The government does not share the International Monetary Fund's criticism of the Cost of Labour Adjustment (COLA), Finance Minister Tonio Fenech said this morning.

In a report following a trip by a number of officials to Malta last month the IMF said the COLA was "highly unusual among advanced economies" and advised government to consider its eventual removal since it "hinders productivity-based wage increases and contributes to entrench inflation".

But speaking during a press conference this morning, Mr Fenech said the government believes that the COLA mechanism helps reduce the pressure on unions to make bigger wage demands.

However, he continued, the government agreed that compensation in salaries should be related to productivity gains, not only in the private sector, but across the board.

The IMF also recommended the (complete) privatisation of Bank of Valletta to a suitable strategic investor. But Mr Fenech said that while government was open to expressions of interest, it believed that the current global situation would not lead to the best price for the country. The government is the biggest shareholder in BOV, although it does not hold a majority stake.

Mr Fenech also reiterated the government's intention not to privatise Air Malta.

Referring to the shipyard, Mr Fenech said the government was studying all possibilities.

In its report the IMF commended Malta for itssuccessful euro adoption and for its three-year economic expansion underpinned by foreign direct investment and export diversification. It said growth will decelerate to
between two and 2.5 per cent in 2008-2009, but Mr Fenech said government still maintained its three per cent target.

The IMF said the primary risk to the country was complacency.