Government shouldn’t bailout bad business choices
We tend to believe that this is a country whose economy is based on the capitalist/free enterprise system.
This is not so, and the facts show this. We, as Cyprus are a mixed model of a capitalist and a communist system, depending on the pressure groups and small politics we chose to suit us at the time.
It seems that any losses regarding trade union funds, certain private businesses and others, have a strong position regarding their own investments in the sense that they can keep any profits from their investments, but any losses the State covers them. What is this?
This is even when these investments are managed by their own members. A few of these board members got told off by the Government, on other occasions the bosses went to prison, but what sort of a system do we have?
Regarding private losses, let’s start with the recent Thomas Cook problem with the hoteliers asking the State to forego the VAT and other charges which benefit the budget. And this after (in particular) this Government offered them free-of-charge incentives to expand in terms of added building density and numerous relaxations (including the cover-up of illegal extensions for 5 years). This business of the hotel industry was doing very well with added profits and now they may suffer losses of some income which according to the hoteliers amounts to EUR 50 mln (recent estimates reduce this to EUR 30 mln). The State is now running around to establish new destinations/tour operators giving them all sorts of subsidies to make up the hoteliers short term loss. If the Government gives in (and it seems that it has) where will this “help” stop? if this happens, then coach tours, taxi owners, the entertainment places and so on will follow with similar claims. Why don’t other businesses, which from time to time have financial problems, expect such help?
The Thomas Cook Group according to reports asked the U.K. government for EUR 200 mln and the Government said no – notwithstanding the reported loss of 20,000 jobs in the UK. We do not have this sort of situation, but it shows you how a capitalist system works.
For this reason, and as an initial suggestion, we have provided the idea of having some sort of a hotel insurance cover, with the contribution towards its cost coming from the hotels, the unions, financiers (who also stand to lose) but not the government. A similar insurance system exists for agricultural products. We do not suggest that the hotel industry should be abandoned since this is the oxygen of the Cyprus economy and practically all the other economic activity depends.
The never-ending union demands, due to the weakness of the government, insist their members must not suffer losses from their own investment emanating from the Cyprus Stock Exchange crash and other real estate ones (some of them illegal) and the government came up with tens of millions in gifts to them in real estate (see the Cyprus Electricity Authority, the Cyprus Telecommunications Authority). So, there is a sort of a guaranteed income for these setups, if they gain from their own investment it is “theirs” and if they lose it is “ours”. Any logic to this?
Let’s come now to the dodgy visa/passports scheme. The greedy developers undertook all sorts of promotions, some of which are most provocative (see the recent Paphos developer (with full-page ads), whereas the previous Government warned them that the E.U. is against us.
So, if now they experience a reduction in profits due to the recently introduced restrictions, will they ask the government for all sorts of help and this after the government gave them numerous building density incentives. We have warned the government on this and we have even suggested the imposition of hefty penalties.
Let’s come now to the GESY (national health service) doctors, who notwithstanding their income demand, are now getting more than EUR 300,000-500,000 p.a. and still asking for more. With these demands, the system will not be financially viable (see also E.U. and I.M.F. warnings). Doctors are now setting up private clinics, they are one of the biggest spenders in this country and be sure that when they run into trouble (most likely over the next 2-3 years) they will turn towards the Government for more subsidies.
Finally, the teachers’ unions who want to replace the Government with their own opinion of how our education system should work. They are among the highest-paid workers in Cyprus, with the fewest working hours and in the end, our children get rock-bottom results by E.U. standards. Now they even want to have a go at the Cyprus University to get their opinion on the management of this unique university which is an asset of Cyprus.
End result, we are paying the top scale in education for poor results, many private schools are trying to close this quality void. These private enterprises appear to be doing well at this point in time and we wish them all the best – hopefully, they will not go into the red, but if they do (we hope not) they may also demand handouts and tax relief?
So, there you are, a unique economic system aided by our own small politics and populist Members of Parliament who only really care about their position and income.
Do we have a chance?