PRESIDENT Demetris Christofias yesterday rejected anew any blame for a recent downgrade of the economy by international ratings agencies and censured the Central Bank Governor for criticising the government’s financial policy.
Christofias also announced that he will be meeting the civil servants’ union PASYDY and other unions tomorrow to discuss ways of saving some €70 million in 2011 and 2012.
“The government is responsible for drafting economic policy,” the president said at a news conference to mark his three years in office. “The (Central Bank) Governor exercises control on banks” not the government.
“This is unprecedented in Cyprus,” said Christofias of Athanasios Orphanides’ comments regarding the economy.
The Central Bank Governor has said swift action was needed to improve public finances in the wake of downgrades by international rating agencies.
“In my view international markets have doubts about our republic right now, to a large extent because we have not taken decisions which we ourselves had said we would take,” Orphanides said on Monday.
Standard and Poor’s cut Cyprus one notch to A- last week, citing its concern about the risk to the island’s banks from a potential debt restructuring in Greece.
Christofias wondered if the government could be held responsible for the banks’ exposure to Greece.
He said his government has asked banks to cut their interest rates on deposits so that they would be able to give loans at lower rates.
“When we tabled the issue it was rejected,” Christofias said, adding that Orphanides could have forced the banks to cut their rates.
The banks ended up with reserves they could not use in Cyprus and so they went to Greece instead, the president said.
But he said the ratings agencies were scare-mongering.
“The EU will not let Greece go bankrupt,” Christofias said.
But the president avoided saying whether he trusted the Central Bank Governor or not.
“The governor is an independent official. I respect him and his independence. From then on I demand the same respect,” the president said.
On Monday, Orphanides said the government had pledged last year to take structural reforms to improve the country’s finances.
The main reform concerns the state workers’ pensions system, but dialogue with the mighty PASYDY has been delayed.
“It is true that the dialogue with PASYDY is delayed. But it is not delayed because of the government or me personally,” the president said.
Christofias pointed the finger at the opposition and coalition partners DIKO, who rejected two bills – taxing companies and property – “which would have certainly made PASYDY willing.”
The pensions issue is not simple, Christofias said.
“These are the secure rights of workers in the civil service and semi-government organisations,” he said.
He added that the matter will be discussed with the unions who had agreed for a study to be done into the pensions system.
Actuarial firm Muhanna was tasked with looking into the pensions system and coming up with recommendations for its reform.
Christofias last night said the study was ready – he showed reporters a copy.
The president pointed out that his government was called to deal with the fallout of the global financial crisis, a job which was done efficiently, despite the criticism.
“We have never maintained that all is well or a bed of roses. It is this government which has highlighted problems and stressed the need to tackle structural problems of the economy. We ask to be compared with others in an objective manner,” he said.
Cyprus needs a positive approach and not constant negative comments which provoke unjustified panic.
The combination of reduced revenues, because of the crisis, and increased spending led to a public deficit, which in April 2010 stood at 6.1 per cent, the president said.
Public deficit was contained to below 6.0 per cent, standing at 5.3 per cent at the end of 2010, Christofias said.
The president said that the government has submitted to the EU a three-year-long Stability and Growth Programme, which foresees limiting public deficit to 6.0 per cent in 2010, 4.5 per cent in 2011 and 3.0 per cent in 2012.
He said the increase in operating costs for 2011 was just 0.5 per cent only, when previous annual increases usually ranged between 7.5 and 8.0 per cent.
Moreover, he said, in “an unprecedented move” the number of public servants decreased by 1,240 by December 2010.
