NEGOTIATIONS on a second package of austerity measures look set to go to the wire as a new round of meetings between the finance minister and unions ended inconclusively yesterday.
Finance Minister Kikis Kazamias met trade unions SEK, PEO and PASYDY for over two hours, the second time in two days he met unions to discuss the second batch of measures due to be tabled before parliament tomorrow.
State broadcaster CyBC reported last night that no agreement was reached between the government and unions on further measures to deepen fiscal consolidation of public finances. However, another meeting has been set with the minister for this morning, after union leaders get the chance to discuss the proposals raised last night with their members today.
The three unions, representing workers in the civil service and broader public sector, met among themselves before yesterday’s meeting with the minister to forge common positions on the issues under negotiation.
Kazamias has remained tight-lipped about the progress of talks with the union heads, despite reports in the press suggesting a number of new developments.
What is known is that the unions have publicly rejected government proposals for a 25 per cent cut in 13th salaries and a two-year freeze on payment of the cost of living allowance (CoLA).
Last night, without citing sources, CyBC reported that the minister has agreed to withdraw the 13th salary proposal. The two-year CoLA freeze was also reportedly rejected, though the unions apparently agreed to discuss other proposals regarding CoLA this morning.
The unions have taken a hard line on the second package of measures, referring to “red lines” and threatening strike action over any “unilateral action” taken by government or parliament.
Glafcos Hadjipetrou, head of the blanket civil servants union PASYDY, has also warned the union is considering suing the state over recent changes to civil servants’ pension schemes.
If a breakthrough is made in negotiations with the unions this morning then Kazamias will likely take the proposed bills to cabinet for approval immediately ahead of tomorrow’s plenary session.
In theory, tabling the second batch in parliament could be delayed until Friday but there is little scope for such a setback as Kazamias flies to Poland tomorrow to attend an informal meeting of EU finance ministers on Friday.
In a rare show of support for the government, Central Bank governor Athanasios Orphanides described Kazamias’ efforts as “very encouraging” in a speech on Monday night.
A credible programme of fiscal purging is necessary to restore trust in the Cypriot economy, he said, adding that soon Cyprus will be asked to implement European legislation demanding a restructuring of its national fiscal budget.
Other measures under discussion for the second package include a 2.0 per cent increase in VAT to 17 per cent and an estimated €200 million of savings through revised targeting of social expenditure.
Last week, ratings agency Standard and Poor’s retained Cyprus on credit watch pending approval of the second package, and its content of course.
Cyprus aims to keep the public deficit to below 2.0 per cent for 2012, and to nil by 2013, requiring major government cutbacks, primarily from the state payroll. A European Commission report on public finances for eurozone countries released on Monday called on Cyprus to focus on structural measures to reduce its deficit.
