The cost of living in Malta on a 12-month average was the highest in the EU and three times the eurozone average, Labour finance spokesman Charles Mangion said yesterday.

He said this was causing social and economic problems, lowering the people's standard of living.

Excessive inflation reduced competitiveness because it led to unions and workers asking for wage increases. It also led to civil servants demanding increases, pushing up the government's recurrent expenditure without increasing production.

Dr Mangion said that while Malta's economy compared well to that of Cyprus, a similar open economy, Malta did not move closer to the eurozone's inflation average like Cyprus did.

He pointed out inflation was highest on essential items such as food, energy, health services and education. The main contributor to this higher inflation was the Prime Minister's decision to raise water and electricity tariffs to levels that did not reflect the international cost of oil.