Finance Minister Harris Georgiades repeated his warning that Cyprus was risking public finances getting out of hand yet again as a delay in pushing forward a bundle of reforms could allow an uncontrollable increase in the public payroll.
Georgiades, who was commenting on state-radio CyBC on Monday said that unless the parliament passes a bill, part of a bundle of draft laws to reform the public sector submitted to the House more than a year ago, the forces which had inflated the public payroll in the past would be unleashed again.
“The hourglass is emptying and we will find ourselves on January 1, 2017 without any arrangement, freezing or somehow putting a reasonable cap on payroll,” he said, three days after delegations of the European Commission, the European Central Bank and the International Monetary Fund, collectively known as the troika, completed their first post-programme review mission to Cyprus.
Cyprus froze public workers’ salaries and hiring in the government as part of the fiscal consolidation measures agreed with international creditors before and as part of its March 2013 bailout agreement. The wage freeze included negotiated pay rises, incremental salary increases according to seniority and compensation for inflation. The wage freeze expires in December, nine months after the completion of the adjustment programme.
Cyprus’s bailout became necessary after the government lost market access in May 2011, caused by repeated large fiscal deficits combined with fears it would not be able to recapitalise its banks exposed to Greece. The public payroll which then accounted for about 15 per cent of gross domestic product and fell subsequently to below 13 per cent, was one of the driving forces that led to fiscal derailment.
“It is easy to spend money you don’t have,” Georgiades said. “This is what we did in the past when we spent a million more and left others to foot the bill. We are not going to follow this path again”.
In a joint statement on Friday, the European Commission and the ECB said that the pace of reforms has slowed down “considerably”. The two institutions encouraged Cyprus to focus on reforming its public administration, introducing a national healthcare scheme, overhauling the title deed transfer system, modernising justice, privatising and opening the electricity market to competition.
The most important reform, “at this situation we are in, which needs to be pushed forward, is that of the public service,” the minister said, adding that while Cyprus was the second top reformer in Europe over the past three-year period “we have not transformed our economy to a perfectly structured economy”.
The finance minister, who repeatedly urged lawmakers to review and pass the reform bills which inter alia provide for a new evaluation system of the performance of civil servants, transferability and a cap on the payroll increase depending on economic growth, said that as the reform package remains pending for over a year, “there is an issue which creditors have spotted”.
He added that the problem is “not that it is noted in a report by the European Commission and the ECB but that we remain with obviously problematic structures and procedures. Do we really need the troika to tell us that this is a reform we have to push forward? “.
The finance minister said that while the ministry was not working on an amnesty aimed at repatriating funds, it was still open to assist lawmakers in case they decided to draft such a proposal.
The post Time runs out for reforming civil service, finance minister says appeared first on Cyprus Mail.