By Stelios Orphanides
Finance minister Harris Georgiades said that five years after Cyprus experienced its worst banking and fiscal crisis since 1974, “the glass is more than half-full”.
At the same time, there is need to continue the effort to recover lost ground, he said at an event in Nicosia on Thursday according to the transcript of his speech forwarded by the Ministry of Finance.
The economy, which rose 2 per cent in 2015 when it exited a prolonged recession, and 3 per cent last year, is expected to expand more than 3.5 per cent this year, he said.
Georgiades said that sticking to a fiscal strategy aiming at generating fiscal surpluses allowed tax breaks which helped economic recovery and an expected reduction of public debt below the 100 per cent mark this year.
The finance minister, who oversaw Cyprus’s fiscal consolidation after taking over the finance ministry in April 2013, days after Cyprus accepted the onerous terms of a bailout which provided for losses for depositors at the two main Cypriot banks, is increasingly succumbing to union pressure for more pay. In March, the government gave in to demands for salary hikes raised by the nurses’ union Pasino, which the government flatly rejected a year earlier on the grounds that accepting them would open a can of worms.
On October 6, Georgiades rejected demands of the island’s two major unions SEK and PEO, representing workers in the Electricity Authority of Cyprus, state broadcaster CyBC and other state owned or sponsored organisations, to increase the general government’s payroll next year beyond a budgeted 2.7 per cent cap. “Granting wage increases to semi-governmental organisations ahead of elections would signal the return to bad practices on the past,” he said on that day.
Two weeks later, on October 20, the finance minister made a U-turn when he announced an agreement to enter talks with the two unions for even more pay in 2018.
The government generated last year a fiscal surplus of 0.6 per cent of economic output and is expected to produce a surplus of 0.9 per cent this year.
“Looking at the Cypriot economy’s future, I would raise the bar for growth, prosperity and prospects even higher,” he said. To achieve this, he continued, Cyprus will have to see the unemployment rate, seen in September at 10.3 per cent, down from over 16 per cent in 2014, drop below the EU average and resolve, once and for all, the problem with the non-performing loans. On Monday, Central Bank of Cyprus governor Chrystalla Georghadji said that delinquent loans in the Cypriot banking system stood at €21.9bn or 44 per cent of the total.