Political parties generally agree on the approach recommended by the government on how to tackle the problems created by a recent court decision that pay reductions imposed on civil servants as part of an austerity drive in 2012 are unconstitutional, Finance Minister Harris Georgiades said on Tuesday.
Speaking on state radio CyBC, a day after a meeting between the government and political parties, Georgiades said the ministry has already processed a series of measures to counteract the negative impact of the decision that could cost the state over €1bn in the next five years.
The government has decided on a two-pronged approach, first to appeal the court decision and second to put in place measures that would offset the fiscal impact, if necessary, supported by amending the constitution.
On March 29 the administrative court upheld appeals filed by civil servants, ruling that 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.
Georgiades said the government was poised to neutralise the impact should the state appeal fail at the supreme court.
“The basic characteristic (of the measures) will be to maintain what we have today,” Georgiades said.
The state had already decided to start returning the lost income to civil servants gradually, a process that will be completed by the end of 2022 or the beginning of 2023.
If the appeal failed, the state would try again to secure the gradual phasing out of the measures through legislation and amending the constitution, he said.
“Because we consider it fair and fiscally necessary. Nothing more, nothing less.”
Asked whether a freeze on promotions and recruitment were among the measures, Georgiades said promotions were not the biggest issue.
Recruitment however, “will be an issue if the effects of the court decision are not neutralised with the actions I have described.”
The fiscal consolidation measures affecting exclusively 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 helped reduce the government’s staff expenses to €2.2bn in 2015 from €2.9bn in 2011.
Speaking on the same show, Diko leader Nicolas Papadopoulos said the additional cost in the next few years would be €1.06bn, not taking into account backpay to those who went to court.
Asked why he assumed only those people would be granted backpay, as that was something a court should decide, Papadopoulos made it clear that no other scenario was possible.
“The scenario of granting backpay to all (civil servants) is non-existent, practically and financially; we are talking about an additional €2.5bn, you understand that in this case Cyprus would have to seek another bailout,” Papadopoulos said.
He said his party placed importance on having the unions on board before putting any measures in place but it was not necessarily a condition.
“We must settle the matter as soon as possible,” he said.