By Stelios Orphanides
Civil servants will get this year a 0.28 per cent pay rise as partial compensation for purchasing power lost to inflation in addition to incremental pay rises, the finance ministry said.
The pay rise is equal to half of last year’s inflation rate, excluding the impact of excise taxes, which ended at 0.56 per cent, the finance ministry said in a statement on its website. Last year’s headline inflation rate was 0.5 per cent. A year ago, finance minister Harris Georgiades and civil servants’ union Pasydy agreed that public sector workers will get no general pay rises in 2017 and 2018, excluding incremental pay rises resulting from seniority and wage indexation.
The government overhauled wage indexation to inflation, also called cost of living allowance or COLA, as part of the adjustment programme agreed with international creditors in 2013. Under the terms of the bailout agreement, the government suspended wage indexation until 2016.
This will be the first time in five years that civil servants have been compensated for loss of purchasing power to inflation as the economy, which entered a three-year recession in 2012, also experienced negative inflation rates in 2013 to 2016, exacerbated by the 2014 oil price plunge.
As a result, while the wage indexation was officially restored last year, given that the inflation rate in 2016, excluding the impact of excise taxes, was minus 1.51 per cent, public sector workers received no nominal compensation.
A disagreement between the previous government under communist President Demetris Christofias regarding wage indexation, kept negotiations in abeyance for several months after Cyprus requested a bailout from the International Monetary Fund (IMF) and the European Stability Mechanism.
In a speech in Pissouri on October 13, 2012, less than five months before he left office, Christofias vowed to “take it to the streets with workers” to defend the wage indexation and the 13th salary, paid to workers in December.
The finance ministry said in October that it expects an inflation rate of 1 per cent this year.