Widely labelled as proof that in Cyprus there is one set of rules for civil servants and another for everyone else, the wisdom of the administrative court’s decision this week that pay cuts imposed on government employees in 2012 are unconstitutional and therefore invalid is now being questioned.
In its March 29 ruling, the court said a freeze of incremental pay rises, a 3 per cent contribution to pensions, and a reduction in civil servants’ pay was in violation of article 23 regarding the protection of the right to property.
The fiscal consolidation measures affecting the public sector, passed by parliament before Cyprus agreed the terms of its 2013 bailout with international creditors, included a general wage and hiring freeze, a 10 per cent drop in hiring salaries, and a permanent up-to 12.5 per cent reduction in pay.
On top came an extraordinary levy on wages in both the private and public sector which was phased out in 2016.
The measures had helped reduce the government’s staff expenses to €2.2bn in 2015 from €2.9bn in 2011.
However, the court ruled that as in the case of pensions, “salaries too constitute property according to article 23 of the constitution.
“Deprivation or limitation of this right, according to the provisions of article 23.2 of the constitution shall be made except as provided in this article,” the court said, quoting the constitution.
The court reasoned that the article of the constitution did not include the reasons cited by the state – public benefit and public interest – as justification to curtail the right of the applicants to property.
The state has since said it will appeal the decision at the supreme court, along with a request to suspend compensation pending the appeal.
Should the decision be upheld by the supreme court – a likely outcome – the fiscal impact could be tantamount to an atom bomb.
Various estimates have been offered on how much the decision might cost the state. The most conservative scenario is that a few million euro as immediate backpay compensating only those civil servants who sued; €200m as immediate backpay to the applicants only, plus the additional costs arising over time from restoring full salaries to all civil servants; or €1bn over time for restoring the pre-2012 salaries of all civil servants.
Meantime the ruling has set social media abuzz. Online pundits are stunned by the court’s rationale that salaries are considered property. They can’t believe the lack of common sense displayed by the otherwise erudite judges.
Some argue that a salary is a contract, a promise to compensate for services rendered. That is to say, a salary is not an acquired asset set in stone. Others disagree; if you’ve done a month’s work – corresponding to a certain remuneration – then the expectation is created that this money rightfully belongs to you. If someone – say the government – subsequently comes along and trims your paycheque, it follows that your property has been violated.
But for lawyer Christos Pourgourides the debate on what constitutes property is merely a side issue.
The essence, he contends, lies in that the administrative court completely misread the spirit of the constitution.
“The court failed to properly assess the function of the constitution, and therefore the interpretation of the constitution, which is that its mission first and foremost is to safeguard the community as a whole,” the lawyer told the Sunday Mail.
“No individual property is absolute. Under the constitution, all property is subject to limitations, and these limitations depend on the needs of the state. The higher the risk to the state, the more severe the limitations may be.”
It should be stated that Pourgourides has strong opinions on the role of the state. In his view, under the constitution the state is supreme and trumps individual rights. Thus, he believes, the first duty of the constitution is to safeguard the state, not the individual – without a state the individual cannot be protected anyway.
In this case, Pourgourides said, the court ought to have examined the crux of the matter: whether the financial viability of the state was in grave danger or not, had the civil service payroll not been curtailed.
Having done that, the court next should have looked into whether other measures – besides slashing salaries – might have been taken to ensure the state did not go bankrupt. And if other steps were available, it should have determined whether these were reasonable or not.
“The judges did none of that. They completely missed the point, which was this: if, absent any austerity measures, the state were allowed to go bust, then what would the civil servants have got? I’ll tell you what: a big fat zero.”
Pourgourides sums up the court’s decision thus: “A bucket full of holes.”
EU case law generated in the wake of the financial crisis and austerity measures appears to lend support to the notion that salaries and pensions are not inviolable.
For instance, in the case of Da Conceição Mateus v. Portugal and Santos Januário v. Portugal before the European Court of Human Rights, the applicants argued that reductions in their public sector pensions were a violation of Article 1 (protection of property) of Protocol No. 1 to the Convention on Human Rights.
However the court found that “in cases where a person was legally entitled to the payment of a pension, Article 1 of Protocol 1 allowed a member State to reduce the amount paid out in the pension when this was in the public interest as long as a fair balance had been struck between the general interest of the community and the protection of the person’s individual rights.”
Further, the Echr said, “the cut to their pension was a temporary measure, and would only last for three years between 2012 and 2014. Therefore the interference with the applicants’ right to peaceful enjoyment of their possessions was limited in both time and quantity…”
It added: “In light of the exceptional financial problems which Portugal faced at the time, and given the limited and temporary nature of the reductions in pension payments, the Court found that a fair balance had been struck between the interests of the general community and the rights of the applicants.”
Speaking on condition of anonymity, a source familiar with public sector matters told the Sunday Mail that the administrative court’s decision defies credulity.
“You have to wonder: do the judges believe that a civil servant can never be sacked? Because you can’t explain their reasoning otherwise. It seems the judges are implicitly saying that since a civil servant can’t be fired, it follows that their salaries, too, are immutable.”
Legal questions aside, the state could have taken practical steps to prevent these matters from ever ending up in court in the first place, said Demetris Georgiades, chairman of the Fiscal Council.
“For years we’ve been calling on the government to devise a new system assessing civil servants’ performance, replacing the current uniform and inflexible method of remuneration,” Georgiades noted.
“So hypothetically, if a government accountant had a contract stating he or she will get 15 per cent more than an accountant in the private sector, that’s pretty clear-cut.
“If you spelled out in a contract the terms of remuneration, under which circumstances a salary may be raised or cut – depending on GDP growth or decline – then you wouldn’t need to resort to constitutional issues. It’d be simply a question of enforcing what the contract states.”
Going forward, what can be done? Georgiades proposes that the finance ministry immediately draw up a list of contingencies to deal with each of the possible scenarios, or fallout from the court’s decision.
“They need to formulate a response, financial measures, to be rolled out as soon as the financial impact of the court decision becomes definite. A separate measure for each of the scenarios: be it a few million in compensation, €200m or €1bn. This has to be done now.”