The declaration made last week by Union Haddiema Maghqudin secretary general Gejtu Vella about the cost of living adjustment (COLA) could be interpreted to mean early pressure on behalf of the unions on the government as it plans its pre-budget document.

Mr Vella told The Malta Independent that there is a “serious risk” that the Lm1 (EUR 2.33) extra cost of living adjustment that became effective in January is already being eroded because of the steep increases in the prices of foodstuffs.

In the budget for 2008, the government had given a total cost of living adjustment of Lm1.50 (EUR3.49), two-thirds of which was to be advanced from the COLA for 2009. The move had been specifically made to cushion against rising food prices, which have continued to soar since last October, when the budget for 2008 was presented.

COLA is normally given to make up for the rise in the cost of living for the previous year, and it is only in exceptional cases that the adjustment is made in advance. Many in fact interpreted the move as being part of the government’s tactics in view of the fact that the election was a few months away.

Now that one of the major unions is already pointing out that the extra increase given for this year is already being eaten away, it is clear that the workers’ representatives will be expecting the government to consider the option of giving further rises to make up for the increase in food prices in the next budget too.

This will no doubt lead to protests from the employers, who had already expressed their reservations, if not downright opposition, to the government’s idea to give an extra Lm1 for the current year. It is easy to say that the employers would not be ready to accept that further increases are given for 2008 when Lm1 per week extra is already being given for this year.

Unions and employers defend different interests; the government always has a tough time trying to please both, and often ends up pleasing neither. When the matter is brought up during meetings of the Malta Council for Economic and Social Development, which is the forum where budgetary decisions are taken collectively, we have no doubt that some sparks will fly.

The government is in the process of preparing the pre-budget document, a practice that was introduced a few years ago. In it, the government’s intentions for the following year in terms of economic planning are laid out for constituted bodies, and the general public, to comment about. The document is presented in the first half of summer and leads up to the actual presentation of the budget, some time in October.

The UHM will most probably be supported by the General Workers’ Union if it is to request the government to consider further wage increases for 2008, based on the current international scenario. Let us not forget that apart from the increase in the prices of foodstuffs as a result of the situation in the international market of cereals, the economy must also contend with the increasing price of fuel.

As from this month, the price of diesel has become more expensive than that of petrol for the first time, and this could, of course, lead to a vicious circle as such an increase is normally passed on to the consumer.

For their part, the employers will resist any further adjustments, knowing that this will lead to a sharp rise in their costs.

It will not be an easy matter for the government to find a compromise. But the social partners must, as from now, try to find common ground so as not to plunge the country into hard times it can ill-afford.