Island to remain competitive, according to the Bank of N.T. Butterfield's chief general manager Mr. Michael Collier.

In a newsletter to the shareholders, Mr. Collier said it was wrong to blame all of the Island's problems on "a global recession beyond our control''.

"As a Country, we have problems of our own making -- from an erosion of traditional values and a tendency towards political divisiveness to an excessively large public sector -- which need to be addressed domestically if Bermuda is to retain its competitive edge for the long haul,'' he said.

Although the Bank of Butterfield was "generally confident'' of a modest recovery in the local economy during 1993, "clouds of uncertainty remain on the horizon''.

Mr. Collier cited the recent controversy surrounding the future of the United States Naval Air Station, at St. David's, as one such cloud.

"We are not out of the woods yet,'' he added.

On the global scene, Mr. Collier said the pace of US economic activity had shown "definite signs of strength in recent weeks after a disappointing performance in the run up to the Presidential elections in November''.

He added: "Both consumer spending and manufacturing activity have firmed while the employment situation, as measured by the weekly claims data, may finally be improving.

"The better tone has been reflected in an impressive recovery in the consumer confidence surveys which in some cases show sentiment to have returned to the levels that prevailed before the 1990-91 recession.

"Since the change in administration in Washington along with expectations for some fiscal stimulus may account for a good measure of this improvement, the economy's first quarter performance of 1993 will be important.'' The prospects for economic growth in Europe and Japan continued to deteriorate, with little improvement expected before the summer, said Mr.

Collier.

"The softness in activity in many of the United States' trading partners is in turn likely to dampen export growth, partially offsetting the current recovery in US domestic demand,'' he said.

"In this environment, global inflationary pressures should remain weak and any upturn in US interest rates modest.'' * Mr. Collier said that preliminary indications showed that the Bank of Butterfield's performance over the first half-year of fiscal 1993 has been "quite satisfactory''.