Pay­ing off civil ser­vants harms econ­omy


Financial Mirror (Cyprus) - - FRONT PAGE -

Fol­low­ing on from the rel­a­tive calm that avoided a storm in labour re­la­tions prior to the pres­i­den­tial elec­tions, it is clear the pay-off by the Anas­tasi­ades ad­min­is­tra­tion was to re­in­state civil ser­vants’ pay to their pre-cri­sis lev­els, with the add-ons hit­ting us over the next few years.

Em­ployer groups were re­served in only ex­press­ing “sur­prise” and “con­cern” this week, when they should have been out­raged over the gov­ern­ment giv­ing in to the priv­i­leged de­mands of self-in­ter­est groups such as the unions rep­re­sent­ing 85,000 civil ser­vants. Their votes ob­vi­ously count more than ours af­ter this turn of events.

This ad­min­is­tra­tion was re-elected on a plat­form of eco­nomic sta­bil­ity, mak­ing clear dis­tance from the bank­ing melt­down of 2012-2013 and quickly ex­it­ing the bailout pro­gramme im­posed by the Troika of in­ter­na­tional lenders.

Pay­ing the price of this ‘eco­nomic mir­a­cle’ were the dwin­dling num­ber of busi­nesses in the pri­vate sec­tor, mostly small to medium-sized en­ter­prises, where, to sur­vive, lay­offs were se­vere and wage cuts were to the tune of 40-60%, and not the 40-60 eu­ros many pub­lic-sec­tor work­ers ‘suf­fered’.

Fur­ther­more, the ad­min­is­tra­tion re­neged on its prom­ises of root-and-branch re­form, tak­ing five years to in­tro­duce half-mea­sures and avoid­ing al­to­gether the trou­ble­some pri­vati­sa­tion of the elec­tric­ity author­ity and Cyta tele­coms.

Ef­fec­tively, pri­vate sec­tor em­ploy­ees will con­tinue to sub­sidise 85,000 state work­ers who, on av­er­age, are much bet­ter paid.

This could go on well into 2029, when pro­jec­tions by the Fis­cal Coun­cil sug­gest Cyprus will meet the 60% bench­mark of the GDP-to-pub­lic debt ra­tio, presently over 100% af­ter the state de­cided to guar­an­tee mort­gages and NPLs at the state-owned Cyprus Co-op­er­a­tive Bank.

Cer­tainly, the pri­vate sec­tor will not be able to with­stand this ad­di­tional bur­den of sup­port­ing the bloated pub­lic-sec­tor pay­roll, de­spite the ar­ti­fi­cial fig­ures of bring­ing pub­lic fi­nances into or­der, that seemed to con­vince the Troika lenders of our abil­ity to exit the bailout pro­gramme and thus avoid more EU tax­pay­ers’ money to be used for yet an­other res­cue.

The ‘real’ econ­omy (once the buzz­word for op­po­si­tion par­ties who have since had a con­ve­nient mem­ory lapse and for­got­ten this phrase al­to­gether), is still strug­gling to stand on its feet.

As a re­sult, com­pet­i­tive­ness is suf­fo­cat­ing and any en­trepreneur­ship ge­nius with start-ups and hi-tech in­vest­ments will not be enough for Cyprus to re­gain its right­ful place in in­ter­na­tional mar­kets. Fun­da­men­tal cuts in the gov­ern­ment’s de­vel­op­ment bud­gets means that school build­ings re­main in dis­re­pair, pub­lic health re­form con­tin­ues to re­main in limbo, roads are merely be­ing patched up and the only projects that catch the eye are those tak­ing place in the pri­vate sec­tor.

Pan­der­ing to union de­mands that in­su­lates their priv­i­leged po­si­tion is why Cyprus is not mov­ing for­ward with the kind of re­forms that would make the coun­try more com­pet­i­tive and guar­an­tee our ed­u­ca­tion and health sys­tems are fit for pur­pose.

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