ANY adjustments to the cost of living allowance (CoLA) will not affect low wage earners, Finance Minister Kikis Kazamias said yesterday.
“We are working hard, considering all the facts so that the arrangement will be fairer than what it seems today” – favouring the high-salary recipients of this privilege, the minister told reporters yesterday.
CoLA is paid every six months as a percentage of a worker’s salary; the higher the salary the higher the allowance is.
This “is a super-privilege for some since the raise received by a worker on €1,000 or €1,500 is not the same with (a worker on) €5,000,” Kazamias said.
The government will seek to overhaul the CoLA system as part of a second austerity package expected to be discussed in the next couple of weeks.
“What remains open … is discussion and conclusion with the unions on the way CoLA is distributed,” the minister said.
Also pending is the government’s intention to freeze CoLA payments for 2012.
The second package includes some €360 million in spending cuts — €200 million of which will be saved from better targeting social transfers.
Kazamias could not immediately provide a figure for the savings aimed by the package but he said further cuts in public spending and a “relative raise in revenues” were expected.
He said there will also be provisions to boost growth and the big objective would be to keep the public deificit below 2.0 per cent for 2012.
Cyprus aims to have no deficit by 2013.
The minister said instructions will also be given to semi-government organisations to adopt the government’s austerity policy.
“It is the government’s decision to intensify its scrutiny (of semi-government organisations) and this will be done through the budgets these organizations will submit,” Kazamias said.
He said the government has embarked on a campaign to inform ratings agencies of the measures and efforts to consolidate public finances.
On Friday, parliament passed a first batch of measures that include permanent and temporary contributions from civil servants as well as a series of new taxes.
A rise of VAT to 17 per cent from 15 per cent was deferred for discussion along with the second package.
A downgrade is widely expected but the minister is placing more importance on the agencies’ assessment of the outlook that could show that “we have reached the bottom and we are beginning to rise.”
Fiscal slippage and the heavy exposure of its banks to Greece have seen the island’s credit ratings repeatedly downgraded in the past year, driving up yields on its bonds.
The government has increasingly focused on its domestic market for borrowing this year as yields on its international bonds have surged. Some €1.2 billion in bonds are maturing in January and February 2012.
