Denial over devaluation

The General Workers' Union's general secretary, Tony Zarb, denied yesterday that the union was proposing devaluation in its report on job creation.

The report never spoke about devaluation, Mr Zarb said when contacted.

The report, Il-Holqien tax-xoghol u solidarjetá (Job creation and solidarity), was drawn up by economist Edward Scicluna last September and presented to the Malta Council of Economic and Social Development in response to an MCESD study on enhancing Malta's competitiveness.

It recommended that an immediate study be undertaken to establish why the country has lost its price competitiveness both in the manufacturing and tourism sectors.

"One has to establish the precise role of the Maltese lira, including the changes in the basket of currencies through which the exchange rate is quoted, the effect of the increase in payments to government agencies, including regulatory authorities, and the effect of increases in taxation," the report said.

Mr Zarb said yesterday: "Those who are quoting from our report are arguing that we are proposing a devaluation. But if they read carefully the sections they are quoting they will realise that the report simply quotes facts from reports by the International Monetary Fund and the Central Bank of Malta. We are not proposing devaluation in any way."

Late last year, Labour Party leader Alfred Sant controversially proposed that the exchange rate be adjusted gradually to make up for the over-valuation of the lira.

Mr Zarb categorically denied the union had any communication with the MLP about the report at drafting stage or at any other stage. The MLP never discussed the issue with the union either, he said.

The GWU would agree to measures that were in the interest of workers but oppose harmful ones, he said.

Contacted for his reactions, Prof. Scicluna said the report did not promote devaluation but merely noted something which both the IMF and the Central Bank had noted before.

"All the report said was that the indicator that shows whether a country is winning or losing competitiveness is the real effective exchange rate. If one were to look at this indicator, one is bound to realise that Malta has been losing competitiveness since 1995.

"The real effective exchange rate kept increasing until this very day. It is an index of the exchange rate vis-a-vis major currencies and it shows that when compared to our competitors, there is inflation.

"When you say that the real effective exchange rate is increasing this could be because of a number of factors but one is not making a claim in favour of devaluation.

"The document is asking a question. Should we see why there is this upward trend? This could partly be due to taxation. It could be our exchange rate regime.

Should we look at these factors? All we know is that it is increasing and the report is asking why it is increasing," Prof. Scicluna said.