‘There are things that can’t be done in Cyprus’
FINANCE MINISTER Charilaos Stavrakis said yesterday the government has a “difference of opinion” with the officials of the International Monetary Fund (IMF) Consultation Mission to Cyprus, which issued a report on Monday calling for wide ranging reform to prevent the Cyprus economy from failing.
“We would like a more flexible and more efficient state mechanism, but this certainly cannot be achieved through cutting wages, which in Cyprus is institutionally impossible and – from the point of view of our government – politically undesirable”, the Minister said.
General Secretary of civil servants union PASYDY Glafkos Hadjipetrou was also unconvinced by the IMF report, saying: “It was no great surprise to us – it was the usual recipe. They always refer to the state sector payroll and to cutting employees’ wages.” He had his own response to the crisis: “The biggest problem we have had since the creation of the Cypriot state is tax evasion. If we solve this problem, or at least mitigate it, we will not have any economic problem in our country.”
Regarding the public deficit, Stavrakis said there was a big gap between the IMF’s forecast of 3.9 per cent of GDP for 2009, and the European Commission’s forecast of 1.9 per cent. He said it was clear that “two international organisations can come to very different conclusions based on the same data”.
Stavrakis argued that it was not economic mismanagement which has seen Cyprus move from a public surplus to a deficit. The huge surge in property sales to foreign nationals during the previous government’s term had resulted in large state revenues. He said: “Right now, that market has collapsed; sales have fallen by around 80 per cent, so the state is losing out on hundreds of millions of euro just through a drop in that tax. Moreover, the economic slowdown is also reducing other state tax income such as corporate tax and VAT, while at the same time, in order to boost the economy and strengthen the weaker economic classes, we have increased state benefits. These three facts explain completely the change from a surplus to a deficit.”
The Minister said the government was sticking to its current target: “Our aim is to reach the end of 2009 with a deficit below 3.0 per cent, so as to avoid the European Commission’s budget supervision.” He added that “people should not panic” at that prospect, because “right now 22 out of the 27 EU member states are technically under supervision.”
Stavrakis said that the government is sticking to its commitment that “there will be no new taxes”, and cutting wages or reforming the CoLA (automatic wage-indexation system) any time soon is not feasible. Therefore, “the issue is to gradually increase the state mechanism’s productivity”, so that “we can create a more efficient state machine that can operate with less personnel.”
Georgos Constantinou, Secretary of the Nicosia government workers branch of the trade union SEK, shares this viewpoint. “As a trade union, we’ve been saying for a long time that we need to improve productivity in the public sector, in order to avoid having to take on more staff and put an extra burden on the state budget”, he said. He added: “Better use of technology and better work organisation would help a civil servant become more productive and serve the public better, without increasing costs.”
Employers and Industrialists Federation (OEV) President Andreas Pittas said that “productivity needs to increase in the public sector. Productivity scales should be introduced and a real discussion begun on how to improve things from where we are now – starting with the current working hours, for example.”
Regarding the IMF’s approach, Pittas said: “I do agree with the logic of slimming down the state machinery. But they tend to repeat themselves – there are things that can’t be done in Cyprus.”
