By Angelos Anastasiou
Delegates from the troika’s Cyprus mission resumed their meetings with various government officials and other stakeholders on Wednesday, day two of the representation’s fourth review of Cyprus’ adjustment programme.
Wednesday’s schedule included a 2 pm meeting with federation of building contractors OSEOK, who laid out the critical challenges faced by the construction sector. A key driver of economic growth over the previous decade, the construction industry suffered a serious hit over the last five years, with a reported contraction of 40 per cent in the last year. Sector leaders have variously made dramatic calls to the government, asking it to take measures in support of the struggling industry.
After the meeting, OSEOK chairman Kostas Roushias said that the construction industry employs 28,000, down from over 40,000 in previous years.
He expressed the need for growth incentives in the construction sector and the absorption of European funds.
“There can be no growth without incentives, like a temporary reduction in the VAT rate to 5 per cent for transactions relating to construction projects and the reduction of capital gains taxation,” he said.
Roushias also reported that one in five businesses in the construction industry had suspended its operations, and reiterated his view on the need for the creation of the post of Deputy Minister for Economic Growth.
Later on Wednesday, the troika delegates saw the management of the Bank of Cyprus. The 3 pm session revolved around the burning issue of non-performing loans (NPLs), which threatens the bank’s prospects and has garnered talk of creating a ‘bad’ bank which would buy up the lender’s toxic assets at a discount, thus taking some of the pressure off the BoC’s balance sheet. The move, however, has stalled in search of the necessary funds to purchase the assets.
The issue of NPLs dominated the troika delegation’s meeting with bank employees’ union ETYK, with the union defending its members’ sacrifices and focusing on the need for employers to repay their loans so that banks can return to health.
Speaking after the meeting, ETYK’s vice president Christos Charalambous said the troika had been briefed on the 40 per cent cuts on banks’ payrolls, bonus payments and the need to repay NPLs.
Charalambous said that the union had asked the banks to impose a three-year moratorium on bonuses but was snubbed on the grounds of this being an exclusive management decision. He argued that salary slashes reached 50 per cent at the Bank of Cyprus and roughly 45 per cent in other banks, “the sacrifices that needed to be made by bank employees have been made, and now management is expected to act decisively in collecting non-performing loans.”
Charalambous also attacked employers’ association OEV and said that employers need to start repaying their loans in order to help the banks return to normalcy.
“At last, OEV must pressure its members into paying their NPLs, instead of pressuring ordinary citizens into repaying their loans,” he said. “The largest amounts are owed by OEV members, and that is why the effort should focus on OEV.”
The delegation started its review on Tuesday with a focus on economic issues – NPLs topping the list as the hottest item on the agenda – as well as health issues, where implementation of the long-delayed National Health Scheme (NHS) has become an imperative for the troika. Monday’s kick-off review meeting with Health Minister Philippos Patsalis was rumoured to have produced moderate results as the Ministry’s roadmap to implementation of the NHS – submitted last Friday – left the troika unconvinced as the level of detail on some key points was deemed weak. As confirmed by official stakeholders, additional meetings with the Health Ministry have been scheduled for further deliberations on the issue.
On Thursday, a troika delegation will meet with Labour Minister Zeta Emilianidou regarding the issue of the Minimum Guaranteed Income policy, the introduction of which is part of Cyprus’ adjustment programme obligations.
According to Emilianidou, Thursday’s meeting has been scheduled for 2pm.
This week’s troika meetings focus on the technocratic level, while next week will see political consultations and negotiations in order to finalise the revised Memorandum of Understanding.