Cyprus Mail
Cyprus

Reform process expected to be slow in new parliament

Populist opposition politicians are reiterating their intention to water down proposed reforms – or even reversing some already in place – while a DISY deputy, the only pro-reform party backing the government, warned that reforms remain a one-way street for the economy.

Angelos Votsis, a deputy from DIKO, the party which in 2015 supported some of the government proposed bills allowing Cyprus to pass legislation required as part of the cash-for-reforms agreement with international creditors, said that following the May 22 elections “the time has come for wounds to heal”.

Votsis, referring to a DIKO proposal to compensate investors and depositors who suffered losses in Cyprus’ 2013 bailout by allocating 10 per cent of the country’s primary surplus over the next 20 years, said that his party was ready to debate a bundle of draft bills on the reform of the public sector but it would prefer to see a provision linking the increase of public payroll to economic growth removed.

“There is a rationale behind that but it could be done without incorporating it into the law,” he said. “There are other ways to do this”.

The bills, submitted to the parliament by Undersecretary to the President Constantinos Petrides in September, remain the corner stone of the government’s reform agenda.

Marios Mavrides, a DISY lawmaker and staunch supporter of reforms, said the process would continue – even at a slower pace and subsequently a heavier price – following the parliamentary elections in which populist parties emerged stronger at the expense of DISY, which lost two seats bringing its representation down to 18 lawmakers.

“I am discouraged as some of the smaller factions will think that they will be able to change things,” said Mavrides, who also teaches economics at the European University of Cyprus. “Fiscal consolidation and reforms are a one-way street but they will come at a slower pace which implies a cost for Cyprus,” he said in an interview on Monday.

Mavrides said that the European Union’s fiscal treaty on stability, coordination and governance, a stricter version of the EU’s stability and growth pact, which came in response to the euro area’s debt crisis and imposes stricter fiscal rules on member states, will make it more difficult for countries to neglect public finances. “Even if reforms are not carried out, this will have a cost for public finances and society”.

Mavrides added that he believes DIKO, which has 9 deputies in the 56-seat parliament, will remain “an ally” in this effort. Other parties are unlikely to play that role.

A taste of the agenda of one of the opposition parties which gained seats in the new parliament was delivered by an economist, elected lawmaker for the first time as member of the Citizens’ Alliance led by Yiorgos Lillikas, a former AKEL deputy and minister under Tassos Papadopoulos.

“Our main concern is the reduction of lending rates,” Anna Theologou-Orati said in an interview on state radio CyBC on Monday. “The private sector has to be supported via much lower (lending) rates than today and in order for this to happen, we submitted a proposal to tax lending rates over 2 per cent with a 99 per cent tax”.

Theologou-Orati, who in 2015 expressed her support for Yanis Varoufakis, Greece’s former finance minister under Alexis Tsipras who led negotiations for an extension of the country’s programme into a deadlock and to the imposition of capital controls, also added that her party is also in favour of including banks in a 2011 law making usury illegal. “If this exemption is lifted, it will be important for lending rates,” she said.

The lawmaker of the Citizens’ Alliance, which has three deputies in the parliament, said that her party would also like to see property tax exemptions for owners of property not generating income. “Taxation should be imposed only where income is generated; that is the rationale behind tax”.

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