An­other fum­ble with the Na­tional Sol­i­dar­ity Fund


Financial Mirror (Cyprus) - - FRONT PAGE -

Just as we started to be­lieve what the gov­ern­ment has been feed­ing us, that the econ­omy has re­sumed on a re­cov­ery path and boasts the sec­ond high­est growth rate in the EU, the Anas­tasi­ades ad­min­is­tra­tion an­nounced it was set­ting up a Na­tional Sol­i­dar­ity Fund to bail out in­vestors who lost mil­lions in bank bonds in 2013.

Fi­nance Min­is­ter Haris Ge­orghi­ades said that the fund would be en­dowed with 25 mln euros, which is lit­er­ally a drop in the ocean com­pared to the 9.5 bln wiped out in the bank­ing cri­sis four years ago.

Although Ge­orghi­ades said that no new taxes would be an­nounced, what the econ­omy needs right now is more in­vest­ment and tax breaks, not golden hand­outs to a priv­i­leged few. The av­er­age SME is be­ing forced to dish out an end­less ream of lo­cal and con­sumer taxes, which in some cases have proven un­bear­able and small en­ter­prises are con­tin­u­ing to shut down, de­spite the sugar-coat­ing of the sit­u­a­tion and the lav­ish dec­la­ra­tions to fund start-ups and in­no­va­tive ini­tia­tives.

This fol­lows the stupid de­ci­sion to bail out bank­rupt foot­ball clubs with a fur­ther 19.5 mln euros, that will now be en­cour­aged to hire more play­ers on con­tracts they can’t af­ford and will se­cure state fund­ing for sta­dia they can’t af­ford to build.

So, with the cre­ation of the Sol­i­dar­ity Fund, the gov­ern­ment has ef­fec­tively laid to rest any no­tion of estab­lish­ing a wealth fund, where rev­enues from oil and gas ex­plo­ration li­censes were sup­posed to have been de­posited. Cyprus had been toy­ing with the idea of cre­at­ing a wealth fund, sim­i­lar to that based on the Nor­we­gian model, only the gov­ern­ment soon changed its mind and de­cided to spend that money (not a cent was saved for a ‘rainy day’), pay­ing the pub­lic pay­roll and promis­ing civil servants their wages would be re­in­stated to pre-2013 lev­els.

What is most wor­ry­ing is that no­body no­ticed the com­ment that the new Sol­i­dar­ity Fund would be fi­nanced from rev­enues aris­ing from state as­sets.

Are these the same unutilised state as­sets that the gov­ern­ment has been try­ing to sell off? Will this also in­clude rev­enues ( aka “sur­pluses”) from other sta­te­owned en­ter­prises, such as Cyta, EAC, etc. or will these once again be re-di­rected to pay­ing off state pay­rolls and pay­ing down debts ac­crued by civil servants’ bank­rupt pen­sion funds?

It is too bad that on the one hand, the ad­min­is­tra­tion de­clares eco­nomic pru­dence, yet re­turns to hap­haz­ard pay­ment meth­ods of the past. Worse still, op­po­si­tion voices are more con­cerned in keep­ing ‘state as­sets’ within pub­lic hands, sim­ply in or­der to en­sure that they, too, would have funds to money to pay to civil servants, in case they win the Jan­uary elec­tions.

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