CYPRUS EDITORIAL: No time to hide away from privatisations

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The ideal time for reforms is when an economy is on a healthy growth path so that the state can sustain the aftermath of changes, such as disruption in the job sector, and to accommodate issues of compensation, added welfare and training and re-integration of labour.


The benefits from reforms are far greater, primarily in the form of improved productivity and raising competitiveness, something Cyprus lacks as we have once again put all our eggs in one (or two) baskets – the passports’ cash-machine and the unsustainable construction boom.

Being in denial for decades over whether or not Cyprus needed reforms (the term is often viewed by trade unions as a threat to exorbitant wages), we were forced into a corner with the banking collapse of 2011-2012, exacerbated by a runaway public debt, driven by out-of-control public spending due to a bloated civil service payroll.

Worried about votes in the run-up to elections, the Anastasiades administration backed down on the necessary privatisations and resorted to generous pay hikes for the public sector, with little regard for sustainability of the public debt and how to drastically reduce it, in order to invest more in infrastructure, education and health.

Although Cyprus seems to be out of the woods, for now, Finance Minister Harris Georgiades insists that we are on a healthy return to growth, and now that we have been removed from ‘junk’ status, our borrowing opportunities are better than before.

In theory, this should have produced a trickle-down effect with a reduction in interest rates, better borrowing and spending by consumers and a return to a healthy savings society, with the state and large pension funds making big-ticket investments yet again.

Had we had a healthy stock market, these funds should have invested in privatised entities, such as Cyta, EAC, hospitals, universities, marinas and even property funds managing under-utilised state assets.

This is a Catch 22 situation.

Normally, a stock exchange is regarded as the barometer of an economy, allowing for fresh capital to be raised for businesses, or in this case for the state to deleverage its portfolio of non-core assets and service its large public debt, with any surplus going towards a “cushion” fund for rainy days, as suggested by the head of the Fiscal Council watchdog.

At the same time, the barometer itself, as an indicator of the general trend in the economy, needs to show it is healthy. Otherwise, why should a strategic investor look into buying a stake in Cyta in the first place?

This is a policy issue and the government is not too keen to proceed with privatisations, let alone selling off the Cyprus Stock Exchange, to a group of investors or to any one of the global bourse networks, that would, in turn, open the Cyprus market to international funding.

We don’t need to list high-risk ventures, such as crypto-currency funds, or even trade in digital currencies, but we do need to secure funding for organic growth, especially for our die-hard steady earners, such as the shipping sector, that has contributed 7% of GDP every year, come rain or shine.

So, let’s get the politicians to reignite their interest in privatisation. It’s not a bad thing, after all.