Finance Minister Harris Georgiades on Monday warned that Cyprus was risking public finances getting out of hand yet again because the delay in pushing civil service reforms forward could allow an uncontrollable increase in the public payroll.
Commenting on state radio CyBC, he said that unless the bills are passed, the forces which had inflated the public payroll in the past would be unleashed again.
“The hourglass is emptying and we will find ourselves on January 1, 2017 without any arrangement, freezing or somehow putting a reasonable cap on payroll,” he said, three days after delegations of the European Commission, the European Central Bank and the International Monetary Fund, collectively known as the troika, completed their first post-programme review mission to Cyprus.
Cyprus froze public workers’ salaries and hiring in the government as part of the fiscal consolidation measures agreed with international creditors before and as part of its March 2013 bailout agreement. The wage freeze included negotiated pay rises, incremental salary increases according to seniority and compensation for inflation. The wage freeze expires in December, nine months after the completion of the adjustment programme.
“It is easy to spend money you don’t have,” Georgiades said. “This is what we did in the past when we spent a million more and left others to foot the bill. We are not going to follow this path again”.
In a joint statement on Friday, the European Commission and the ECB said that the pace of reforms has slowed down “considerably”. The two institutions encouraged Cyprus to focus on reforming its public administration, introducing a national healthcare scheme, overhauling the title deed transfer system, modernising justice, privatising and opening the electricity market to competition.
The most important reform, “at this situation we are in, which needs to be pushed forward, is that of the public service,” the minister said, adding that while Cyprus was the second top reformer in Europe over the past three-year period “we have not transformed our economy to a perfectly structured economy”.
Georgiades was speaking ahead of the House finance committee meeting which continued a series of discussions over the bundle of government bills overhauling performance appraisals, promotion and hiring procedures, and salary increases in the public sector. The discussions concluded on Monday, kicking off weeks of consultations between parties to propose amendments, before finally making its way to a House floor vote at the end of the month.
After Monday’s session, Reform Commissioner Constantinos Petrides expressed hope that “the bundle will be passed without substantial changes that would alter its balance”.
“This isn’t the end of the road – there is plenty that can be done [to reform] the public sector,” he said.
“But we need to get these basic ones out of the way first.”
The bills have been under discussion since late August, with deputies seeking clarification on several points, including the nature of 180-degree job appraisals, the proposed evaluation and salary-hike systems, as well as appeals recourse for civil servants who feel they have not been evaluated objectively.
“It is now up to parliament to decide on these bills,” Petrides said.
“Rejecting the package would mean, among other things, a return to the previous regime, with indiscriminate pay increments and hirings, possibly outside of what the economy can handle. It would mean the absence of a real performance-appraisal system for civil servants. It would mean the absence of objective hiring criteria and promotions.”
Rejecting the bill would also mean that the Public Service Commission would continue to be unable to move personnel from departments with redundancies to short-staffed areas of government, thereby forcing new hirings, he added.
Disy deputy Onoufrios Koulla said the party would support the reforms, and highlighted the risks of significantly altering or rejecting the bills.
“It would leave us with today’s obliterating system, where every civil servant is graded ‘excellent’, where needs will trigger new hirings, and unchecked salary increases,” he said.
Communist Akel deputy Stefanos Stefanou said his party acknowledged the need to modernise the public sector, but these bills were the government’s way of subverting a long-standing achievement of the labour movement – collective agreements – and facilitating the privatisation of state-owned companies like the Cyprus Telecommunications Authority (CyTA).
“The job mobility bill is the government’s attempt to do what it failed to do months ago – privatise CyTA – by moving staff to the public sector,” he said.
“That is, sell off the company to a private firm and place the burden of the staff’s payroll on the taxpayer. How believable is the claim that the state payroll needs to remain in check, when the government is trying to move a significant number of staff to the public sector?”