Just after the global economy was seeing signs of a recovery from the pandemic, the war in Ukraine broke out, plunging many countries into economic and social turmoil. Some countries in Africa, Asia and South America are facing famine and, as a result, social unrest is on the increase.
In Europe, the situation is somewhat different; however, with the rise in inflation, unions are resorting to industrial action to protect the standard of living of their members. While some governments in Europe have taken measures to protect families and the most vulnerable, others have done very little or next to nothing.
Ironically, the energy giant BP in the UK has reported its biggest quarterly profit ($8.45 billion) for 14 years after oil and gas prices soared, more than triple the amount it made in the same period last year. Other energy producing companies are also making record profits at the expense of consumers and businesses alike.
In July, Malta and France registered the lowest inflation rates in the EU at 6.8 per cent, followed by Finland at eight per cent. The highest annual rates in the EU were recorded in Estonia at 23.2 per cent, Latvia at 21.3 per cent and Lithuania, 20.9 per cent.
The government’s policy of subsidising energy tariffs, gas and fuel at the pump is bearing fruit. And, by protecting families and pensioners, it is also ensuring that businesses remain competitive. In fact, the economy is still growing and most economic indicators are showing that nearly all economic sectors are doing very well.
In fact, demand for labour is still increasing. Certainly, when comparing Malta to some EU countries, we are doing very well, with a forecast annual real GDP growth rate of 4.9 per cent in 2022, which is higher than that projected in spring, plus record low unemployment and one of the lowest inflation rates in the EU.
Therefore, the call by employer organisations not to award COLA in full, which is currently estimated to be around €10 per week, to some employees is uncalled for. Had the country been experiencing a recession and jobs were at stake, the situation would have been different. One has to keep in mind that the COLA mechanism is there to protect purchasing power against inflation and is not in any way related to the productivity or the performance of an enterprise. Such increases are negotiated at enterprise level, not at the national level.
This is where such productivity increases belong, since one company might be doing very well while another may be having problems. Furthermore, the award is not a percentage increase on one’s salary but a flat increase which is calculated on a base social wage. In fact, when both the European Commission and the IMF understood the COLA concept and its benefits, they dropped their demands for Malta to scrap this well over a decade ago.
It is not by chance that we have one of the lowest inflation rates in the EU; it is the result of government intervention for businesses and households. While Enemalta is not making record profits, we certainly have businesses that are taking advantage of the situation. For example, how can one justify that prices of some locally made products, such as table water, are rising every week when the government is subsidising their basic costs. Price rises are also being registered in some imported products which then can be found to be much cheaper in nearby Sicily.
Had the employer organisations called for more responsibility and restraint on their members they would have certainly garnered more credibility and support from the public. These businesses should be thankful to both the government and the taxpayer for their support during the pandemic and the war in Ukraine.
While not advocating the return of price controls, the government needs to be more selective in providing support for businesses. The emphasis should be on assisting businesses that are transparent in the way they operate and show a sense of responsibility towards the community.
Certainly, those businesses which do not pay their tax dues or, worse still, their national insurance contributions, should not be assisted further.
Victor Carachi is president of the General Workers’ Union.
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