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If Kikis Kazamias is having trouble getting austerity measures past the militant trade union leaders, then perhaps he should take a page out of Chancellor of the Exchequer George Osborne’s workbook, who has focused this week on two fundamental areas to stimulate the economy – credit easing, primarily for small companies, and infrastructure projects – while maintaining the drive to cut back on public spending.
The ruling communist party and the opposition Disy have finally agreed on something – to hike VAT, conditionally. They couldn’t be more wrong.
Although this newspaper has on several occasions called for a VAT increase, this should have happened a long time ago. Now, it’s too late and Disy, in its effort to appear as playmaker, has played into the hands of the administration that is so off track and beyond reality.
VAT cannot be hiked to 17% as it would reverse any confidence in the market and reduce consumer spending.
The IMF told us two months ago – we should reduce public sector spending and abolish COLA, and that we will have 0% growth. Was it that hard for people to read the writing on the wall?
The communist leadership may be overwhelmed by attaining executive power after so many decades, but is the opposition that stupid so as not to have realized what is really needed?
The economy needs a shot in the arm and this will only come through aid to the small and medium-sized enterprises, ie. 90% of businesses on the island. At a time when small companies do not have access to funding in order to maintain or expand their operations, they require credit easing, with the government ready to support them through lower tax incentives or loan guarantees in order to reduce borrowing costs. Banks are not giving out as much credit needed and are demanding up to 110% collateral in property or cash for almost every credit line. With no growth, there will be no revenue earned for the state.
On the other hand, private pension funds are sitting on huge amounts of cash and should be encouraged to invest in public projects through public-private initiatives or the privatisation of more government services or other assets. At the same time, money should be passed on more generously to local administration, as the town councils are the ones who best know the problems in the market.
Investment in major infrastructure projects offer a better return than interest earned in the property market, stock or even bank deposits.
These in turn will have a spillover effect into regenerating the construction and housing market, spending on research and investing in education.
