IT WAS not clear yesterday whether the government and the coalition parties were any closer to an agreement on an economic package.
With the rest of the public watching, DIKO, AKEL and the Finance Ministry are still discussing the proposed government package which provides for curtailing the civil service payroll and raising taxes on a number of products, including medicines and foodstuffs.
The measures are aimed at slashing the deficit to achieve the EU goal of 4.5 per cent of GDP by the end of 2011.
But time is fast running out for an agreement. The coalition has just a fortnight to reach a conclusion, with discussions on the 2011 state budget scheduled to begin in mid-December.
And DIKO’s Nicholas Papadopoulos warned yesterday his party would not vote for the budget as it stands.
His party was not to be blamed for the delay in reaching a deal on the economic package, he stressed.
Back in February, Papadopoulos said, the Finance Minister had submitted an economic package, to which DIKO had agreed. That package, which among other things had provided for cutting civil servants’ wages by one per cent, was later dropped, Papadopoulos said.
The implication was that the plan was shelved because of opposition from the civil servants union PASYDY, taking the government back to square one.
“In February the Finance Minister was talking about reductions in wages of one percent, and now we’re talking about two per cent. If we delay for another year, we’ll be talking about three or four percent,” said Papadopoulos.
Nevertheless, he expressed hope that the parties would close a deal soon.
Earlier this week Stockwatch reported a €160 million difference between DIKO’s and the government’s proposed measures to raise revenues and cut state expenditures. The website said the party is looking at €400 million, compared to the government’s €240 million.
Defending the administration’s policy, government spokesman Stefanos Stefanou said yesterday that the 2011 budget provides for a 1.1 per cent increase in expenditures, compared to an average of seven to eight per cent in recent years.
Stefanou also answered criticism from DISY deputy Averoff Neophytou, who earlier claimed the government had failed to ask the EU for an exemption in levying VAT on medicines and foodstuffs, as Malta had done. Neophytou claimed that the current administration let slip another window of opportunity in 2009, and promised to quit politics if he was wrong about this.
Stefanou said that, prior to acceding to the EU, Malta had specifically stated to the bloc it would not impose VAT on these two items. This statement allowed Malta to be exempted beyond the year 2010.
By contrast, the Cyprus government of the time had not done the same. Cyprus got an exemption from levying the above VAT until 2007, and then in that year got a second exemption which expires on 31 December of 2010.
According to Stefanou, in 2009 the AKEL government had in fact asked for a VAT exemption on medicines and foodstuffs, but its request was denied by the European Commission.
Meanwhile the Cabinet yesterday gave the green light to commercial banks to issue covered bonds.
Stefanou said the ability to issue covered bonds had been a longstanding demand by both the commercial banks and the Central Bank.
The issuing of covered bonds is aimed at drawing liquidity from abroad and would potentially help bring down interest rates, the spokesman said.
The Cabinet’s decision would be passed on to parliament for ratification, he added.
