Cyprus Mail

Employers denounce pay increases for civil servants

Did we, or will we cut the cost of the public sector?


Planned pay increases for civil servants, slated to inflate the state payroll by €75 million over 2017 and 2018, should be axed, Employers and Industrialists’ Federation (OEV) chief Christos Michaelides said in an open letter to the leaders of parliamentary parties.

He said the €75 million should be directed towards those truly in need.

In the letter released on Monday, Michaelides referred to an earlier letter, dated October 26, he sent to the leaders of all eight parties, which contained “the dramatic plea of our country’s business world” to maintain the state payroll over 2017 and 2018 to this year’s level.

“With the exception of one leader, you have all opted to not reply, which is fully respected,” Michaelides wrote.

However, he added, as the moment to evaluate the 2017 government budget is fast approaching, OEV summarised the main points of its appeal.

“The economy remains fragile, non-investment grade ranked, with growth owing, for the most part, to non-recurring income,” Michaelides wrote.

“Public debt remains high. The state payroll remains bloated, and civil servants’ remuneration, relative to the private sector, do not justify further increases.”

Further, it added, pay increments will be recurrent ad infinitum, creating unbearable fiscal costs.

Meanwhile, government bills reforming the public sector and the state payroll have sat with parliament since August 2015.

The proposals cap annual increases to the state payroll at nominal GDP growth.

“Although this proposal is a significant departure from what OEV considers appropriate, it has repeatedly welcomed the tabling of these bills, as they mitigate, to some extent, the risk of renewed uncontrollable payroll spikes,” Michaelides said.

However, he added, one fact, one clarification, and one question, should be recorded.

“For 16 months the set of bills has been outstanding at parliament, risking a return to the old practices if they are not adopted soon,” he said.

The clarification was that the nominal GDP growth as ceiling is merely the maximum rate to be allowed as a pay hike, provided that the economy and fiscal conditions allow.

“There is no obligation by the state to raise its payroll by the GDP growth rate,” he pointed out.

“Bearing this clarification in mind, is it possible for the marginal surplus created by the sacrifice of businesses and employees to go toward pay hikes for civil servants?”

OEV has repeatedly argued that this would be inconceivable, Michaelides said.

The cost of the planned pay increases, €25 million for 2017 and €50 million the year after, to the extent that it is not used to repay the public debt, should be funneled toward one-off payouts to groups that suffer the most by the financial crisis, he said.

“Such groups are low-pension recipients, the long-term unemployed, single parents, and other groups that you evaluate as such,” Michaelides told party leaders.

OEV, he added, will return to the issue after the government budget has been voted on, with a view to welcoming a rational decision.

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