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Our View: Businesses may think twice before applying for state assistance

Labour Minister Zeta Emilianidou with Finance Minister Constantinos Petrides announcing the measures on Wednesday (Christos Theodorides)

The government’s new package of measures for supporting the economy announced on Wednesday involves five schemes of which four will be aimed at protecting jobs and one will be for the unemployed. The programmes will last four months until October 12 and cost a total of €150 million. As many as 50,000 people will be eligible in what is described as a ‘safety net for workers.’

Speaking during the presentation of the schemes, finance minister Constantinos Petrides said “the implementation of the schemes would be governed by a stricter framework of control so as to prevent possible abuses.” It was an admission of fears that some businesses would be claiming state assistance under the scheme without being eligible. Labour minister Zeta Emilianidou said a significant loss in revenue would have to be certified by an auditor, while the business would not be able to make workers redundant for a specific period after receiving state assistance among other things.

The main concern, as has been made clear repeatedly, is the protection of jobs, and while the government is correct to focus on this, it is questionable whether many companies will apply for assistance which will cover 60 per cent of wages, given the requirement of making no redundancies.

Will businesses be prepared to make this commitment considering that they would have to see a fall in turnover of more than 35 per cent or 40 per cent in a specific period to be eligible? A business that has seen such a big fall in turnover because of the pandemic might decide its prospects of survival would be better served by making redundancies now than taking the state assistance.

For one thing, no business can be certain that the turnover will return to anywhere near the pre-crisis level, so even if it takes state assistance now, there is no guarantee it would be able to cover its payroll when no more assistance is available.

State funds will eventually dry up and Petrides did not shirk the issue on Wednesday. “The capabilities of state assistance and of public finances are not unlimited, while the uncertainty regarding the course of the pandemic and of the world economy is still big,” he said. Many businesses will be taking this into consideration before deciding about whether to apply to one of the schemes.

The government has done what it believes would protect jobs and keep unemployment in check. If a percentage of jobs are protected the scheme will be deemed successful, but given the conditions and the general uncertainty there is a strong possibility many businesses will decide it makes no economic sense to apply to the scheme.

 

 

 

 



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