There has been no agreement at the Malta Council of Economic and Local Development on a wages policy or social pact.

This was not the only bit of news that emerged from the discussions within the MCESD. Last week we were also told that there was a breakdown in the common position agreed among the organisations representing the business sector and trade unions. There was also divergence between the positions taken by the two major unions in Malta: the General Workers' Union and the Union Haddiema Maghqudin.

The information reaching the public via the newspapers also included the view taken by the social partners that the government was too late with its proposals on electricity charges, which need to be revised to take into account the disproportionate increase in the price of oil in the recent months.

Yet another bit of news was that the GRTU was strongly opposed to tax benchmarking, which appears to be the government's answer to combat tax evasion.

All this means that the government has to go it alone in the forthcoming budget, with no agreement with the social partners and with the risk that the budget measures will end up displeasing everyone.

There is no doubt that there were very high expectations that some form of agreement on wages and on the Social Pact would be reached. These expectations were generated by the fact that in the absence of such an agreement, firms operating in Malta across the board would continue to lose their competitiveness when compared to firms operating elsewhere. The public is aware of this and was therefore expecting that national interest would be given priority over sectorial interests.

At the end of the day, the government is always ultimately responsible for the measures presented in the budget. Agreement with the social partners would, however, have been a very significant signal to individual employees and businesses that there is a common intent to resolve the various economic issues by seeking to find common ground. It would have provided a much needed element of security in our economy, given the turbulence in recent years caused by the international economic slowdown, the September 11 events and now the increase in the price of oil.

Going into the various issues, one is likely to find merit on both sides. For example, on the issue of tax benchmarking, one may claim that such an initiative would be too high-handed. It would bring back memories of the times when so called ex-officio assessments were the order of the day. On the other hand, tax benchmarking is being considered only because in certain segments of the economy tax evasion is so rampant. More self-discipline in the payment of tax would mean more tax revenues and less need for government to increase taxes. If government has to choose between increasing taxes and initiatives aimed at curbing tax evasion, it is morally bound to choose the latter.

On the issue of a wages policy, one may claim that employees in one organisation should not have to pay for mismanagement in other organisations and that wages should be decided at the level of the individual firm through a process of collective bargaining. This would provide a great deal of flexibility and room for manoeuvre to trade unions. It would also be a signal to employees in individual organisations that they could negotiate any deal they wanted. On the other hand this is not what our economy needs. Individual collective bargaining today is likely to have more negative than positive effects as it would raise employees' expectations beyond what is realistic and affordable.

So we roll on to Budget Day, each holding his ground. It would be easy for anyone to blame one side or another for the disagreement that ensued among the social partners. I do not believe it is an issue of blame as the mere fact of trying to allocate blame goes against developing the collective team spirit that we need today to tackle the various challenges our economy is facing.

I believe that what we need today on the part of the social partners and government is the recognition that they really need each other to safeguard the interests they represent. This would mean a sense of mutual accountability that only the brave have.

The title of this week's contribution is taken from the phrase coined when Yasser Arafat and Yitzhak Rabin (then Prime Minister of Israel) had reached agreement on the resolution of the conflict between the Palestinians and the Israelis. That agreement had been described as "the peace of the brave" (liberally translated from Italian la pace dei coraggiosi). In effect it has to be a brave move to agree with the government on some of the measures proposed in the budget. However, to address the current difficult economic situation of the country, one needs to be brave indeed.