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Maintaining fiscal discipline under pressure

Maintaining fiscal discipline under pressure

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Maintaining fiscal discipline under pressure

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  1. Maintaining fiscal discipline under pressure Sustainable Wage Bill Management Practices: Malta’s Experiences Paul Zahra Permanent Secretary Office of the Prime Minister - Malta

  2. Malta ? What is this?

  3. Small Island State… • Island economy in the centre of Mediterranean • No resources whatsoever…except its people! • Independence since 1964 • Member of British Commonwealth • Member of the European Union since 2004

  4. Country’s Economy • Population: 415,000 people • GDP per capita: Euro 13,000 • Main industries: manufacturing, tourism, financial services, trade, other services • Inflation : 3.5 % • Unemployment : 7 %

  5. A European Social Model • A vision of society that combines sustainable economic growth with ever-improving living and working conditions • This is what distinguishes Europe from the US model

  6. The Maltese Scenario – The Milestones • Stevedores and Port Workers Ordinance of 1939 and the Factories Ordinance of 1940 • CERA (1952) – regulated the relationship between employers and employees including wage rules • 1974 – Introduction of National Minimum Wage • EIRA (2002) – Part III of the Employment Relations Section of EIRA deals specifically with the protection of wages

  7. Malta – Cost of Living Adjustment • Collective Bargaining at enterprise level possible and enhanced as agreed wage increases are “Net” of COLA. • Important for Employers (incl. Public Sector) as ensures predictability of costs and budgetary impact & limited impact of competitivness. • COLA opt-out clauses exists for firms that prove that COLA for year is not affordable.

  8. Methods explored in Malta • Wage Freeze (1983….no success and had to be abandoned) • Incomes Policy (1990….still in place with limited success save COLA adjustments) • No panacea for problems exist and pragmatic approach • Take stock …and communicate widely the options and impacts.

  9. Facing Realities in the Public Service…all on Board • Political commitment …critical. • No redundancies, but reductions through - strict recruitment policy - no recruitment at industrial level - natural attrition across wide rage of categories - simplification & re-emgineering - Use of ICT (incl. e-Government) - Labour flexibility

  10. Role of Government in Economy • Not a political ideology but pragmatic reality • Regulator not Operator • Privatisation • PPPs…with public service manpower attachments • Benchmarking Malta with other EU countries. • Long term planning necessary

  11. Public Service Collective Agreement 2005-2010 • Agreement for 5 years…against tradition 3-year term • Employers and unions commenced discussions not having financial implications in March 2007 • Wage levels determined for 5 years (net of COLA)

  12. Results thus far…

  13. What about headcount?

  14. What future? • External environment • Stance of trade unions • Government commitment