The Return of the Sacred Cows
Employees of the public sector seem to hold firmly their status as the country’s “sacred cows” as private sector employees appear to be “children of a lesser God”.
At a time when employees of the private sector are still struggling to come to terms with the debilitating effects of the economic crisis, the public sector appears to have initially concluded a collective agreement which includes increases in the civil servants’ compensation.
The improvement in the government’s fiscal situation achieved during the last two years as a result of changes and controls largely imposed by the Troika, have not yet reached the real economy as evident by the number of unemployed people.
Unemployment, although lightly down recently, stubbornly remains at record high levels.
Even if employed, a large number of employees in the private sector are earning significantly less than what they used to before the crisis while the loss of a series of benefits remains without any real prospects for regaining them in the near future.
As a result, a large number of households are struggling to meet their debt and other obligations with the non-performing loans of the banking sector staying at unsustainable levels of around 50%.
At the same time, and before even officially exiting the economic adjustment program with a lot of crucial issues still pending, the increases to be given to the broader public sector from 2017 seem to have been agreed already.
According to initial information these will be related to the performance of the economy and are expected to be 2%-4% – an underestimate, given the better than expected macroeconomic environment.
For 2016 the current status will remain in place, and any changes to be agreed will be applicable for 2017 and beyond.
This will be a crucial period for the junk-rated Cyprus as it will be struggling to refinance a large chunk of its already high debt (about €7 billion) and to convince markets that the” good old” practice of giving pay raises to civil servants beyond their productivity rates, has come to an end.
The public sector union PASYDY portrays its positive stance during the crisis as the main factor for this improvement stating that the time has come for the “sacrifices” of the civil servants to come to an end, “sacrifices” that curtailed their scandalous super-privileges that they enjoyed all these years up to the time crisis hit Cyprus.
The public sector’s payroll has indeed been cut since 2012 but this happened after it enjoyed unsustainable increases during the previous years.
Wages and salaries of civil servants in 2014 not including pensions amounted to about €1,7 bn meaning that a 4% increase will burden the taxpayer by about €70 mn per year, about 0,4% of GDP.
What if this money were funneled to improving infrastructure or making investments (not simply by constructing roads and buildings) that would generate sustainable employment. What if, for example, the money went to funding new research that would generate jobs and potential innovation for hundreds of unemployed highly qualified youth, who are currently immigrating from Cyprus?
With the coming parliamentary elections of May 2016 rapidly approaching, employees of the private sector may once again feel indeed children of a lesser God.
George Vakis is a financial analyst and editor of StockWatch’s english edition.