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Our View: Government has not done enough to put public sector on sound footing

It is only a matter of time before PASYDY starts agitating for pay rises for its members

AFTER 14 quarters of continuous contraction, the economy recorded a low rate of growth in the first three months of 2014. The rate of growth, according to the Statistical Service, was 1.6 per cent. It is a small and imperceptible improvement but at least it has ended the contraction of the economy that started in the second half of 2011 and dragged on for three-and-a-half years. However, expectations are that the figure would fall over the year and be in line with the forecasted 0.4 per cent.

Finance Minister Harris Georgiades saw the bright side, describing the news as “a significant development that confirms the positive prospects of the Cyprus economy.” But being a level-headed chap, he added a note of caution. “It must be noted that we still have some distance to travel; the recovery is at its early stages and therefore remains fragile,” he said, warning that the effort to put the economy on a sound basis was ongoing and “premature celebrations” had no place. Was anybody celebrating, because the economy had grown by 1.6 per cent after contracting for three-and-a-half years on the trot?

The government is desperate to tell us some good news with regard to the real economy, but this does not qualify as such. The only improvement has been in the public sector, with the government, through a combination of spending cuts and higher taxes, has brought public finances under control, reducing the budget deficit. It has even been able to return to the markets, from which Cyprus had been excluded for close to four years, even though the interest it is paying is still high compared to other eurozone economies.

Despite the improvements, there have been worrying signs that we are slipping back into our old ways. Public sector unions that were relatively quiet for a couple of years have started making demands of the state and the government has been giving in – it has agreed to give permanent posts to teachers on contracts and it has given in to the hospital doctors’ demands for additional overtime pay and more full-time jobs. Hospital nurses are demanding higher pay scales, while it is only a matter of time before PASYDY starts agitating for pay rises for its members.

Although the figures have improved, the truth is that the government has not done enough to put the public sector on manageable basis for the long-term. It has done the bare minimum, avoiding pushing for the much-needed radical reform because it would have sparked a hostile reaction and now it is facing new demands. Perhaps public sector workers should be reminded that despite the positive rate of growth announced this week, the number of the unemployed remains unacceptably high and shows no sign of falling. That is a more accurate indicator of how the economy is doing than the growth rate for the first quarter of 2015.

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