Without state intervention following the pandemic and Russia's invasion of Ukraine, the cost-of-living adjustment would have hit a whopping €16 to €17 a week, Finance Minister Clyde Caruana claimed on Monday.
Caruana was addressing parliament, days after EU's data agency announced that the annual consumer price inflation in the 19 countries that use the euro had soared to 8.6 per cent. Malta's remained the lowest, with the annual June inflation estimated to reach 6.1%.
Just one month before, experts had told Times of Malta that the COLA was likely to reach €8 per week - up from €1.75, hitting the country’s competitiveness because it will increase costs for businesses.
On Monday, the finance minister said he had asked his staff to run the numbers, and it transpired that had the government not subsidised cereals, milk, fuel and energy, employers would have had to shoulder a €16 to €17 COLA.
The adjustment would have had to increase further by September, meaning by the end of the year, employers would have had to fork out an additional €800 to €900 per employee, Caruana added.
"We will do whatever it takes so that such challenges continue to be faced by the government, rather than businesses," Caruana said, adding that as finance minister he needed to ensure the country had enough resources to carry the burden.
It was cheaper for the government to keep up the subsidies than to deal with the blow that would otherwise hit the economy, he explained.
“This is not the time for austerity for our people. The government will, however still need to be careful (bil-għaqal), more than ever before.
“We need to ensure that our economy is robust, business ongoing and that the government continue shielding the impact.”
He warned that the government will collect every cent due from everyone, ensuring the country remained fiscally strong.
Caruana expressed disbelief that other European governments had not learnt anything from past recessions and continued to let people face increases in prices.
He explained that when prices increased substantially, this same increase ate away at workers’ income, resulting in a drop in consumption and an ensuing drop in the economic rhythm.
The US, among others, was entering a ‘mild recession’ after registering negative growth in two consecutive quarters, he said.
Caruana told parliament that in a few months, people in several countries will find themselves with their back to the wall, while Maltese citizens will be proud that despite the country’s small size, the government would have done its utmost to avoid such a burden and challenges.
Air Malta reaches 94% load factor
Caruana also briefly referred to Air Malta, which is going through a major cost-cutting plan in a bid to survive.
Talks with the European Commission were ongoing, Caruana told parliament, however, for the first time in years, the load factor of the airline had reached 94 per cent in June.
This compared to between 70 and 74 per cent in 2019, a record-breaking year.