DEFIANT civil servants said yesterday that the economy’s problems were not their fault, as the finance minister warned that if the conditions were not reversed, Cyprus could soon be seeking a bailout to cover its needs for financing.
However, the government workers union PASYDY suggested they were not to blame for the situation and that eradicating tax evasion would solve the economy’s problems.
Union boss Glafkos Hadjipetrou said government workers have already made several concessions.
“This cannot go on indefinitely,” he told state broadcaster CyBC.
Reports yesterday said that Finance Minister Kikis Kazamias has made a first failed attempt to get the union to agree to a pay freeze – including cost of living allowance and pay scale rises – for two years, in a bid to reverse the conditions created by the successive downgrades of the economy from all three credit rating agencies, which have made it virtually impossible for Cyprus to seek financing from the secondary market.
In a memo submitted to the cabinet, Kazamias said the only thing keeping Cyprus from the European support mechanism so far were the partial refinancing and short-term financing from local banks and a €2.5 billion loan from Russia.
“If the situation is not reversed soon (and much worse, if new downgrades follow that will bring Cyprus in the non-investment grade) then Cyprus will soon be led to an increased need of resorting to the EFSF (European Financial Stability Facility) in order to cover its financing needs,” the memo said.
But instead of giving more, PASYDY is currently trying to take back what they had agreed with the government in August.
Five members of PASYDY’s the nine-member central secretariat have filed appeals against a law providing that civil servants contribute between 1.5 and 3.5 per cent of their gross monthly income – those making over €1,500 — for two years towards tackling the economic crisis.
Their basic argument is that the law, passed by parliament in August, violates the constitution in that it selectively targets civil servants.
Hadjipetrou said this was done at the behest of the union, which is covering all expenses.
And it is understood that this was done because parliament passed a separate law forcing them to contribute 3.0 per cent towards their pensions – until that point they contributed nothing – instead of the 2.5 per cent they had agreed with the government.
But asked by reporters of private radio station 107.6 whether they would appeal against the EU and the EFSF when they impose their austerity measures on a bankrupt Cyprus, Hadjipetrou said: “If we go to the (support) mechanism it won’t be the fault of the public sector. It will be for other reasons.”
He suggested that Cyprus’ problem was the banks’ exposure to Greek debt and that even with a zero deficit the island would have been downgraded.
Ratings agencies have all cited the banks’ exposure to Greece in their downgrades, but they also note the reduced ability of the state to support them if necessary.
And as it has lost access to international markets, Cyprus would probably need to seek a bailout, the agencies say.
Government spokesman Stefanos Stefanou highlighted the necessity for everyone to be responsible and understand that “all should contribute to tackling the problems caused by the global economic crisis.”
Stefanou said everyone agreed that tax evasion was a problem that needed to be addressed.
He said the government last year drafted 22 laws to strengthen the fight against tax evasion but “unfortunately parliament delayed in approving the bills, and not only that, but five significant laws were eventually rejected.”
The government has recently tabled two new bills – pending in parliament — aimed in bolstering its arsenal against tax evasion.
