THE EUROPEAN Commission yesterday called on the government to adopt a wide range of recommendations to get Cyprus’ economy back on a sound footing, proposing measures “of a permanent nature” to curb the public deficit and debt.
The measures include reform of the pension and healthcare system, with references also made to the way collective agreements are negotiated and the Cost of Living Allowance (CoLA).
The proposals are part of a package of 27 country-specific recommendations – plus one for the euro area as a whole – to help member states gear up their economic and social policies and deliver on growth, jobs and public finances.
Reform measures need to be implemented to control pension and healthcare expenditure to curb the projected increase in age-related expenditure, the Commission said.
For pensions, the Commission proposes extending the years of contribution, linking the retirement age with life expectancy, while taking care to address the high at-risk-of poverty rate for the elderly.
On healthcare, Cyprus is recommended to take further steps to accelerate implementation of the national health insurance system.
The government should accelerate the phasing-in of an enforceable multiannual budgetary framework with a binding statutory basis and corrective mechanisms, starting with the preparation of the 2012 budget.
Cyprus is also advised to further strengthen supervision of banks and cooperative credit societies to ensure early risk detection and improve the long-term sustainability of public finances.
In consultation with social partners and in accordance with national practices, the government is advised to reform the system of wage bargaining and wage indexation, a likely reference to CoLA, to ensure that wage growth better reflects developments in labour productivity and competitiveness.
Further steps are also needed within the reforms planned for the vocational education and training system, to match education outcomes to labour market needs better, notably by setting up a post-secondary vocational education and training institute.
The EU body calls on Cyprus to abolish remaining obstacles to the establishment and free provision of services in sector-specific legislation by October 2011 to create more opportunities for growth and jobs in the services sector.
Furthermore it suggests new measures to increase competition in network services by allowing greater freedom to set prices and establish, by 2012, a water management plan and a price-setting scheme reflecting cost efficiency and equity concerns in order to ensure more sustainable management of water resources.
