PRESIDENT Christofias finally had the long-awaited meeting with the bosses of the three big unions on Tuesday. But the result was predictably underwhelming. The two sides appeared to have agreed on a formula for the government to make a total saving of €70 million on the public sector pay-roll over the next two years.
According to press reports, a small percentage would be deducted from the monthly salary of public servants earning in excess of €1,500, from July 1 this year to June 30, 2013; the higher the salary the bigger percentage deduction. After June 30, 2013, the deduction would stop and public servants would receive their full salary again.
To get the unions to agree to this measure, Christofias promised to raise funds from businesses as well. On Wednesday, the president proposed to representatives of the employers’ associations, that all companies which made a profit in the last three years would contribute €1,000 to the state. The finance ministry said this levy would net the government €80-100 million which seemed a rather optimistic estimate.
These ridiculous, half-baked, temporary measures are all that Christofias is capable of implementing. He simply does not have the political courage to tackle the long-term structural problems that threaten to sink the economy, preferring stop-gap measures that would postpone the crisis for a few months. The €35m he will cut is a temporary 1.75-per cent saving on an annual payroll of €2 billion that keeps rising.
The state pensions system, described as a ticking time-bomb by the finance minister, was not even brought up at the meeting with the unions. We would not be surprised if another six months passed before he found the courage to discuss the matter with the unions, which are unlikely to agree to any cuts in state pensions.
It is alarming that the president does not understand gravity of the situation and pressing need for decisions on the structural problems facing the economy. By the end of the year, the government would require close to €2 billion for the refinancing of its loans. If it has not tackled the economy’s structural problems by then, it would have great difficulty raising the funds abroad.
Finance Minister Charilaos Stavrakis is aware of the problem and has been raising funds from the Cyprus market in recent months. He would be unable to borrow €2 billion locally, but would he dare go to international markets for funds, given the precarious state of public finances? And what if he fails to find any bank to under-write a new bond issue?
It is time he explained to his boss that half-baked measures might delay but will not prevent the inevitable crash of the economy.
