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Business leaders have called for a reduction in the number of councils in Wales from 22 to seven.

CBI Wales also wants a minister for north Wales as well as a two year public sector pay freeze in its "manifesto" for parties ahead of May's assembly election.

Director David Rosser said the measures would help "put the economy back on track".

But local government leaders warned council mergers would cost.

Mr Rosser said growing the economy must be the "overarching priority" of the new assembly government.

He said CBI Wales was focussed on policies that would secure "sustainable economic growth" for Wales.

"The next four years will be a critical period for Wales,

"The new assembly government must seize this opportunity to put the economy back on track," he said.

"Delivering a 'devolution dividend' is the challenge we are setting the politicians of the next assembly term.

"It behoves us all to leave the Welsh economy stronger than we found it with greater opportunities for this generation and the next."

Mr Rosser said the recommendations in CBI Wales' manifesto, including a cut in the local authorities in Wales, the creation of a North Wales minister, and a public sector pay freeze, were "tough choices".

He described a reduction local authorities as "radical" public sector reform, but a way of getting public services to deliver more for less.

Steve Thomas, chief executive of the Welsh Local Government Association (WLGA), said many councils already work together.

"The idea about local government is to provide local services. What the CBI is suggesting would see, for example, one authority covering Anglesey to Wrexham.

"But this is why we got rid of regional councils - they were too big, too unresponsive and too bureaucratic.

"The idea of reducing the number of councils in Wales has been floating round for a long time but to do it now in the midst of cuts would come at a cost.

"It costs to merge councils, and it costs to make people redundant."

Mr Thomas said the WLGA organisation already had four regional boards across Wales to "encourage regional collaboration".

"These include public sector, police and local government representatives. It's to encourage regional collaboration and is about sharing services and resources."

Last month, the assembly government put forward proposals giving them power to merge Welsh local authorities.

An assembly government spokeswoman said: "In the current financial climate local authorities need to work together and collaborate much more closely with their neighbours."