The government has proposed tax credits for small and medium enterprises to make up for the rise in water and electricity rates.

However, while agreeing that tax credits would benefit businesses, the GRTU would prefer having the amount equivalent to the proposed credits reduced from the actual tariffs, said Vince Farrugia, director general of the Chamber of Small and Medium Enterprises - GRTU.

Speaking to the press following a two-hour meeting with Finance Minister Tonio Fenech at the ministry yesterday, Mr Farrugia said the GRTU was foreseeing difficult times ahead for industry, especially SMEs, and every little bit of help was important.

Mr Farrugia described the meeting as positive and said the GRTU would be meeting Mr Fenech again in the coming days to finalise discussions.

The GRTU, he said, presented the minister with workings for tariff reductions that would be equivalent to the cost of the tax credits the government was proposing.

He explained that, first of all, the estimated €365 million that the government had originally calculated it would recoup to cover Enemalta's costs had already been reduced to €305 million.

This amount, he said, could be reduced further to around €278 million. Moreover, the €233 million spent to buy oil could be cut down to €211 million.

Mr Farrugia insisted that with the fast-approaching recession, the country could not afford the shock of high water and electricity rates. The tariffs hike would raise costs for small and medium enterprises by an estimated six per cent.

He also reiterated that if the government forged ahead and applied the new rates retroactively, the GRTU would mount a legal challenge both in Malta and in Europe. The new rates are meant to apply from October 1.

Meanwhile, the government is expected to reply to the trade unions following a meeting they had with the Prime Minister last Saturday to discuss their proposals on easing the tariffs burden.

The unions presented a nine-point package which included postponement of the new energy bills to January 1 and keeping meter charges at the current level.