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Cyprus

Georgiades says under ‘unbearable pressure’ to spend in public sector

Finance Minister Harris Georgiades claimed on Monday that many of the government's economic reforms had been introduced

Finance Minister Harris Georgiades on Sunday urged MPs to up vote the bill on the state payroll otherwise, sooner or later, the country would find itself facing a new fiscal impasse.

In an interview in Alithia newspaper, Georgiades said that if the bill was not passed, it would send a negative message to the credit rating agencies and the international investment community. They will interpret such a development, he said, as undermining the financial recovery “achieved with effort and sacrifice”.

Speaking to Politis, Georgiades said that from the first day of Cyprus’ exit from its bailout programme earlier this year, he has been under tremendous pressure to increase public expenditure, beyond the country’s capabilities.

These pressures, he said, come from organised groups, political parties, trade unions, even from within the government, which he characterised as a tendency “to return to the irresponsible practices of the past”.

Should such a thing happened, he said, it would lead to austerity policies and the imposition of new taxes.

The island’s three-year bailout programme officially expired on March 31. Cyprus, which used €7.25bn of the total €10bn earmarked in the bailout, was the fourth euro area member state to exit its bailout following Ireland, Spain and Portugal.

What this “unprecedented (economic) crisis” must teach us is that “logic-defiant decisions, mindsets and choices always lead to adventures,” Georgiades said. The answer, he said, is not borrowing money without having the ability to pay it back, or keeping low taxation while increasing public expenditure.

“Nor is it possible to believe that the only answer to the health and education problems and of the malfunction of the public service is inconsiderate (pay) raises and constant hiring,” Georgiades said.  The problems lay in the structures, mindsets and procedures of the civil service, he said, and was not due to a lack of staff, or low wages.

“Instead of everyone pushing for reforms and changes, all we know is to push for pay raises and additional hiring,” Georgiades said.

He added that with the decisive intervention of President Nicos Anastasiades, to this day, the limits set have not been exceeded.

At the end of the year  the special levy on salaries both in the public and private will be abolished, he said, while there has also been a significant decrease in other taxation. The government has also begun to fill some posts to replace people who have retired, he said, but this is calculated in the state budget.

He added however that he receives pressure on a daily basis, “in some cases unbearable and this makes me worry”.

As regards increases in state payroll, he said that the proposed government legislation ensures that not only today, but in the long run, any recruitment, pay raises and benefits given to the public service will remain within the strictures of public finances and the economy in general.

“If we had applied the proposed reform fifteen years ago, the benefit to our economy would be more than €2bn,”Georgiades said.



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