financial guarantees to investors interested in redeveloping the old Club Med site.

As Tourism Minister David Allen notes in today's newspaper, Government is not in the hotel business -- and it never should be.

Nonetheless, the fact that the Camberley deal for Club Med, which initially looked very promising, is now near collapse leaves Government and Bermuda in a Catch-22 situation.

Offering financial guarantees, or tax incentives, to prospective developers could lead to protests from the rest of the hotel industry who are forced to compete in the world tourism market without similar assistance.

And too much generosity on the part of Government could lead to a heavy and never-ending drain on public finances and questions of whether good money is being thrown out after bad, particularly if properties are losing money as a result of poor management.

There are times when public financial incentives are good for the economy and for the community. It may be that some form of incentive will have to be offered to investors for Club Med, which had a poor financial record even when the Island's tourism industry was far more buoyant than it is today.

Given the Island's high labour costs and the marginal financial performance of some of the Island's major hotels, only the brave, or the foolish, seem to be prepared to make heavy investments on the Island now.

And Bermuda is also competing with other destinations, some of which are prepared to make any kind of deal in order to attract investors.

It could be argued that a financial guarantee, which may never have to be used if Bermuda is truly confident about its "new'' tourism product, would be money well spent if it means that a hotel on the Camberley model could be built, bringing jobs and business to the East End.

But Mr. Allen is right not to make a decision on the Club Med building on an ad hoc basis. What is needed is a careful look at the whole tax and wage structure of the hotel industry to see where reductions in costs and improvements in productivity can be made.

Some of the work on productivity is being done already by the Monitor Group and its partners, and it has been reported that Finance Minister Eugene Cox is looking at breaks on Customs duty for the retail/tourism sector. Mr. Allen is doubtless involved in these talks -- perhaps the time is right to look at the whole range of tax incentives -- but not guarantees -- and decide which would suit Bermuda best.