Our View: Oev gave up on economic rationality

The executive council of the Federation of Employers and Industrialists, Oev, on Thursday decided to accept the mediation proposal on CoLA submitted by the labour minister Yiannis Panayiotou, citing the need to preserve industrial and social peace. The unions, which were meeting at the same time decided to reject the proposal, even though the minister said, after meeting the two sides separately on Friday, he expected a deal to be agreed next week.

In the announcement of its acceptance, Oev also noted the following about the proposal. “It is long way from Oev’s positions as these have been expressed, analysed and submitted both during the consultations of the social partners with the labour minister and in public debate.” It added that it considered CoLA “an outdated system which fuels inflation, widens the wages gap between the highly-paid and lowly-paid workers, affects disproportionately the production cost, undermines the competitiveness of businesses, hits exports and damages the economy as a whole.”

Was this some kind of joke by the federation? How could it give a host of compelling reasons against CoLA only to then announce its acceptance of the minister’s proposal, which would make the existing outdated system more harmful to the economy? The minister has proposed that CoLA would be raised from 50 per cent to 66.67 per cent of the cost of living index with negotiations to follow on the final shape it will take. So Oev will work on making permanent an outdated system which fuels inflation and undermines the competitiveness of the businesses it represents.

It could not have taken a more irresponsible stance – when the unions demanded the full restoration of CoLA, Oev maintained that it should be abolished. Its excuse that it accepted the proposal in order to preserve industrial people was at best laughable, a show of weakness. Surely, if it was so certain about the damage caused by CoLA to the economy it had a responsibility to fight it and safeguard the competitiveness of businesses, not to mention the taxpayer, considering the biggest beneficiaries would be the overpaid workers of the public sector. It should be reminded that only 30 per cent of private sector workers are entitled to CoLA.

And if there was industrial unrest for a few weeks, it would cause less harm to the economy than giving a boost to the inflation rate and increasing the pay of highest paid workers. This is not first time Oev surrendered to the unions over CoLA. When Cyprus was in the assistance programme, the Troika argued for the abolition – for all the reasons mentioned in the Oev announcement and to keep the public payroll in check – but Oev, inexplicably, agreed to its partial restoration in 2017. And now, Oev is helping the government honour its election pledge on CoLA at the expense of the businesses and the economy.