Cyprus’s communist-led government blows its budget surplus

The nominally communist AKEL government of Cyprus managed to spend all of the huge surplus it inherited in less 12 months, according to the latest figures for the general government accounts.
The outgoing government, which started out with a ballooning deficit, left office five years and three finance ministers later with a fat surplus of 3.5% of GDP (EUR 537.4 mln) in February 2008.
However, the new government had turned this into a deficit of EUR 326.3 mln by the fourth quarter of the same year.
Although the government still managed to scrape a surplus for the full year, it was much smaller, at EUR 157.2 mln (0.9% of GDP) than in 2007.
The government’s excuse is that in keeping with its socialist principles it has been raising expenditure on those with low incomes.
However, there is evidence that it also took its eye off the ball. National accounts figures show that it racked up public expenditure to double digit growth rates in the third and fourth quarters of 2008.
At the same time it has been very slow to realise that the economy would grow much more slowly in 2009 than in 2008.