Malta had the lowest annual increase in labour costs among the 16-members of the euro area in the 12-month period to June.

New Eurostat figures show that in construction and services, for instance, labour costs have even gone down when compared to the previous 12 months.

The only increase was seen in the manufacturing sector, where costs increased by 2.8 per cent, well below the 5.8 per cent rise in the euro area.

During the period under review, labour costs in Malta rose by just 0.3 per cent, compared to four per cent.

"Although this may be good news for Malta's competitiveness, because it means the island's labour is more competitive in comparison with the rest of Europe, it also has its negative side as workers are being paid less when compared to their European counterparts," a Eurostat official said.

"This modest increase also has to be compared with inflation, which during the past year has been particularly high in Malta when compared to the rest of Europe," he said.

Eurostat's Labour Cost Index is a short-term indicator showing the development of hourly labour costs.

Malta's index shows that the 0.3 per cent in wages and salaries included direct remunerations, bonuses and allowances paid by an employer to workers.

Non-wage costs, which include the employers' social contributions, increased by 0.1 per cent.

Among the EU member states, annual decreases in hourly labour costs were observed in Lithuania (-6.2 per cent) and Estonia (-0.6 per cent) while Bulgaria (15.5 per cent) and Romania (11.7 per cent) registered the highest increases.