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Our View: State cannot be expected to bail out struggling Paralimni shops

paralimni old

‘Cry of anguish’ from the shopkeepers of Paralimni read the headline of a story by Cyprus News Agency, which reported that shops were on ‘life-support’ and were seeking government support ‘before it is too late’. They wanted reductions in rent, electricity and VAT.

The report quoted the president of the Paralimni shopkeepers, Koula Goumenou, “we are striving, in every way, to keep our businesses open even though things are not good at all. Costs continue to be unbearable, rents and electricity are still very high, while consumers are restrained and careful about what they buy.”

Shops were still suffering the effects of the pandemic, but the absence of Russian tourists, who spent lavishly, has made a bad situation worse, while there was also the competition from shops in the occupied area, said Goumenou. She argued that the government and ministries “must do something about the rents, VAT, company tax and electricity, in order to give some relief to shopkeepers so they could recover.”

Calls for the state to come to the rescue of businesses are set to increase, especially after the precedent set during the pandemic when the state was paying workers’ wages to help out businesses. Now, however, the situation is very different from what it was during the pandemic. We are now in inflationary conditions, which affect all businesses and it would be economic suicide for the state to bring back the support schemes of the pandemic. Even if there was such a desire, those funds do not exist.

It may sound harsh, but things are bound to get worse for the retail sector and there is nothing the state can or should do about it. We live in a market economy and when things go bad for a business it is not the state’s legal or political obligation to bail it out. It is against EU law that does not allow state subsidies of businesses or the scrapping of VAT. Germany has asked the European Commission for a special exemption on VAT, for very specific energy-related reasons, and not as a way of helping shops stay afloat.

There may be too many shops in Paralimni as there are in most towns in Cyprus. When there is a downturn in the economy, those that were scraping through in good times, cannot survive. Goumenou mentioned another reason for the fall in business, which will not go away – people were shopping on the internet. Should the government stop trade on the internet to protect shops?

Shop-owners, not only in Paralimni, need to accept that market conditions and consumer behaviour are changing and they have to adapt to survive, because the state cannot, and will not, come to their rescue.

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