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It would seem that European Commissioner for Economic and Financial Affairs Piere Moscovici was right last month to caution Cyprus about veering off course in its non-compliance with the requirements of the Stability and Growth Pact, and that additional fiscal measures were necessary.
After Monday’s Eurogroup meeting, the body’s chairman and Dutch Finance Minister Jeroen Dijsselbloem said that the budget was at risk of deviating from the structural target, with the fiscal target of 2017 set at 1.4% of GDP, even though Nicosia has pledged that it will comply with the SGP, but would prefer to avoid fiscal measures.
The government was courageous to declare ahead of time that it met the requirements laid down by the three-year memorandum, as agreed with the Troika of international lenders, as a result of which Cyprus was free from these chains from March this year.
But the administration could not withstand the pressures from the power yielding trade unions and was obliged to give in to additional recruitment in the public sector, all the time being blackmailed that the government machine would collapse without the necessary (increased) workforce.
It has also given in to demands to reinstate civil service wages and promotional rewards to their pre-2013 levels, from where they had simply been frozen (not cut), a shameful development that kicks in from January 1 of the new year.
And all this because trade unions, political parties and the enlightened members of parliament decided that exiting from the bailout memorandum meant that more money could be spent on their salaries.
This is exactly what has happened with the government being criticised during budgets speeches that the all-important development budget has been reduced by a whopping 300 mln euros, while the public payroll has been increased, forcing the budget to deviate from its ‘balanced’ form to a deficit.
What MPs have not realised is that revenues are stable, but only because they have been boosted by once-off additions of the 3.3 bln raised in the past three years from selling passports and residency permits, which does not make the present budget sustainable.
The ordinary man on the street and all SMEs will tell you that the economy has not really improved, as there is no real growth and this has only been propped up by extraordinary items, which though complying with international accounting standards, is far off from the ethical side of things.
