By Christopher Pissarides and Omiros Pissarides
The coronavirus pandemic and the ensuing economic crisis brought the members of the European Union closer together in unprecedented fashion. The agreement of the leaders of the member states on July 21 gives significant assistance to member states in the face of the deep recession caused by the pandemic and creates conditions for enabling sustainable recovery and growth in the years beyond.
The funds made available open up enormous opportunities, of which states can and should take advantage. More than half of the 750 billion euros of the EU Next Generation programme are provided in the form of grants, which is particularly important for countries such as Cyprus, which are faced with large debts.
In the past, our country has not been very effective in the utilisation of European funds, although they have been extremely beneficial. This is a new and larger opportunity that should not be missed. The essential question is what kind of recovery we are seeking. Major shock events, such as wars, natural catastrophes and pandemics, like Covid-19, create momentum to radically change the long-term course of an economy. In this context, any idea of utilising EU funds solely to cover losses and then return to past practices should not even be contemplated. Tomorrow’s world will not be the same as that of the pre-Corona era. When the existing economic and business model is challenged and ultimately altered by a crisis, the right choice is to build the foundations of an efficient economy that can make the most of the new economic environment, not go back to old models.
The pandemic has accelerated the path towards more automation and has increased the use of digital technologies worldwide. The Cypriot public sector and Cypriot companies ought to get the message and transition swiftly in this direction, which will yield higher levels of productivity, new products and services and the penetration into new markets. The funds made available from the EU offer a unique opportunity to increase our digital infrastructure, both in the private and public sectors, to improve education and training programmes and to turn the country into an attractive investment destination on the basis of an environmentally friendly and long-term sustainable economic model. Once this is achieved, growth will return at a satisfactory rate, the economy will become more resilient and so less susceptible to shocks, and debt levels as a percentage of GDP will start falling without the need of new taxes.
At the societal level, the pandemic has also affected vulnerable demographic groups disproportionately, due to unemployment or loss of income. EU funds provide substantial scope for strengthening the social support framework as part of a long-term development budget.
Europe and our country are at a crossroads. Now is a good time to demonstrate the necessary will in order to support the recovery and invest in our future, through a three-pronged approach aimed at effective social cohesion, targeted education and beneficial reforms that will enable Cyprus to transition to the new world of green development and digital technology.
Christopher Pissarides is a professor at the universities of Cyprus and London, awarded the Nobel Prize in Economics in 2010, and is heading the Greek Development Committee
Omiros Pissarides is the managing director of PricewaterhouseCoopers Investment Services