Prices for goods in Malta in relation to workers' hourly wages are 77 per cent more expensive than the EU average, according to University professor Joe Falzon.
By adjusting the island's price levels - 78 per cent of the EU average - to the hourly labour costs that stood at 44 per cent, Malta emerged with the second highest cost of living in Europe. Only Slovakia is more expensive on this relative scale.
Prof. Falzon, head of the university's department for banking and finance, was yesterday addressing a conference on the cost of living organised by the Labour Party.
The conference, attended by Finance Minister Tonio Fenech, brought together social partners to address the problem of inflation since Malta has the highest rate in the eurozone - 2.8 per cent in June.
Throughout the conference there was a concerted effort from everyone to steer clear of political rhetoric and focus on resolving the problem, with the exception of Labour deputy leader Anġlu Farrugia who was rapped by Mr Fenech for going against the spirit of the debate.
Prof. Falzon said Malta had to identify what enabled the government to keep inflation low in 2007, so that it could replicate it, while assessing what had driven up prices more recently.
Malta had to improve its overall competitiveness and reduce market imperfections, such as monopolies. He called for the Office of Fair Competition to be strengthened to better monitor price movements.
Malta, he stressed, had to control inflation to maintain a competitive edge, and most importantly increase the national investment in physical and human investment to hasten real economic growth.
Economist Alfred Mifsud, intervening from the floor, said Malta must be the only country discussing inflation, when it should be tackling growth and employment.
Price repression in the run-up to the euro adoption had caused prices to explode, but inflation was about statistics and it was important to look ahead.
Finance Ministry permanent secretary Alfred Camilleri gave a presentation on the cost of daily household goods and said food was the main contributor to inflation, accounting for 43 per cent of the increase. Since fruit and vegetables emerged as the main causes behind food inflation, the time had come to reform the pitkali cooperative market.
It was important, Mr Camilleri said, that the impact of public policy on price levels continued to be assessed.
Wage moderation, was key for the economy, while improving government regulation.
The cost of living allowance (Cola) was mentioned several times after a debate was recently sparked among employers that a blanket salary adjustment - estimated at €7 per week for 2010 - could compromise jobs and threaten the country's competitive edge.
Finance Minister Tonio Fenech said the established Cola mechanism would continue to be followed, but this allowed for particular circumstances. Decisions would be taken with the social partners.
He said it was easy to call for salary increases, but the important thing was not to drive out jobs.
It was also easy to show up Malta's shortcomings compared with other countries, but many conveniently left out, for example, the situation in Ireland where the deficit soared to 10 per cent and public sector wages were cut.
At the end of a marathon five-hour conference, Labour leader Joseph Muscat released 23 proposals to tackle inflation.
He called for complete transparency in government services, a reduction in inefficiency and eliminating excessive bureaucracy.
The detailed proposals called on the government to boost capital investment to create productive jobs and yield value added for the country.
Dr Muscat called for effective regulators and urged the government to consider a freeze on new or higher taxation or tariffs.
Reacting later in the day, the Finance Ministry issued a statement saying Dr Muscat's proposals added nothing new to the debate and questioned whether he had purposely presented them at the end of the conference to avoid criticism.