Bakers may stop making the traditional Maltese loaf unless an agreement is reached with the government to increase their subsidy on bread or, alternatively, hike the price per loaf by 2c following a hefty rise in the price of flour.

Karmenu Micallef, from the Bakers' Cooperative, said yesterday the cooperative had given the government until tomorrow to study the situation.

If the government did not subsidise the increase in the cost of flour or agree to a new price, bakers would stop making the Maltese loaf and produce just fancy bread, the price of which was not regulated by the government, Mr Micallef said.

Competitiveness Minister Censu Galea said on Monday the subsidy demanded by bakers would cost the government an additional Lm11,000 a week. The government had said it needs more time to study the situation.

The price of a sack of flour soared by Lm1.60 a few days ago. Mr Micallef said yesterday that as suppliers had the right to increase the cost of their product, bakers should also have the right to cover their costs and earn a living.

According to an agreement between bakers and the government, he said, the government was bound to issue a subsidy when the production costs of bread increased. This was acknowledged by the minister on Monday, who said, however, that in this case the amount involved was extraordinary so the situation had to be assessed by the Finance Ministry.