THE government and civil service unions last night rubber stamped a number of measures concerning the public sector that will be part of an austerity package expected to be officially announced today and sent to parliament tomorrow.
Shortly after the measures were announced, DIKO vice chairman Nicolas Papadopoulos said his party – which abandoned the coalition only last week – could not be expected to support the package.
“What we agreed was for a specific contribution on pensions, which everyone says is a time-bomb but it seems some don’t want to do anything to prevent the explosion,” Papadopoulos told Sigma television.
He said that his party would either try to amend the bills or reject them tomorrow.
“The only certain thing is that measures agreed tonight at the Presidential Palace will not be implemented,” Papadopoulos said.
Government Spokesman Stefanos Stefanou told reporters after the meeting: “Included in the agreement are substantive structural changes to rationalise public finances. At the same time the government will continue the dialogue for additional measures related to the situation created after the deadly Mari blast.”
The measures provide for a 10 per cent cut in the pay scales for newcomers in the broader state sector, including newcomers in the social insurance pension fund – it is understood they will be paying 6.8 per cent instead of the current 3.45 per cent — and raising civil servants’ contributions to the widow and orphan fund to 2.0 per cent from 0.75 per cent.
The deal also provides for a 3.0 per cent per year contribution from every worker of the broader state sector for three years, and if necessary extend the measure further should problems continue.
The measures are expected to save the state €22.5 million this year and €101.65 million in 2012.
Though not officially announced, the package is expected to include a 2.0 per cent rise in VAT on items that are already taxed at 15 per cent, which will bring the state an estimated €20 million this year and €130 million in 2012, more than the savings from the public service.
The rise in VAT will not be considered in the calculation of the cost of living allowance.
Reports said the package will also include a 5.0 per cent rise – from 10 to 15 per cent – on gains from interest rates. It is understood that this will only affect residents of Cyprus.
There will also be a 5.0 per cent raise in income tax — 30 to 35 per cent – on income over €60,000.
Glafcos Hadjipetrou, the leader of PASYDY, the state workers umbrella union, speaking after the meeting with President Demetris Christofias said: “The measures we have accepted are very painful for workers. We have accepted making sacrifices to help tackle the economic crisis.”
“As unions we think we are contributing positively to tackling the problems faced by our country and expect that political parties and parliament will respect what we have agreed with the employer,” said SEK boss Nicos Moiseos.
Stefanou said the cabinet will finalise the package today and send bills to parliament.
The spokesman said details on the package – including the overall value — and prospects on economy will be presented by Finance Minister Kikis Kazamias in parliament.
But the measures that affect the public sector appear to fall short of what parties expected, setting the scene for a showdown in parliament where the government does not have a majority.
In particular, the package does not include a 4.0 per cent contribution by current state workers towards their government pension, which parties say was included in earlier measures discussed in July.
“Everyone should help in a constructive way, seeking what unites us and not what we disagree on so that we will be able to have decisions on the economy as soon as possible and by implementing these measures to send a strong message domestically and abroad that the Cypriot economy has a present and future,” Stefanou said.
Theoretically, opposition parties could amend the package and pass the 4.0 per cent contribution, something which most certainly prompt reaction.
“Unions certainly will react to this and I think its natural for us to demand that agreements with government should be respected,” PEO chairman Pambis Kyritsis said.
DIKO’s Papadopoulos said his party had the good will to enter a constructive dialogue but “what we are not prepared to do is tax people so that increased spending in the public sector continues.”
Papadopoulos said the government should cut spending first and then discuss any additional taxes.
