CYPRUS: Civil servant pay cuts deemed unconstitutional

The Administrative Court said on Friday that pay cuts imposed on Cyprus civil servants as part of an austerity drive in 2012 are unconstitutional, a decision that could cost the state a billion plus euros in compensation.

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The court said that the pay rise freeze, a 3% contribution to pensions, and a reduction in civil servants’ pay was in violation of article 23 regarding the protection of the right to property.

These austerity measures were imposed by a cash-strapped government that tried reign in debt as the economy went into meltdown – many in the private sector endured heavier pay cuts to keep their jobs.

The decision essentially means that the government may have to compensate civil servants for the loss of an annual income of EUR 200 mln.

While initially only 208 employees took part in the lawsuit against the government, the decision may see thousands more taking legal action.

This could mean that the state will have to return some EUR 1.2 bln, deducted from public servants salaries and pension contributions over the period from the end of 2012 to date.

With the state having 42 days to appeal, consequences of this decision are yet to be calculated as the island’s economy maybe in for some serious turbulence.

Reacting to the decision, the government will assess the court’s decision in cooperation with the Legal services said spokesperson Prodromos Prodromou.

Prodromou said "this is a decision on a very serious issue with major consequences for the country, which the government, is evaluating with the state’s Legal Services”.

He said that at this current stage, any reference to economic impact or cost would obviously be premature as the government has yet to look into whether it will appeal the decision or not.

Asked whether the Government is to enforce the decision until an appeal is filed Prodromou said that the competent bodies are to look into the ruling and the government will announce its decision in due course.