The Cyprus economy recorded a rate of growth of 3.7 per cent in the second quarter of this year in comparison to the corresponding period of 2023, according to Eurostat. It was the best performance in the eurozone, even though there were no figures for all the countries. This was in keeping with the latest forecast of the central bank governor who said growth in 2024 would be in the region of 3 per cent.

Despite the complaints by the tourism industry that bookings are down, tourists are spending less per capita, the average duration of stay is shorter, the economy is still doing well at a time of regional instability and general uncertainty. The only concern is the rate of inflation which is 3.1 per cent compared to the average 2.5 per cent in the eurozone. The European Commission has warned that the indexing of wages (CoLA) puts upwards pressure on consumption and structural inflation.

Although the economy is doing well it should be no excuse for the type of complacency the government has been displaying. A rise in tax revenue because of increased consumption should not lead to increases in state spending especially on inelastic expenditure such as the systematic increasing of the public payroll, which now stands at €3.7 billion. In five years, since 2019, it has increased by an astonishing 37 per cent, the equivalent of €200m per year.

This is not exclusively the fault of the Christodoulides government, which took over at the start of 2023, but in this year and half it has shown a worrying degree of profligacy, first by restoring CoLA, which added €150m to the public payroll last year and second by giving a 1.5 per cent across the board increase to the public service, estimated to cost €50m. The government has said that these rises were affordable and did not affect its stated priority of fiscal discipline, even though the IMF experts, who visited recently, expressed concerns about the growing public payroll.

The annual payroll does not increase just through pay rises. It increases by hiring more workers, something the government seems to have been doing zealously since taking office. In the first seven months of this year, the number of people employed by the state increased by 4.3 per cent (2,238) compared to the corresponding period last year.

Meanwhile, another 745 teachers will be hired before the end of the year, taking the total number of teachers to 15,389. The number of children at public schools might remain the same but there is always a need for more teachers. A supplementary budget worth €33.5m was submitted for approval the legislature for this purpose, raising questions from deputies, who asked why additional staffing needs arose every year in education. The education ministry gave some unconvincing explanations to deputies about the increase of all-day schools, the expansion of the teaching of German and the introduction of financial literacy lessons, but the reality is that the state sector is renowned for its grossly inefficient use of human resources.

Cyprus’ government keeps hiring more public employees while constantly paying lip service to the digitalisation of the state machinery. If it were serious about digitalisation, it would not keep hiring more public employees to shuffle paper files from one department to the other and still use fax machines for their correspondence. That the state keeps hiring more workers for the grossly overstaffed public sector would indicate that there is no real plan for digitalisation any time soon. If there were, it would be cutting, not increasing, staff numbers every year, which is a political decision, showing utter disregard for the interests of the economy.

It is worrying that the government has become so complacent about the economy, that it is happy to allow the public payroll to remain on the growth path, based on the dubious assumption that there is no possibility of an economic downturn, even at a time when there is the risk of a large-scale war in our region which could wreak havoc on the economy. This lack of prudence in managing the economy, is a throwback to the Christofias years, when during a world economic crisis the government was recklessly spending state money, oblivious to what was happening.

This is no example to follow. The Christodoulides government must start putting the fiscal discipline it talks about into practice.