PRESIDENT Demetris Christofias yesterday blamed an “alliance” intent on harming the government for a downgrade of the country’s debt rating by Standard and Poor’s, saying his administration could assume no blame for the cut.
A similar comment was made a day before by Finance Minister Charilaos Stavrakis, who sought to shift the blame on to the Central Bank.
Speaking yesterday at an event to mark the April 1 EOKA anniversary Christofias said:
“The issue of the economy is being used in an unacceptable manner, blaming the government though it has absolutely no responsibility for the recent downgrade, no responsibility at all,” Christofias said.
“The responsibility lies elsewhere, with those who have created, I would say, a bloc, an alliance, to hit the government mercilessly on the issue of the economy and to create a panic among the people,” he added. Christofias did not elaborate on who he thought was in this alliance.
He was answering a question on whether the state of the economy was as bad as opposition parties portrayed. “Of course not,” he said, adding that those who bore responsibility for spreading panic would be ‘held accountable by history”.
Opposition parties have repeatedly criticised the government for painting a rosy picture of the economy and dragging its feet on structural reforms. But so have the ratings agencies, and Central Bank Governor Athanasios Orphanides.
Orphanides has repeatedly said economic reforms – particularly public sector cuts – were needed to put the island on a sustainable growth path. He said recently he was perturbed that the government’s fiscal problems were casting the banking sector in a bad light.
Moody’s ratings agency, which cut Cyprus to A2 in February, and subsequently the three main banks, also cited fiscal slippage for its decision to downgrade.
Moody’s said there were rigidities in government spending which needed to be addressed, highlighting social transfers and the high public payroll.
Another ratings agency, Fitch, which has placed Cyprus’s A rating on credit watch negative, said it was worried at delays in structural reforms.
The state payroll represents about 30 per cent of annual spending. It has 55,000 civil servants among a population of about 800,000. Its payroll exceeds €2.0 billion, a huge chunk of total spending of around €8 billion. Stavrakis even said during a meeting recently with Moody’s that he was “ embarrassed showing the figures to analysts.”
Yet little or nothing has been done on structural reforms other than cutting 1,000 civil servants.
It has been exactly a year this week since Christofias said he would be meeting the leadership of public service union PASYDY to discuss wide ranging cutbacks. The negotiations would begin after Easter 2010, the government spokesman said at the time.
Since the government late last year imposed a raft of new taxes to bring in extra millions, there has been little or no mention about further public sector cuts or meetings with PASYDY to discuss them.
When asked yesterday about the dialogue with PASYDY, Christofias said talks had started with the powerful trade union. However it was not clear when and where this dialogue had been taking place.
“I have already met with PASYDY twice and I will invite PASYDY to meet again next week, if they can,” Christofias said.
PASYDY boss Glafkos Hadjipetrou said however “no meetings have taken place recently. The last meetings with the government were at the finance ministry, with the rest of the unions, when it was announced they were” hiring an actuarial firm to look into the pensions system and come up with recommendations.
Hadjipetrou voiced his readiness to meet the president whenever his union were summoned but he reiterated: “at least as regards civil servants, the pensions system is secured and cannot change for those currently serving.”
He added that unions agreed to wait for the study to be completed and then look into the matter.
The meeting at the finance ministry took place late last year. Actuarial firm Muhanna is expected to conclude its assessment in a couple of weeks. The finance minister has said that dialogue with the unions will start soon afterwards.
The response to Christofias’ passing the buck yesterday came strong and swift from main opposition DISY deputy chairman Averof Neophytou who said he was even more worried about the economy after the president’s statement.
“If it were different times, he would have sent us to Siberia without second thought,” Neophytou told reporters, referring to Christofias’s communist roots.
“For the president and the government, foreigners are to blame for everything, Neophytou said, adding that the government was out of touch with reality.
“This has been confirmed for us in the best way possible…by the President of the Republic,” he said.
