PROVIDENT funds are collective saving schemes into which employees contribute a portion of their salary. These contributions are usually matched by an equal contribution on the part of the employer. Thus, a sum of money is gradually accumulated (on an employee by employee basis), which is intended to financially support the “members” of the fund, at the stage of their retirement.
In my articles, I have consistently supported the view that the “haircutting” of these deposits, without affording them the relief that was extended to all other depositors (i.e. of exempting the first €100 thousand of deposits) was grossly unfair. It appears that, at last, this injustice will be rectified, albeit by the taxpayers.
Last Thursday, Finance Minister Harris Georgiades confirmed his intention to rectify what is probably the only injustice committed in the 2013 “bail-in” process. The trade unions, however, were quick to protest. The leftish PEO as well as the right-leaning SEK but also Etyk, the union of bank employees, which carries a high responsibility for what happened to Cypriot banks in 2013, rushed to protest. They protested because they were not consulted on the issue and were, thus, deprived of the possibility of claiming that the relief is being granted because of their intervention and, therefore, their membership should be appreciative. In addition, they complained that the proposed relief was limited to €100 thousand per person, thus depriving “their own top-brass” from being compensated in full.
The argument of the trade unions that the issue of the provident funds concerns their members and, therefore, they should have been involved in resolving the problem is not valid. It is not valid for three reasons: (a) Over a number of years it was readily apparent that the banks were heading for trouble but the unions and, in particular, Etyk not only did absolutely nothing to avert the crisis but, in fact, they positively contributed in inducing the catastrophe which ensued. (b) The money, which will be utilised for “compensating” provident funds, will be coming from the Cypriot taxpayers and, therefore, if somebody should have been consulted in the process, it is the Cypriot taxpayers (rather than the trade unions). (c) The widespread phenomenon in Cyprus of the government yielding to the pressure exercised by organised pressure groups (such as the trade unions), at the expense of other citizens who are not similarly organised, often results in unfair preferential treatment being extended to the former. This is an injustice, which must be eliminated.
In my opinion, the relief which needs to be given in respect of provident funds should relate to 100 per cent (and not limited to 75 per cent) of the equivalent “individual” bank deposits (with a ceiling of €100,000 in deposits per person). Beyond this, no taxpayers’ money should be given to anybody else! If somebody wished to speculate by investing in bank shares or in convertible banking bonds and, in the end, lost their investment (either as a result of incompetence or greediness), such a person has no right to expect the taxpayers to cover their losses today.
Christos Panayiotides is a regular columnist for Cyprus Mail and Alithia