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Role of CyTA staff post privatisation discussed at House

Finance minister Haris Georgiades (second right) at the House committee

Employees of the Cyprus Telecommunications Authority (CyTA), which is slated for privatisation, are civil servants, even if their wages are paid from a separate government budget, Finance minister Harris Georgiades argued in parliament on Tuesday.

Countering arguments, he said the government’s proposal to redeploy all CyTA employees made redundant post-privatisation to other departments of the public sector will not burden the state’s payroll.

This is because, he noted, studies have shown that 1,462 public-sector posts – suitable for CyTA employees –remain vacant in the public sector, versus a total 1,649 CyTA employees.

“It makes no difference if they are paid from the government’s Consolidated Fund or a separate budget that is also the government’s – they are employees of the state, in either case,” Georgiades said.

The Finance minister was addressing the House Finance committee, which discussed the government’s proposal to create a private-law – but fully state-owned – telecoms company to replace the existing company, CyTA, which operates under public law.

Support for the government’s bill has thus far been anaemic, with most parliamentary parties standing in opposition.

“The bill will not differentiate labour rights in the slightest,” he told lawmakers.

“Those working for the state today will also work for the state tomorrow, and they will receive the same wages they receive today.”

Noting that the private-law company will have the right to fire employees on grounds of redundancy, paying them the required severance, Georgiades assured MPs that employees made redundant “will be used elsewhere as needed”, since they are already public-sector employees.

Asked to explain the logic of privatising a profit-making entity that pays the state substantial sums in taxes, the Finance minister said the decision needs to be made after looking at the financial data, but pointed out that “we are nowhere near this step”.

But state-aid commissioner Theofanis Theofanous said there are five possible provisions in the bill that could be considered state aid by the European Competition Commission, meaning that if one of CyTA’s competitors were to contest the bill on these grounds, the government would be forced to rescind it.

According to Theofanous, offering CyTA employees free shares in the new company, extending the collective agreement into the post-privatisation regime, state guarantees of CyTA’s pension fund, and implementing the voluntary exit scheme, all of which are included in the government bill, could be considered state aid.

Privatisations commissioner Constantinos Irodotou said he has been in constant contact with Theofanous’ office since August, and noted that the compatibility of each point in the bill with state-aid rules has been backed by legal opinions.

Also, Irodotou said, the only remark made by the European Competition Commission related to the pension fund deficit.

Georgiades explained that CyTA has double the payroll of similar organisations in Europe, and noted that the first step in reducing it is to offer a voluntary redundancy scheme.

Further, he pointed out that turning CyTA into a private-law entity requires the “extension, or renewal, of the existing collective agreement, which, according to Cypriot law, will be binding to the company, irrespective of whether some of its shares change hands or not”.

And this company, he added, will have the right to make its employees redundant, just as any of its private competitors can.

“What happens to these employees after they are made redundant is not a question for private companies, but the state,” he said, fending off criticism of an unfair business advantage given to CyTA.

With regard to CyTA’s value, both at present and in its new private-law form, Georgiades said a specialised and independent valuation is required by law.

“We have an obligation, per the rules, to commission an independent valuation before a single share is sold,” he said.

“But this has not yet been done because no company exists at present, nor have the assets it will take over been identified yet.”

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