PUBLIC sector wages are part of the wider problem Cyprus’s economy faces and a two-year wage freeze alone may not help, unless this measure is accompanied by a complete overhaul of the public sector, a fund manager said.
“Transferability is something the public sector badly needs,” Marinos Gialeli, general manager of the Hotel Employees Provident Fund, which is the largest of its kind in Cyprus, told the Sunday Mail in an interview.
“We must finally start regarding the public sector as a company and introduce some proper management in it as it will benefit public finances,” said Gialeli who manages 270 million euros in assets. “Without it, the government cannot transfer unneeded staff from the ministry of Agriculture to the Ministry of Commerce and must therefore hire more people. We also need a system to measure a public servant’s performance”.
Minister of finance Kikis Kazamias said on Friday that the government is considering a complete freeze in public sector wages, a tax on revenue of local companies and a contribution of private sector workers earning more than 2,500 euros monthly. The proposed measures are what can help Cyprus avoid resorting to a bailout, he said.
Cyprus’s Hotel Employees’ Provident Fund has been winning the IPE Best Pension Fund in Smaller European Countries Award for the past three years. In 2010, it was also runner-up for the IPE Best European Industry-wide Fund Award.
“Whatever politicians decide to do, they must take action that will allow the economy to grow again,” Gialeli said.
The fund had disinvested all its positions in Greek and Cypriot stock by early 2010, according to Gialeli. Unless the economy starts growing again, the provident fund he manages will not reconsider its decision not to invest in Cypriot stock, he said.
For this to happen, it will only take “some orthodox economics,” according to economist Michalis Florentiades.
“New taxes are not encouraging economic growth while what is effective to achieving budget targets is cutting spending,” he said. “It also sends a signal to creditors that we reliable and do what we have to do”.
While Cyprus’s companies are already facing enough problems themselves, with a further increase in taxation and “the state becomes yet another one,” he added.
Florentiades cautioned not to “demonise” the European rescue mechanism in order to justify wrong measures. “We should not try to avoid at all cost resorting to a financial rescue. It is not an anathema, it is a cure, just like what happens in the case of someone who’s ill and goes to the doctor”.
