THE ONLY mildly positive thing Finance Minister Harris Georgiades said on Monday, presenting the 2014 budget to the legislature, was that there were no plans for more taxes. Then again, existing taxes, such as VAT, corporate tax, fuel tax would increase in 2014 while the Immovable Property Tax would be updated, aligned to current prices. How much more property owners would have to pay next year remains to be seen.
There might be no new taxes but there would be plenty of tax hikes to look forward to and, given the economic outlook, it was the only thing that qualified as mildly positive. As the minister said, 2014 would probably be the most difficult year for the Cyprus economy. In short, the worst is yet to come and it was not as if this year was not very difficult. But next year, there would be €626 million less cash circulating in the economy as the government decided to cut net spending by 10 per cent.
In combination with the tax hikes and pay cuts in the public sector, disposable incomes of those who are in work would be further reduced and so will consumption. More businesses will be forced to close down and the numbers of jobless would continue to rise. And it will be no consolation to people that the ills plaguing the economy would be corrected, as Georgiades said, trying to put a positive spin of the budget.
“Let me stress that 2014 must be, and will be, the year when the most crucial decisions will be made to correct all those that led the economy to this difficult position.” The minister could not be accused of sugaring the pill and he deserves credit for his brutal honesty, something politicians have not accustomed us to. As recently as last December, the former president and despicable demagogue Demetris Christofias was celebrating that he had saved 13th salaries and CoLA for public employees even though the state did not have the money to pay them, while the economy was in free fall and the second biggest bank was insolvent.
For decades, our politicians have been telling people what they wanted to hear while sweeping the mounting problems under the carpet. We still recall former finance minister Charilaos Stavrakis boasting that Cyprus had been untouched by the world recession when he presented the expansionist 2009 budget. And now AKEL’s populists who drove the state to bankruptcy have the nerve to protest because the budget does not include development spending. They know there is no money to spend but offering false hope costs nothing.
Georgiades, to his credit, has not gone down this path, preparing us for the very hard times ahead. At least there is one politician in Cyprus who believes that honesty is the best policy.