The Government intends to propose changes to the Cost of Living Adjustment mechanism to better reflect Malta’s productivity and bring it in line with EU expectations, Finance Minister Edward Scicluna revealed yesterday.
A final agreement had to be reached with all social partners
Prof. Scicluna underlined that he will propose the possibility of an “escape clause” to the mechanism, which could be used when the economy is passing through a rough period.
However, the minister made it clear these were just proposals, since a final agreement had to be reached with all social partners.
The minister was speaking to The Times before the presentation of Malta’s draft National Reform Programme to the Malta Council for Economic and Social Development and the Malta-EU Steering Action Committee.
He recalled that in his previous position as consultant to the employers when the COLA mechanism was established, he had already proposed the insertion of an exit clause.
“We intend to reform COLA to address the concerns of the European Commission. Our idea is to tweak the mechanism particularly in relation to productivity.”
Asked specifically about the concrete changes he will be proposing, Prof. Scicluna said they would not match the Commission’s expectations but would include a proposal to insert an escape clause to be used when the economy is passing through a rough period.
“However, this is just a proposal and we have to agree with the social partners first,” he underlined.
Changes to the COLA mechanism have always been a hot potato since the social partners are divided on the issue.
While unions have been adamantly against any changes to the system, employers have been lobbying for a total revamp so that increases in wages will not continue to be automatically pegged to the cost of living index. The latter position is the same preferred by the European Commission.
The Nationalist administration always took the unions’ side and defended its corner with the EU executive every time it suggested changes to the COLA system.
The Finance Minister also said the Government intends to continue the pension reform, respecting the pledge that the retirement age will not increase, at least for the next 10 years.
Pressed to state whether the Government intends to introduce the second pillar pension – which will result in more contributions by both employers and employees – Prof. Scicluna said he would provide more details at a later stage.
EU member states are obliged to send their National Reform Programme – a plan of action towards reaching important financial, economic and social goals set by the EU for the end of the decade – by the end of this month.
To have more time for local consultations, the Government has asked Brussels for a two-week extension for the submissionof Malta’s programme, Prof. Scicluna said.