Prime Minister Lawrence Gonzi said this evening that sovereign aspects such as taxation should not be transferred to the institutions of the European Union because they were democratic institutions.

Speaking in Parliament on the outcome of the latest summit of EU leaders, Dr Gonzi said that Malta would continue to discuss the various proposals made in the summit for greater economic and financial integration, but sovereign aspects such as taxation could not be transferred to Brussels.

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He said that in the summit, Malta also renewed its disagreement with current proposals for a financial transactions tax because it felt this would lead to an exodus of financial business from Europe and because the burden of the tax would not be borne by the speculators but the economic operators, who actually needed help.

Dr Gonzi said Malta had also renewed its opposition to European Commission proposals for Malta to raise its retirement age and to review the cost of living adjustment mechanism.

Malta did not see a need to raise the retirement age because spending on pensions as a percentage of GDP was not expected to rise in the near future. The 2006 pension reform was seen as adequate to ensure that pensions were sustainable in the years to come.

He said there had been pressure within the meeting for Malta to accept the Commission proposal but Malta did not budge an inch, although he favoured further talks with the social partners on this issue.

On COLA reforms, Dr Gonzi said Malta had collaborated with the commission on a technical level. He agreed that wage increases should be matched by production increases, but workers should also be guaranteed a decent standard of living. Despite COLA, the salaries sector in Malta was flexible and employers and unions had been responsible enough to reach collective agreements as necessary.

The EU, he said, wanted Malta's COLA formula to be amended to have a lower weighting to imported inflation. He could not understand this advice, he said, when Malta had a huge exposure to imports. The government therefore disagreed and felt that while talks would continue with interested parties, it did not see a need to change the current mechanism.

Dr Gonzi said that in view of these objections, the draft text of the summit conclusions was amended so that instead of saying that the member states had endorsed the country-specific recommendations, it read that the member states 'generally' endorsed the recommendations. Malta's objections were also recorded.

Dr Gonzi said Malta's objections to these two points was not new and Malta had not taken anyone by surprise, despite what somebody may say in the EU.

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