Forty-five Naxxar shop owners have signed a petition objecting to the local council's plans to pedestrianise part of the town square, saying a loss of parking space would spell the end of their business.
The council said it would compensate for the lost lots by changing the parking system along the town's main road.
The council has applied for a planning permit to close Victory Street, situated near the church, and Toni Bajjada Square to traffic and create seating areas.
Toni Bajjada Street, which is one-way, will become two-way, according to the council's plans.
However, the shop owners fear that the loss of parking space and the change in traffic flow could be detrimental to their business. Lawyer Martin Fenech, legal representative of the 45 shop owners, said that between 50 and 60 parking spots would be lost if the project went ahead. Moreover, the plan for perpendicular parking along Labour Avenue was flawed because parked cars could not reverse into a main road in order to drive off.
Council executive secretary Paul Gatt said there would be space for cars to reverse without getting into the way of the main road's traffic.
The objectors have also raised concern that Toni Bajjada Street is not wide enough for two-way traffic, thus leading to chaos in the locality and problems for the garages in the area.
Dr Fenech said that, apart from causing problems for the residents, a decrease in business would leave shops with no other alternative but to close down.
Patricia Buchanan, who owns a toyshop close to the church, said business was dead for a week when road works were underway prior to Pope Benedict XVI's visit.
Although the council had not yet assessed the economic impact of the plans, Mr Gatt said he did not exclude this would be carried out in the future.
"This is an outline application," he said, adding that the outcome also depended on whether the council managed to get about €850,000 in EU funds for the project.
Pedestrianisation has worked in favour of businesses in Valletta, with another 23 shops opening in Merchants Street since it was closed for vehicles two years ago.
Ms Buchanan questioned the plan to have seating space on the side of the church, saying Naxxar was a residential area with tourists only visiting Palazzo Parisio.