Inching forward towards a deal

THE OUTCOME of yesterday’s talks between the unions and the government on a rescue package for the economy remained elusive, with the two sides putting off a potential deal until next week.

From comments to the media after a two-and-a-half hour session with President Demetris Christofias and Finance Minister Charilaos Stavrakis, it emerged that pension reform was still the largest stumbling block for an overall agreement.

Unions have resisted pressure to accept demands for cuts to income and pension benefits as a way to slash the state payroll – the major drain on state coffers with the government deficit rising sharply to 3.47 per cent for the first half of the year and amid growing fears that Cyprus may eventually need financial support from the EU.

Civil servants contribute towards their social insurance pension around half of what workers in the private sector do. They moreover contribute nothing towards their professional pension, which comes straight out of state coffers.

But they appear to have grudgingly agreed to an emergency contribution, perhaps for as long as two years running. But their union PASYDY has driven the point home that this is to be a temporary arrangement.

A report by actuarial firm Muhanna has shown that the government spends too much on pensions, which take up 2.9 per cent of GDP here compared to the eurozone average of 2.0 per cent.

The leaders of PASYDY and trade unions PEO and SEK are to continue deliberations with the Finance Ministry on Monday. On Tuesday, they hold another meeting with the Finance Ministry, after which they trek back to the Presidential Palace in the hopes of clinching a deal paving the way for the government to finalise bills and forward them to parliament.

Under this most optimistic scenario, the bills will be fast-tracked to Thursday’s House plenum for a vote.

Although the union leaders declined to go into specifics yesterday, media reports suggested that some progress was made and that the sides had inched a little closer to agreement.

According to the state broadcaster, PASYDY backed down and agreed that all newcomers to the broader public sector contribute to social security.

CyBC also reported that, as a trade-off, the government agreed to the unions’ demand for a new law taxing large landowners.

Mega reported meanwhile that a 2 per cent rise in VAT (on items currently bearing a 15 per cent VAT) was also agreed to appease PASYDY, which claims its members are being singled out and wants the burden of new measures to be equally spread out among the population.

“We have covered a lot of distance today. We have agreed to resume (the talks) intensively on Tuesday, in the hopes of reaching a final agreement,” SEK union head Nikos Moiseos told newsmen.

Asked which point still troubled his union the most, Moiseos cited pension reform.

All the other issues have been agreed, he added.

PASYDY leader Glafcos Hadjipetrou said his union would study the government’s latest proposals and would be seeking “certain clarifications” from the Finance Ministry prior to Tuesday’s crunch meeting with the President.

“It is of course our right to draw red lines in the sand. Our members must be kept updated, but now we’re in a dialogue with the President and we want to preserve this dialogue in order to obtain a result,” he said.

For his part, outgoing Finance Minister Stavrakis said that the economic crisis is manageable, provided however that the right measures are taken now. Cuts in government expenditures were a necessity, he added.