Cyprus business associations call for public sector restraint, reform implementation

Employers and Industrialists Federation (Oev) president Antonis Antoniou has stated that only through strong competitiveness can Cyprus ensure the prosperity of its people, strengthen the social safety net for the vulnerable, and improve the living standards of everyone residing and working here.

In a written statement released this week, Antoniou said that concerns are mounting, particularly with the war in Ukraine, ongoing since early 2022, and a new one in Israel, resulting in an uncertain mid-term outcome.

He noted that “the only certainty is that the geopolitical map is changing, and until the final picture is formed, we will face a 2024 with unpredictable parameters”.

“Amid these constantly changing conditions and the uncertainty they exacerbate, Cyprus has had to rediscover its path countless times, redefine its course, reassess its strengths and capabilities,” he added.

He stressed that the Cypriot business community has always had a leading role in this process and, as in all risk situations, was called upon in 2023 to bear the burden of the country’s recovery.

Moreover, Antoniou explained that despite adverse signs so far and the challenging environment, Cyprus’ productivity has performed well, growing during this time, and coping admirably with the interest rate hikes imposed by the ECB.

He noted that this has created the right conditions for the country to face 2024 with grounded optimism, an ambitious yet realistic and achievable vision.

“The state must harness the developmental potential, ensuring continuous improvement of public finances through generating primary fiscal surpluses and reducing public debt to tackle any new unforeseen challenges,” notes Antoniou.

Continuing, the Oev president mentioned that given the persistent external risks, such as fuel and energy price increases, supply shortages, or high prices in raw materials, food, and essential goods, the primary duty of government should be to strengthen the competitiveness of the Cypriot economy with the tools available to it.

“Only with strong competitiveness can the country ensure the welfare of its people, reinforce the social safety net for the vulnerable, and improve the living standards of every individual residing and working in the territories controlled by the Republic of Cyprus, including pensioners, the unemployed, students, workers, self-employed individuals, or entrepreneurs,” Antoniou said.

What is more, he stressed that improving competitiveness primarily requires strong determination from the state, as well as political and social consensus for completing fundamental reforms.

These include digitising public administration, combined with new organisational structures, a reduction in bureaucracy, and containing public sector salaries.

It also involves making the justice system more expeditious, producing inexpensive electricity, modernising tax planning, revisiting the pension system, neutralising weaknesses in the healthcare system, and making public hospitals autonomous.

Additionally, he called for a stable and unchanging legal framework, as well as the efficient operation of the financial system.

He added that vital parameters defining economic growth include securing an adequate number of suitable human resources for businesses, aligning mid-term educational measures with labour market needs, and accelerating plans for the employment of foreigners to alleviate pressure inhibiting Cyprus’ growth momentum.

Furthermore, he advocated connecting wage increases in the private and public sectors with the national productivity growth rate, abolishing any automatic, unconditional wage increases.

In this context, he called for the modernisation of the automatic cost of living adjustment (CoLA), as agreed in the summer of 2023, by incorporating productivity and economic growth principles into its implementation.

“Together, we must work towards freeing our country from factors that affect its image and tarnish its reputation. We have dramatically improved our regulatory, supervisory, and control framework and excel in many areas compared to our international critics,” the Oev president said.

“The few remaining tasks must be swiftly implemented with determination and courage, and in this effort, the state will find unwavering allies in us,” he added.

“Our country continues on its European destiny, focusing its efforts and dedication on the positives that set us apart. We welcome the new year with optimism and confidence,” Antoniou concluded.

Meanwhile, In his own message, the newly elected Cyprus Chamber of Commerce and Industry (Keve) president Stavros Stavrou said that the focus is on two fundamental weaknesses that must be addressed as a priority.

These include the “resolution of the enormous problem of the lack of staff across the entire spectrum of the economy, to meet the pressing needs of businesses, and the fight against the cancer of state bureaucracy, which seriously undermines the competitiveness of our country”.

Additionally, the chamber sounded the alarm for the significant increase in the state payroll and other non-productive expenses of the state, eroding fiscal balance and threatening public finances with a deviation from previously set targets.

He continued by noting that “the recent government actions to increase public sector jobs, coupled with the concession of an increased rate of the Cost of Living Adjustment (CoLA) for government employees, will only result in the inflation of the already high state payroll”.

“The continuous rise in expenses for the maintenance and operation of the state machinery, coupled with the low productivity and excessive bureaucracy of the public sector, undermines fiscal stability,” Stavrou concluded.