EU Enlargement Assessments Favour Malta And Cyprus

Ulrika Lomas, Tax-News.com, Brussels

08 November 2000

A report on the EU's enlargement process is due to be approved today by the Commission ready for presentation to the Nice Council which will close the French presidency next month. Among five applicant countries said to have functioning market economies (one of the key tests to qualify for membership of the EU) Cyprus and Malta are both said to be ready to join.

The report says that negotiation process for the front-running countries will not be completed until some time in 2002, meaning that the earliest date for the first wave of enlargement could not be before 2004 and might well be 2005. There is a hint, however, that the timetable could be advanced for certain countries.

Economically speaking, it is not surprising that Malta and Cyprus should be the most advanced of the applicant countries, since they have not suffered from a period of Communist stagnation (although it got fairly close to that in Malta for a while).

In fact, progress has been particularly rapid for Malta, which was in the second wave of applicants for enlargement, but is now seen as being up with the leaders of the first wave. In October, the European Parliament voted 502 to 11 with 19 abstentions on a European Popular Party resolution saying that Malta is well on the way to meeting most of the political and economic criteria for membership. The problem for Malta remains its lack of political solidarity on the EU issue, with the opposition still lukewarm at best on membership.

Cyprus has done well on the harmonisation process of assimilating the 'acquis communautaire' into local law, but doubts remain on its offshore status. The head of the EU's negotiating team Leopold Maurer recently warned that the EU will be closely monitoring the implementation and enforcement of Cyprus' harmonised legislation particularly with regard to money laundering. Maurer said implementation was just as important as having the required legislation in place. 'It could be that a country could have all the legislation but on the ground nothing takes place,' he added referring to the island's legislation on money laundering, which he said was good.

Maurer also mentioned Cyprus's problems with the OECD, who recently gave the island until the end of the year to make its proposals to comply with 'unfair tax competition' guidelines. Cyprus insists that it sees no problem with compliance and that it will be able to create a level playing field for domestic and offshore companies.

Cyprus and Malta are small enough not to present a financial problem to the EU, something that can't be said of most of the applicant countries for membership, so it is economically feasible that they could join on their own, perhaps with Estonia, on the same grounds, while the larger countries may find it impossible to leap the barriers of the CAP and freedom of movement even by 2005. But is it politically feasible? Enlargement as an overall process is thought to depend on a major extension of qualified majority voting and a restructuring of the Commission, if not the whole governing structure of the EU, and neither seems likely to emerge from the Nice summit. Then there is the partition of Cyprus as an unresolved, not to say unresolvable problem.

The future remains inscrutable; but today's report marks a further step forward for both Malta and Cyprus in their progress towards membership of the Union.

See the EU Strategy Paper at http://www.europa.eu.int/comm/enlargement/index.htm

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