Higher bread prices

The price of Maltese bread will go up on Monday following an agreement between the government and the Bakers' Cooperative that will also see the liberalisation of the bread market come January 1.

The price of a large loaf of bread will rise by €0.07 to €0.54 and that of a small loaf by €0.04 to €0.34.

The price order fixing this price will be the last one and will expire on December 31.

Bakers' production expenses will increase on Monday after the cost of flour jumped by €3.8 per sack. This was announced by Finance Minister Tonio Fenech at a press conference yesterday in the presence of Bakers' Cooperative president Karmenu Micallef.

Talks on the issue had been going on for some time, the last round held before the press conference.

Mr Fenech said that an important aspect of the agreement is that the government will continue assisting bakers to restructure to become more competitive once the market is liberalised.

Subsidies on Maltese bread were stopped in 2000 but a price order system was retained through which the government controlled the price.

Subsidies were reintroduced in 2006 when it was thought that the increasing cost of fuel would be temporary. But this was not the case as prices persisted in galloping with the government continuing to fork out more subsidies.

The government subsidy on bread at present stands at €2.2 million.

One of the problems facing bakers was that ovens which run on fuel were at a disadvantage in relation to those fired by gas, which is subsidised.

One of two initiatives being taken to help those using fuel was to carry out an exercise to determine whether some 30 ovens operating on diesel or light heating fuel could be converted to gas. The government is committing itself to grant €5,000 to each of these bakers to restructure.

The second initiative concerns bakers who cannot switch to gas. A mechanism will be set up through which such bakers would be subsidised on the consumption of energy, which subsidy would be comparable with that enjoyed by those using gas. This would ensure a level playing field, Mr Fenech said.

The government will conduct a separate exercise to assess the impact of the bread price on low-income families. Compensation would be given through the budget.

Mr Micallef said subsidies were the government's prerogative and one had to see how the bread market would be affected as from next year.

"Our fear is that the higher cost of bread would dampen demand," he admitted.