointed head of the European Commission’s Malta Representation, Lorenzo Vella, urges critics of the EU to ‘appreciate the positives’ that we have achieved, in 20 years of membership. 

Let me start with a question about Air Malta. There seems to be some confusion on the subject. A few weeks ago, CEO David Curmi gave comments to The Times, to the effect that the European Commission had denied – or was about to deny – Malta’s request for State aid approval. But Finance Minister Clyde Caruana has since argued that no final decision has actually been taken, at Commission level. Interestingly, however, we haven’t heard the Commission’s say, in the matter... 

That’s because there is no ‘final say’, as yet. Basically, Malta has for a number of years now – I can't remember exactly how often – been submitting requests to be able to provide State aid to the national airline. And it's still awaiting a reply, to its last one, from the DG Competition: the directorate-general that is responsible for assessing State aid requests. The latest information we have, up until last Friday [23 June], is that Malta is still awaiting a reply. And in fact, Malta was asked to provide further information, a few days back. 

Meanwhile it has been reported that, by December of this year, Air Malta will be officially replaced by an airline ‘run on commercial lines’. Are we to understand, then, that those reports were misinformed... i.e., that there is still a chance, after all, that Air Malta will continue to exist after January 2024? 

I cannot comment on what the Maltese government intends to do. What I can say is that, so far, the process is still ongoing. If the Maltese government is planning on an ‘Option B’, for example: at the moment, that is something we do not know. It is the prerogative of the Maltese government.  

What we do know, however, is that Malta has requested State aid. It has done so before; and the European Commission has approved Malta’s requests, on a number of occasions in the past. Unfortunately, however, the restructuring that took place after those requests was not sufficient to save the national airline, up until now: at least, from the indications that we have at present. So, we'll have to see what the Commission will decide this time, on the latest request. 

Meanwhile, there have been two recent European Court of Justice rulings against the Commission, for approving State aid to other European airlines: namely, Lufthansa (Germany) and SAS (Sweden). Does this have a bearing on the Malta decision?  

I don't know the specifics of those cases. But what I can tell you is that the EU’s regulations on State aid, are there to guarantee a level playing field when it comes to certain industries: preventing governments from constantly pumping taxpayers’ money into these industries - airlines being one of them – thereby distorting the playing field, to create an unfair advantage for certain companies. So obviously, if there were ECJ rulings, I'm sure that the Commission will be taking them into consideration.  

But there are occasions where some people confuse [the EU’s State aid regulations]. For example: states ARE allowed, under the regulations, to provide certain incentives to airlines. And when it comes to low-cost airlines, I think this has been the model across the European continent. That's why there is a proliferation of low-cost airlines at the moment, which has proven to be successful. This can range from incentives or promotions to the airlines themselves; or else, assistance to airports operating in low-capacity destinations, to attract different airlines.  

So, in this case, we have to distinguish between incentives that governments are allowed to offer to airlines; and State aid... which is basically ‘subsidies’. 

But the argument in Air Malta’s case – consistently made by different administrations of government - has always been about the airline’s strategic importance, in a small, peripheral EU member state. Air Malta provides services to the nation (including in the medical sector) which no low-cost airline can be expected to provide. Why, then, is the Commission always so reluctant, to accept the argument that ‘Air Malta’ is more than just a commercial airline? 

I don't want to sound like a broken record, but – as I said before - we do not know the outcome of the assessment, as yet. And I'm sure that when the submissions were made by the Maltese government to request State aid, these considerations would have been placed in the argumentation: especially because the regulations specifically state that there are certain preconditions that can help to favourably consider an application; like the remoteness, or periphery of the member state.  

Having said that - and I'm just thinking aloud, because obviously, I am not the person who is doing the assessment – you also have to also look at the past. If Malta was allowed to provide State aid to its national airline, a number of times in the past; and restructuring had been promised, but did not result in a slimmer, or more financially sustainable airline then the Commission would be bound to respect other principles in the regulations, which state that there cannot be unfair advantages being provided to any airline: not just Air Malta.  

In fact, this has been the history of a number of airlines across the continent where governments were barred from injecting taxpayers’ money into their national airlines; and this led further to a change in the format of the airline, for example. 

This is why I disagreed with your recent article – if I may – in which you compared ‘State aid to Air Malta’, with ‘State aid to STMicroelectronics’... 

Well, I got a lot of flak for that one anyway; so go right ahead... 

All I was going to say is that I don’t think it’s a like-with-like comparison. In the case of airlines, there are very, very well-established regulations, when it comes to State aid. When it comes to ‘microchips and semiconductors’, on the other hand... the scenario is different. Europe has fallen behind, when it comes to raw materials [in the micro-electronics industry] such as chips, microchips, and semiconductors. For those, we are highly dependent on third countries such as China, Chile, the United States... and Russia, before the war.  

And basically, that's the push [behind the investment in manufacturers such as STMicroelectronics]. It is aimed at removing, or reducing, our reliance on third countries; and becoming more independent in this sector, ourselves. That is why the Commission approved those projects: which will help Malta’s economy, as well; but much more importantly, they will help reduce our reliance on unstable partners - let's say Russia, for instance - or partners that can hold us to ransom, when it comes to... the transition to electric cars, for instance. For that, we need batteries; and for batteries, we need to have lithium. 

But we are not producing the batteries in Europe. Instead, we are dependent on others... 

I understand that argument perfectly; but it’s not what I was questioning, with that article. My question was: ‘why only semi-conductors’? Why does the European Commission only agree to ‘bend State-aid rules’, in cases where its own interests are at stake; but not, the interest of any one member State? (Bearing in mind that Air Malta is just as strategically important to Malta, as ‘semi-conductors’ are to the EU) 

More than ‘the Commission’s own interests’, I would say it’s a case of protecting the common European interest: which means that projects like these, will further the European Union as a whole. Don't look at it specifically from the perspective of STMicro-electronics; look at the bigger picture. This will help the EU fight threats that come from the external sources: either in the future, or at present... 

Fair enough: we’ll just have to agree to disagree. On the subject of ‘external threats’ and ‘unreliable partners’, though: when Malta signed a memorandum of understanding with Azerbaijan, for the supply of natural gas, we were criticized for ‘cosying up to dictators’. Fast-forward to 2022, and suddenly the Commission announces a similar deal with the same country and even describes the Aliyev regime as a ‘reliable partner’. Isn’t this a case of double standards?  

To be fair, you have to see where the criticism actually stemmed from. I don't recall the European Commission itself criticizing the Socar agreement, in that sense... 

No, in fact the Commission approved the deal... 

Precisely. So, what the European Union is trying to do, is diversify its energy sources and Malta is doing this, as well. Because as far as I am aware, Malta’s gas supply has been diversified; it’s no longer coming just from Azerbaijan, but from different sources.  

What happened, in a nutshell, was that when Russia launched an unprovoked and unjustified invasion of Ukraine, most EU member states were being held to ransom, because of their fossil-fuels importation from Russia. Within record time, however, the European Union has managed to mobilize – through programmes such as Repower EU – in order to try and shift our dependence on Russian fuels, to other fuels originating from more reliable partners; or else, investing in renewable energy sources. And I think that is the success of this Commission: it reacts in a very prompt manner to threats.  

Let's face it: no other Commission has had to face a global pandemic – where we had to mobilize all our resources towards the procurement of vaccines - and then, war on the European continent, on such a large scale.  To give you an example: a year ago, I was living in Strasbourg; and we were talking about the possibility of power shortages, power cuts, and heating cuts in winter. It didn't happen, however because of the productive work of different governments, obviously; but also, because of the decisions taken by the European Commission... 

Onto another issue now: immigration. The European Commission has just announced a ‘breakthrough’ in discussions of a new ‘Asylum and Immigration Pact’. For the first time, member states have agreed to a ‘mandatory relocation’ system. On closer scrutiny, however, it turns out that they still have the choice to make a financial contribution, instead of actually accepting relocated migrants. So, what would happen if all EU states agree only to take the financial option? Wouldn’t it still leave border states to cope with the influx, regardless? 

First of all, I think we need to go into detail, when it comes to the legislative process: just to explain things a bit better. The Commission originally came up with the proposal for the Asylum and Immigration Pact, which included this kind of ‘mandatory relocation’ - or solidarity - mechanism. With options, yes. But it's still something that had always been considered inconceivable, until this point. 

Let me put it another way: I've been working in the EU for the past 16 years. And never, in all that time, would I have imagined that there would be ‘mandatory solidarity’, ever featuring in some [European Commission] text. 

But that’s precisely what I’m asking: does this really count as ‘mandatory solidarity’? Because it looks as though countries can still ‘opt out’, at will; and this is, in fact, why the Maltese government abstained on the motion: despite having called for ‘mandatory solidarity’, for years... 

That's why I said ‘let's go into the legislative process’. The process itself works like this: the Commission comes up with the proposal; then, there has to be a discussion between member states and the European Parliament. At which point: it is no longer in the hands of the Commission itself, but in the hands of parliament and the member states. All three will decide together. So, if, for example, mandatory relocation is a ‘red line’ for Country X: they would need to negotiate, and come up with alternatives... like, for example, monetary contribution, instead of relocation. 

I've seen the reaction of the Maltese government. What I can say is that, obviously, the Maltese government feels that the agreement is not as ‘far-reaching’, as they would have wanted it to be.  

What I can tell you from my perspective, however, is that: having reached this stage now, that we are actually no longer talking only about ‘voluntary’ relocation - because that’s how it had always been framed before: as a ‘voluntary’ agreement - but everyone now agrees (in principle, at least) with a ‘mandatory’ mechanism, instead... I think that we have to appreciate the positives, as well.  

This could be a first step towards a more tangible, more concrete proposal in the future. On top of that, we also have to keep in mind what used to happen before. Basically, whenever there was an arrival in Malta, the authorities would be in contact with different authorities around Europe, to see who would be willing to take in any refugees or migrants. Now, however, we have a more structured proposal on the table, which is more concrete.  

Let's appreciate the positives, that we have achieved in the 20 years since joining the European Union. Today, we have reached the situation where more member states are now sensitised towards the difficulties that countries such as Malta face, due to migration flows. Because let's face it: there are other member states that have experienced the same situation on the Eastern borders of our continent: even more so now, because of the war in Ukraine; and all the refugees coming in from that country.  

So, at the moment, there is a bigger sensitization of the European dimension, towards migration. And I think that having reached this step, is already a big milestone. It’s already quite an achievement, in itself.  

It doesn't mean that [the agreement] is perfect: obviously, it isn’t. But I do think it's a first step in the right direction. And I hope that the deal will be reached very soon.