Call for joint action by social partners

Central Bank Governor Michael Bonello said yesterday that the challenge of creating sustainable wealth was best addressed by the social partners together.

Speaking during a seminar on whether there was a need for a social pact, organised by the Reggie Miller Foundation of the General Workers' Union, Mr Bonello insisted that governments on their own could not tackle competitive challenges successfully because these involved taking difficult decisions which affected employers and employees.

Moreover, all difficulties required a decision to be taken for them to be solved and this strengthened the argument for everyone to sit around a table and find solutions.

He said that because of the increase in the price of oil and food, organisations such as the European Central Bank (ECB), and also local bodies such as the Central Bank, had to update their forecasts, revising growth downwards and inflation upwards.

He warned that if wage increases were given now to compensate for these increases, other domestic costs would also be increased. But price stability was necessary for sustainable growth and job creation.

Mr Bonello said that imported inflation could not be avoided so domestic pressures on prices had to be kept at a minimum. Anti-competitive practices had to be countered by regulatory surveillance and enforcement and inefficient practices and unnecessary costs had to be eliminated. Automatic compensation for inflation, especially at the national level, was counter-productive, he warned. The Governor said that between 2000 and 2007, compensation in Malta went up by 23 per cent when productivity improved by less than four per cent. The economy, he said, could not carry this burden of inefficiency indefinitely.

He said that agreements between the social partners were not necessarily reached just in bad economic times but they were especially useful in such situations. A policy of wage moderation was beneficial even if the country enjoyed high international competitiveness and strong GDP growth. So a mechanism to agree on such matters should be found.

Malta Employers' Association director general Joseph Farrugia said that the parting shot of any discussion should be to see what results one wanted achieved. The discussion would then see how best those objectives could be reached.

When attempts were made (and failed) at reaching a social pact in 2004, the situation locally was different and although an agreement was not reached a lot of benefit had come out of the discussions.

A sense of realism had been introduced and more responsible collective bargaining started taking place. Industrial relations had also stabilised.

Closing the seminar, GWU general secretary Tony Zarb said the union had been accused time and again of not wanting a social pact. What the union wanted, he said, was for everyone to shoulder their burden accordingly.

The union agreed that all efforts should be made for the country to become more competitive and not necessarily through a social pact.

There were employers, he said, who wanted to reduce their workforce and introduce inferior conditions for new employees. There were still companies which employed their workers 14 hours a day and paid them the minimum wage.

He hoped that any discussions would not be aimed at introducing measures which would badly affect workers, such as overtime not being paid at the overtime rate. Workers, Mr Zarb said, could not keep up with rising costs since their purchasing power was going down. The government should lead by example and stop burdening workers and their families.

He hoped that a MCESD meeting scheduled for today would not be just full of rhetoric. The GWU, he said, would be seeking solutions since it was very worried by the cost of living.