Cypriot finance minister warns of economic risks

NICOSIA, April 8 (Xinhua) — Cyprus’ economy would be in danger of a second collapse, should the government comply with a court decision declaring unconstitutional fiscal consolidation measures taken to deal with the 2013 crisis, Finance Minister Harris Georgiades said on Monday.

Georgiades was speaking at an emergency meeting of eight parliamentary parties called by President Nicos Anastasiades to consider ways out of a possible imminent crisis.

State radio quoted sources with inside knowledge as saying that Georgiades told the participants the cost of restoring reductions in the public payroll would amount to 1.6 billion euros (1.8 billion U.S. dollars), almost one fifth of this year’s budget.

He was also reported as saying that such expenditure would drain the public coffers.

A government spokesman said Anastasiades briefed party leaders on alternative plans prepared to deal with the crisis, including a last resort of amending the constitution in case the state failed in an appeal being prepared against the court’s decision.

Ruling DISY party leader Averof Neophytou said after the meeting that the only way to restore cuts in salaries and benefits of public employees should be a gradual process over several years of economic development.

He said it would take up to four years to fully restore cuts.

“Returning to the status quo of 2012 overnight would mean we did not correct anything in the economy. Such an eventuality would mean that money left in the state’s account would be enough to pay civil servants for one of two months and the next development would be an economic Waterloo,” Neophytou warned.

The cuts were approved in 2012 by all parties in parliament during the negotiations for a bailout of the Cypriot economy by the Eurogroup and the International Monetary Fund.

Public servants had their salaries cut by 12.5 percent and their yearly incremental salary increase and cost of living allowance frozen. They also were made to contribute 3 percent towards their pensions and to an additional contribution of 3 percent, which was phased out in 2016.

After about 150 public employees filed actions against the fiscal consolidation measures, Cyprus’ administrative court decided that the cuts and contributions were part of their property which could not be impaired in any way under a provision of the constitution.

Restoring the salary cuts alone would add to the budget and additional expenditure of 200 million euros a year, while retrospectively compensating public employees would cause an immediate expenditure of 1 billion euros.

Party leaders asked to be given time to consider the issue and return to a new meeting in the presence of the Attorney General, who is preparing an appeal against the court’s decision, to be tried by the full bench of 13 Supreme Court judges.

Depending on the outcome of the appeal, the issue could even be taken before either the European Court of Human Rights or the Court of the European Union.

Source: Parikiaki.com

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