THE GOVERNMENT’S long overdue decision to reduce the fiscal deficit has come under concerted fire from the moment Finance Minister Makis Keravnos announced the proposed package of measures in the legislature last Monday. Unions and parties, including members of the government alliance, such as communist AKEL, have not just slammed the package but have also accused the minister of formulating the measures without first consulting them. It was unacceptable that the government prepared a package without engaging in a dialogue with the social partners, they insisted.
This is utter nonsense. If the government had made the mistake of engaging in consultations with its partners, in the hope of reaching a consensus, it would still be discussing the measures well into the next year. To achieve consensus on a package of austerity measures is almost impossible and it would have been a monumental waste of time to have tried. Could the civil servants union, Pasydy, the most strident critic of the measures, ever have agreed to any cuts in the public sector wage bill, without demanding something else (that would have a cost) in exchange? Pasydy would never agree to the proposed three-year wage freeze no matter how many rounds of negotiations there were with the government.
What the unions and the parties fail, or do not want, to understand is that there is no time for consultations and that the implementation of the measures is of the utmost urgency. Gone are the good old days when they could apply stalling tactics and prevent the government from taking measures. Now we are members of the EU and the government cannot do as it pleases, because it is accountable to a higher authority which would take punitive action if we fail to meet our obligations. And the fact is that we have been misleading Brussels as regards the economic convergence plan for some time.
According to Keravnos, three convergence plans had been submitted to the EU – two by the previous government and one by this government – so far, but none of them has been implemented. The latest, the fourth, was submitted several weeks after the deadline, yet the unions, oblivious to the government’s obligations, insist on time-consuming consultations, in a blatant attempt to block implementation of the package. Any further delays or stalling would not only prevent Cyprus from reducing its fiscal deficit by the end of the year as it has committed itself to doing, but also destroy the government’s credibility. It would be regarded as totally untrustworthy in Brussels, just two months after accession.
But Keravnos warned last Tuesday: “Cyprus belongs to the EU and must respect the procedures, directives and decisions. Gone is the era when we could decide for ourselves as if we were the centre of the universe and consider any cost as a reason not to take a decision.” If Cypriots did not tighten their belts soon, others would do it for them, the minister pointed out. And the EU would not be consulting unions and the political parties before deciding how to reduce the deficit.
In short the government had to take decisions. If it deserves any criticism it is because it delayed preparing the package, but its choices were correct, given that the biggest drain on state resources is the all-devouring public sector. The three-year freeze on pay rises and recruitment in the public service was an imperative as was the raising of the retirement age to 63. Pasydy boss Glafcos Hadjipetrou protested, quite disingenuously, that the public servants should not carry the burden of the austerity measures. But of course they should, as it is the constantly rising public service wage bill that is the primary cause for the widening fiscal deficit. Why should businesses and private sector workers, who are paid much less, make sacrifices so that the parasitic public servants continue to enjoy their fat salaries and benefits?
The alternative to making cuts in the public sector would be a higher rate of VAT and income tax, which the government, quite rightly wants to avoid, especially at a time of an economic slowdown. But if the parties act irresponsibly and back Pasydy, refusing to pass the government package or delaying its approval then increased taxation would be unavoidable if we are to honour our obligations to the EU. And this, apart from being socially and morally wrong, would be disastrous for the economy as it would exacerbate the slowdown.
We hope that the Parties leave behind the irresponsible populism of the past, which contributed, substantially, to turning the public service into the biggest drain on Cyprus’ resources and back the government package. Our government’s credibility and trustworthiness in the EU is low enough and we really cannot afford to see it sink any lower, because the Parties feel obliged to pander to the most privileged and spoilt group of workers in Cyprus.
