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Our View: BoC backed into expensive corner by weak government

THE BOARD of the Bank of Cyprus failed to secure the consent of the bank employees union Etyk for the very generous ‘voluntary’ retirement compensation scheme it has put together. The bank offered a month’s salary for every two years of service plus five salaries and payment of up to a month’s leave. An employee with 20 years’ service, would receive 16 salaries, which is extremely generous from a company that is in dire financial straits.

Etyk, however, wanted the compensation to be calculated on the old salaries and not the new ones that were subject to cuts of up to 30 per cent. The board held its ground and submitted its proposal to the Central Bank. Without the union’s consent, there is a strong possibility that the target number of 1,500 job cuts through voluntary retirement will not be reached. An employee could decide to stay on and wait to be made redundant in the belief that he or she would receive even more compensation in redundancy pay.

This problem would never have arisen if we had a strong government that acted in a rational way. When Laiki was declared bankrupt, its employees should have been paid the two months’ compensation that was stipulated in their contracts and told they were jobless. Instead, under pressure from Etyk, all Laiki’s employees were transferred to the Bank of Cyprus which has been paying their salaries for the last four months and would now have to compensate them to leave.

But why should the depositors of the BoC that have been bailed in, pay generous compensation to employees of a bank which had gone bankrupt? Had not enough millions been taken from the bank’s depositors, without them having also to pay off Laiki’s employees a total of €90 million in compensation? This was a scandalous decision, which was taken solely for political reasons – to stop the street protests by Laiki’s employees after the resolution of the bank last March – because from a business point of view it was monumentally stupid.

Then again, our politicians seem incapable of taking rational decisions, always opting for the easy way, disregarding the problems this would subsequently create. The easy option will cost BoC a minimum of €90 million in compensation plus four months’ of salaries to 2,500 extra staff it did not need. In order for our populist politicians to ingratiate themselves to Laiki employees and their union Etyk the BoC was lumbered with an additional expense, in excess of €100 million it cannot afford. With people like this running the country, could there be any hope of the economy avoiding total collapse?

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