Prime Minister Lawrence Gonzi said yesterday that the government strongly objected to proposals by the European Commission for Malta to increase the retirement age to 65 immediately and to revise the computation of the Cost of Living Adjustment (COLA).

Reporting to Parliament on the outcome of the latest EU summit, Dr Gonzi said the government believed such revisions were not needed.

Malta made its stand clear from the very beginning.

The government was in favour of ensuring the sustainability of the pension system, so much so that it brought legislative amendments to ensure their adequacy as early as 2006.

Legislation also required analysis every five years to strengthen pensioners’ quality of life and to ensure the viability of the safety net.

The Ageing Working Group predicted that the expenditure on pensions would remain on the same levels, as a percentage of the GDP, until 2030 as it was in 2010. Increases were expected in the following years and it was for this reason that the government was against such recommendation.

The commission had suggested that member states revise their retirement age according to their respective life expectancy. Maltese government experts had confirmed that if such a proposal were to be adopted, Malta would not need to take additional measures until 2030.

While the commission suggested the government speed up the process by which the retirement age would be increased to 65, the government argued that this was not logical, especially when Malta was already satisfying the commission’s life expectancy formula proposal.

Dr Gonzi said there had been pressure within the summit for Malta to accept the commission’s proposal but Malta did not budge an inch, although he favoured further talks with the social partners on this issue.

On COLA reforms, the Prime Minister said the government cooperated with the commission on a technical level.

The government’s economic experts analysed such mechanism and did not find a clear and systematic evidence of changes in wages in important sectors in Malta that were determined exclusively by COLA.

Their analysis showed that Malta was not less flexible than other countries that did not adopt such a mechanism. This fit within the picture in which there was a relatively low level of unemployment in Malta during a global recession.

After having analysed the study, the commission concluded that such analysis could not be interpreted as evidence that COLA, as applied in Malta, could not leave repercussions in the future that could result in an excessive cycle of inflation. It also suggested not to include oil prices in COLA.

Dr Gonzi said that, on the other hand, the government was ready to keep monitoring and discuss Cola with the social partners.

However, it was convinced that it was not wise for it to intervene in the computation of inflation on which COLA was set up.