Τhe Cyprus Chamber of Industry and Commerce (Keve) is against pegging the public payroll to the nominal economic growth rate and proposed to link it instead to real growth.
In an interview with the Cyprus News Agency, Keve general secretary Marios Tsiakkis expressed disagreement with provisions in proposed legislation.
“Our disagreement with the proposed bills is the rate of pay rises provided for the public payroll,” he said.
The draft law is part of a wider effort to reform the public sector, setting the rate of change of the nominal gross domestic product as a cap for pay rises for public sector workers.
The government is trying to address the situation that allowed the public payroll to increase to unsustainable levels as a result of a combination of factors, which included hiring new staff, an automatic compensation for inflation, incremental pay rises granted based on seniority, and general negotiated pay increases. In 2009 to 2012 when Cyprus ran fiscal deficits of around 6 per cent of economic output, the public payroll rose to almost 15 per cent, compared to 12 per cent in 2001.
Finance Minister Harris Georgiades said on August 23 that any failure to pass the bill which the government submitted to the parliament more than a year ago could undermine Cyprus’s fiscal consolidation efforts, as several arrangements which helped reduce the government’s staff expenditure to below 13 per cent in 2015, will expire.
As part of Cyprus’s bailout terms, it was agreed to freeze wage indexation in the government sector until the end of 2016 and to subsequently reduce it to half, granted once a year instead of every six months, provided the economy grows in the second and third quarter.
The private sector employers have yet to agree with unions on a new formula on compensating workers for the loss of purchasing power suffered from inflation, Tsiakkis said, adding that he is in favour of adopting the same model outside the government sector.
“If we give pay rises beyond the real growth we achieve, we shall go back to the previous problems we had where reckless behaviour led the country to a disaster,” the chamber of commerce official said.
According to the government’s fiscal planning, public payroll is expected to increase to €2.3bn in 2017 from €2.2bn this year.