Previous administration ignored warnings to rein in spending

Technocrats had warned the previous government as early as 2008 to rein in expenditure but the cabinet and parliament would nonetheless approve inflated budgets, a finance ministry official told an inquiry today.

“It was obvious that the economy was overheating especially in the real estate and construction sectors,” said Stavros Michael, head of the finance ministry’s state budget department.

Despite the warnings in view of the anticipated drop in revenues, by the time the budget went to parliament, state expenditure grew, Michael said.

“Economic theory states that if you have high, unusual revenues, you must not also increase spending. You must use that to pay back debt and leave spending alone to allow the economy to return to normality,” Michael said.

The ministry technocrat also charged that the Demetris Christofias administration failed to take timely action to address deteriorating state finances.

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