Social partners warn of economic shocks

Industry is reeling from the government's proposed energy tariffs and social partners have warned that hotels and businesses will be crushed, leading to significant job losses and a shock to the economy.

After a day of silence following the government's announcement, the reactions from the social partners poured in yesterday all accusing the government of its failure to discuss the proposals.

The Malta Hotels and Restaurants Association (MHRA) warned that a number of hotels will have to shut down leading to significant job losses. It is convinced the proposed measures will increase operational costs threefold.

Its council will be calling an extraordinary general meeting on Tuesday to discuss the stand it will be taking. The MHRA felt the upward pressure on costs, at a time when the industry was bracing itself for a potential drop in demand due to the international economic crises, was going to lead to "very serious problems".

It said it was very disappointed by the government's lack of consultation and was surprised by its declared stance on the matter.

"MHRA cannot understand the government's admission that no social and economic impact assessment was necessary in the light of the proposed tariffs," it said.

The Federation of Industry's warnings were just as dire and it predicted "a sudden economic shock", which will directly affect investment expansion decisions and business confidence levels in the economy.

"The proposed tariffs will threaten thousands of jobs; there will be an increase in inflation rates and a slowdown in the economy's growth," FOI deputy president Helga Ellul warned.

She said all the options proposed by the government were based on a "fundamentally-flawed approach" to policy formulation.

Ms Ellul pointed out that the financial position of Enemalta and the Water Services Corporation was imperilled, not just because of international oil prices but by "decades of short-term oriented policies" - the economy was not in a position to afford bailing out these corporations.

Ms Ellul criticised the government for not presenting any mitigation measures to soften the impact or staggering its implementation, at a time of an international economic crunch and uncertainty.

The FOI stand was endorsed by the Malta Chamber of Commerce and Enterprise. The Union Ħaddiema Magħqudin said the proposed tariffs would place a heavy burden on households - a family of two will incur an average increase of €7.21 per week; a family of four, €8.96 per week and a family of five, €10.24 a week.

It also criticised the government for not studying the impact of these measures from an economic and social aspect.

The Malta Employers' Association added its voice saying the economy could not afford such sudden shocks and expressed disappointment at the government's lack of consultation.

"The proposal would have serious repercussions on companies, particularly manufacturing and hotels and may result in a significant loss of jobs," it said, while objecting to the fast retroactive timing of the change in tariffs and the removal of the capping.

The Malta Council for Economic and Social Development also voiced its protestations and, in a letter to the Prime Minister, said members had been presented with a fait accompli.

It was unacceptable that the measures would take effect from October 1, the council said, slamming the way the exercise failed to take into consideration the international situation and the resulting uncertainty.

Reacting to the MCESD stand, the government defended its position saying the proposals put before the members were intended purely for consultation.

However, the members said they had clearly formed the impression they were being presented with a final decision.

Both Alternattiva Demokratika and the Labour Party said it was unacceptable for the government to announce an increase in utility tariffs before carrying out a socio-economic impact assessment.