The EU Constitution applies only “the least common denominator” as far as economic reform is concerned, therefore “the burden of economic policy still lies with the member states” and Cyprus will have to face these issues very fast, according to Dr Stelios Platis, speaking at the Economist Panel Discussion last Thursday.
Platis is disappointed at the Constitution’s failure to address Europe’s flagging competitiveness in any substantive way, especially as closer political union means that “structuring a uniform, competitive and well functioning integrated common market becomes even more essential.”
“The drafters of the constitution seem on many occasions to have made a conscious effort to leave the exact parameters of the politically sensitive economic policy as ambiguous as possible and as far away from Brussels,” he said.
Instead, governments adopted “vague and politically correct phraseology” such as “solidarity between generations”, “social market economy” and “sustainable development”, he said.
The risk if the constitution’s welfare provisions are fully enforced is that the European economy will be relegated to a “permanent, second-class socio-economic status,” he said.
Implications for Cyprus
The failure of the five year-old Lisbon agenda that is meant to raise Europe’s competitiveness, combined with the fact that the Constitution more or less ignores economic reform, makes it all the more urgent for Cyprus to reform its economy further, Platis argued.
Cyprus should “in now way limit itself to applying the least common agreed denominator,” he said, noting that high fiscal deficits and public debt had already delayed eurozone entry for Cyprus.
Blaming Cyprus’ falling competitiveness on a sizeable public sector (employing 20% of the workforce), a highly unionised workforce (amounting to 70%), fierce opposition by the government to privatisation–a “major potential source of investment”–and dependence on “inaccurate and politicised” research produced by the government rather than using applied business research, Platis called for a greater involvement of the private sector.
“It is obvious that Cyprus, burdened with the current large fiscal deficits in recent years and a highly unionised workforce, would benefit greatly from incentivising the further involvement of the private sector in the Cypriot economy and indeed the public service,” he said.
Fiona Mullen
