Speaking at the AGM of the Cyprus Chamber of Commerce on Monday night, President Anastasiades said the following: “Our principal target remains the strengthening of the competitiveness and outward looking of our economy, the viable administration of public finances, the further reduction of public debt, the safeguarding of taxation and the smooth operation of our banking system.”
It is good to hear this is the primary target, at least in theory, because the government’s actions do not suggest it is being pursued with great resolve. How for instance would it be strengthening competitiveness when through its pay policies in the public sector it is encouraging bigger pay demands in all sectors? The unemployment rate is currently at the lowest level it has been in 10 years but the government is working on setting a statutory minimum wage, which would erode the competitiveness and push up prices, which have been steady for years now.
How has the government gone about strengthening the competitiveness of businesses when electricity costs remain among the highest in the EU so that the EAC monopoly can be preserved? When will the energy market be opened up so that businesses and households could benefit from more competitive electricity rates?
As for the viable administration of public finances, anyone can see that we are returning to the bad old practices. Not only are wages of the public employees being gradually restored, but their numbers have been steadily rising in the last few years. It is only a matter of time before the public sector payroll returns to pre-2012 levels; this could be sooner than we think if the Supreme Court upholds the administrative court’s decision ruling pay cuts unconstitutional.
Should we mention Gesy, which has been based on over-generous pay for everyone and could encounter major deficits once it is in the second phase from the middle of next year?
The government could point to its budget surplus, but this has more to do with healthy tax revenues boosted by record tourist arrivals in the last few years and the citizenship by investment scheme which has pumped more than €6 billion into the economy. How long this will last nobody can forecast, but everything can be turned upside down if Turkey continues to escalate tension in our area.
We hope this will not happen, but a prudent government would not be pursuing policies on the assumption that nothing will change, especially as the forecast for the world economy is rather gloomy. Cyprus’ economy has been doing extremely well in the last couple of years, but this is no excuse for the complacency being displayed by the government, which, despite the president’s rhetoric is returning to the reckless practices of the past, as if 2013 never happened. The president should encourage confidence in the economy, but an element of caution is also necessary.