FINANCE MINISTER Charilaos Stavrakis yesterday described the state’s 2011 budget as “the tightest in the past 30 years”, as he presented it to House President Marios Garoyian.
The minister said the primary goal was to achieve economic recovery.
“It is an extremely important budget, which has the primary aim of economic recovery or improving public finances,” said Stavrakis. “This year’s budget can be described as the tightest budget in the past 30 years.”
He said that total expenditure would increase by 1.1 per cent, “which is the lowest percentage in the past 30 years”, while operational expenditure would be reduced by 3.0 per cent.
In the frame of reducing the state’s expenses, said Stavrakis, the government will for the first time in Cyprus’ history submit a bill to cancel 405 permanent positions in the public sector.
He added that up until August this year, employees in the public sector were reduced by 800, while the plan is to reduce them by a further 1,000 in 2011.
“Therefore we are talking about a very important structural change that reduces the notion of a spendthrift state,” Stavrakis said.
“The government has done whatever it could possibly do to improve public finances,” he said, adding that the European Commission’s guidelines – which provide that around two thirds of an economy’s recovery should come from reducing expenditure and a third from increasing state revenue – had been taken into account during the budget’s preparation.
“We reduced state expenditure by around €400 million and the remaining amount needed is just €150 million or 1.0 per cent of GDP,” said Stavrakis.
He said he hoped the government’s proposals on how to come up with the added €150 million would be met with a positive reaction by the parties and social partners – with whom he is currently holding extensive consultations. “We are optimistic that in the next few days, we will conclude on an effective and socially-fair package of measures, agreed by the parties and social partners,” said Stavrakis.
Asked if there were plans to increase VAT to 16 per cent, Stavrakis said it would pointless to start a public discussion on possible measures that may be discussed. “But we are definitely no going to rediscover the wheel,” he added. “The measures that are being promoted have been implemented in the rest of Europe with quite a bit of success.”
Stavrakis pointed out that the budget for 2010 had been described as the budget that would help Cyprus’ economy emerge from the crisis.
“And I think that despite the great difficulties and challenges that we are still facing, last year’s budget was a success. Cyprus’ economy did emerge from the recession, positive growth rates have been noted in 2010 and we are all expecting that we will achieve economic recovery in 2011,” said the minister.
The Finance Ministry is predicting a positive 1.5 per cent growth rate for next year, he added.
According to Stavrakis, there will be a five per cent increase in public servants’ salaries, which would have been 6.5 per cent if the reductions hadn’t been made.
He said an increase in state revenue didn’t necessarily mean an increase in taxes, while a reduction in expenditures would have to take place without affecting the government’s social and developmental aims.
Receiving the budget, Garoyian said parliament would examine the budget, “with the necessary sobriety and attention”, while he explained there would be some new procedures put in place for this year’s discussion.
Apart from assessing each ministry’s budget separately – as was the case in previous years – there will be a further four “specialised” sessions: the first will analyse the state’s revenue and the remaining three will discuss the expenditures chapter by chapter.
Party Reactions
WITH THE usual exception of ruling AKEL, all the other parties were yesterday less than optimistic about the new budget.
The Chairman of the House Finance Committee, DIKO’s Nicolas Papadopoulos, was especially critical saying the party did not agree with any notion of the consumer picking up the tab for holes in the public finances.
He said the government’s main aim should be to reduce expenditure. “Unfortunately, from what we have seen so far, it seems the expenses for 2011 have increased instead of reduced,” he added.
Papadopoulos said his first question to the minister, once the budget starts being discussed, will be: “Did the government really do all it could to reduce the state’s expenditures?”
DISY deputy spokesman Christoforos Fokaides said the government’s predictions and estimations of the two previous years had not materialised. “The two budgets led us from an intact economy, to an economy under surveillance,” he said.
EDEK’s Marinos Sizopoulos said he doubted the new budget would achieve its final goals. “It is obviously not a developmental budget when the predicted growth rate will only be around 0.5 per cent, and it can’t be a budget for economic recovery from the moment that the deficit is fluctuating around 5.5 per cent, and when the public debt has exceeded 63 per cent, when two years ago it was 48 per cent.”
EVROKO leader Demetris Syllouris was also critical: “Unemployment is nearing the levels it reached immediately after the Turkish invasion, the high cost of living has is making it hard for the public to survive and interest rates are increasing instead of falling while no support is offered to small and medium sized enterprises,” said Syllouris.
