The head of Sek union federation Andreas Matsas joined forces with his Pasydy counterpart Stratis Mattheou to have a dig at the IMF, which had warned against any “fiscal loosening.” It also advised that “the authorities should refrain from further increases to the cost-of-living-adjustment (CoLA) indexation or new ad-hoc pay rises to contain the already large public-private wage gap and avoid further pressure on real wage growth.”

“The IMF’s proposals are more or less known and reminiscent of past eras,” Mattheou told the Philenews website, stressing that any effort to control public service costs “should not involve reducing public servants’ wages.” Matsas said the proposals were reminiscent of the Troika period, stating that the IMF’s position on CoLA was beyond reason and “we are not even discussing such matters.” What he wanted was for a dialogue to start on CoLA.

Unions have been demanding that the full value of CoLA is incorporated in wages (it is currently at 67 per cent) and that it become mandatory in the private sector in which about a third of workers are eligible for it. The argument over CoLA has been raging for decades. The adjustment was scrapped during the financial crisis and the period of the assistance programme but was re-introduced in stages, first at 50 per cent of its value and increased to 67 per cent in 2023.

The argument about CoLA, which primarily benefits public sector workers, the least productive workers of the economy, has been raging for decades, with union bosses insisting that it protects the ‘purchasing power of wages.’ Economists at the IMF and the World Bank, who are much better qualified than union bosses, all agree that increasing wages without a corresponding increase in productivity is an inflationary measure that fuels price rises and in the medium term is more likely to reduce purchasing power of wages.

Union bosses obdurately refuse to accept the economic orthodoxy. Next week, Sek said it will present a “scientific study that will rock the boat with regard to the level of wages in Cyprus.” The study will reportedly show that wages are too low and back union claims for an increase in the minimum wage, the full restoration of CoLA and the expansion of collective agreements which allow unions to dictate wages and pay rises.

The reality is that wages in Cyprus are not as low as unions claim them to be. According to Eurostat, GDP per capita in Cyprus, rendered through purchasing power units is at 95 per cent of the EU average, which is similar to that of France, Italy, Spain and Czechia; Greece, by contrast, is at 70 per cent. Wages are not as low in terms of purchasing power as the unions claim to back their CoLA demands. When will we finally accept that IMF economists’ advice on the economy is markedly better than that of union bosses?