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Civil servants being ‘pushed to sue’ en masse over pay cuts, Georgiades says

File photo: Finance Minister Harris Georgiades with civil servants union Pasydy chief Glafcos Hadjipetrou

Various law firms are soliciting civil servants, encouraging them to file class-action lawsuits against the state over the latter’s refusal to reimburse them for pay cuts enforced in 2012, Finance Minister Harris Georgiades claimed on Thursday.

“There is soliciting going on via letters sent en masse [to civil servants], promising that for a few thousand euro they can file lawsuits on their behalf,” Georgiades told the state broadcaster.

“Letters are being sent left and right, via fax directly to government offices.”

The minister went on to question whether this practice by lawyers is ethical.

In March 29 decisions, the administrative court ruled that a freeze on incremental pay rises, a 3 per cent contribution to pensions, and a reduction in civil servants’ pay were in violation of article 23 of the constitution regarding the protection of the right to property.

The judgment applied to civil servants as well as persons employed in the broader public sector, such as semi-governmental organisations.

As such the pay reductions were deemed null and void and the applicants entitled to compensation, effective immediately.

But the state is appealing the decision with the supreme court. It is also seeking a ruling that would freeze any reimbursements to civil servants until the matter is definitively adjudged.

Nonetheless civil servants argue that the monies ought to be paid now, irrespective of the final court outcome.

Various estimates have been floated on how much the decisions might cost the state should the administrative court’s ruling be upheld and the affected civil servants compensated.

The most conservative scenario sees a few million euros as immediate backpay, compensating only those civil servants who sued, plus €200m annually from restoring full salaries to all civil servants.

Georgiades said the government as well as the European Commission are closely monitoring the case, because should the state lose the appeal, the compensation it would then be forced to pay is on a scale that could derail public finances.

A day earlier, the Commission said it would not be opening an excessive deficit procedure for Cyprus, despite the increase in the deficit brought about by the state guarantees provided in the sale of certain co-op bank assets to Hellenic Bank.

“Concerning Cyprus, our report says the deficit in 2018 reached 4.8 per cent of GDP,” said Economic and Financial Affairs Commissioner Pierre Moscovici. “However, this was entirely due to banking support measures that were necessary to maintain financial stability.”

In the same interview on Thursday, Georgiades dismissed the notion that Cyprus had dodged the excessive deficit procedure “by a whisker,” as suggested by some media commentators.

He explained that when an EU member registers a deficit of over 3 per cent, it enters the excessive deficit procedure, a process where it’s placed under surveillance and is required to take steps to return the deficit to acceptable limits.

But in Cyprus’ case, the Commission found extenuating circumstances, namely that despite the sudden spike in the debt-to-GDP ratio – owing to the Hellenic deal – the country’s fiscal performance overall was robust.

The minister brushed off suggestions that Cyprus would be asked to take corrective fiscal measures, given that “we are operating with surpluses.”

Georgiades also announced that the ‘Estia’ debt relief scheme for distressed home owners would be launched next month.

 

The first payments to debtors should be expected by the end of the year.

The purpose of Estia is to assist, support and protect vulnerable households who have mortgaged their houses for their loans. The scheme is expected to assist the repayment of primary home loans that were not serviced at the end of September 2017.

Under ‘Estia’, the state will meet one-third of the payment for those on the scheme throughout their revised payment plan on the condition that the person who took out the loan will pay the other two-thirds. The state will pay this amount at the end of each year once the finance institutions confirm the rest of the payment has been met.

To be eligible, a household must have a declared gross income of €50,000, and their primary residence which is mortgaged must have a maximum market value of up to €350,000.

 

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