Malta: Skeptical Populace, Other Hurdles Remain

The former British colony of Malta is not very different from other southern European countries. Though poorer and more agrarian than the EU average, the country has been working hard to establish itself as a financial center in recent years.

Malta, about twice the size of Washington D.C., has had a comfortable growth rate hovering around 4 percent in recent years. It’s economy is heavily dependent on foreign trade, which amounted to more than 5 billion euro in 2001.

The country, at the crossroads between North Africa and Europe, has been working hard to establish itself as a manufacturing and communications center. Foreign companies have been attracted by the island’s multilingual and flexible work force.

On its way to European integration, Malta has worked hard to rid itself of its reputation as a shady offshore tax haven. The last remnants of the offshore system will expire in 2004. The EU is not convinced the island has done enough, and Malta remains the only candidate country yet to satisfy EU requirements on taxation.

If Malta joins, it will compete with other low-tax jurisdictions such as Luxembourg, Gibraltar and the Isle of Man.

Problem areas: Environment, agriculture

Unlike the Eastern European candidates, Malta has not had to overhaul its democratic and economic structures in order to join. Yet its progress in fulfilling entry requirements has been patchy and it is behind on adopting farming and environmental directives.

Nearly half of Malta’s trade is with the EU. In the future, it aims to sell its financial services' skills to its northern neighbors. At the same time, Malta plans to develop banking and financial markets in North Africa.

Its GDP is slightly ahead of Greece and Portugal and slightly behind Spain. The governing Nationalist Party favors EU membership, while the Labor opposition is against it.

Squeezing to the last drop

Like other candidates, however, the Maltese government is trying to get the best deal out of Brussels in order to sell EU membership to its population.

Maltese voters are likely to vote in a referendum early next year on whether to join in 2004, and the euro's emergence may have pushed the balance in favor of a "yes" vote. That hasn't stopped the government from balking at Brussels' recent offer of 7 million euro annually in aid, calling the figure far too low.

The referendum result is likely to be close. The most recent opinion polls are running 51 percent in favor, versus 49 percent against joining -- the closest in any of the candidate countries.