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Cyprus Internet Directory [ Editorial: Not the best way to inspire confidence ]

Editorial: Not the best way to inspire confidence

THE HONEYMOON period for the new government is over. The election hangover has been overcome, the president has already received his first taste of Brussels and ministers have had a chance to acclimatise to their new jobs and responsibilities. Now the hard work begins: formulating policy, dealing with pending issues, resolving problems inherited from the previous government, anticipating future problems and asserting its authority.

Routine stuff some would say, but there is no underestimating the importance of a good start as it determines expectations and creates the grounds on which the new government will be judged. The new president (and his government) has left the no-cost realm of big words and promises of the election campaign and entered the world of decision-making and action which are judged and questioned on a daily basis. And no matter how good the government’s PR techniques may be, covering up slip-ups and blunders is never easy, which is why a degree of caution is recommended in the first few months.

President Christofias took over the presidency during very difficult times. Leaving aside the mounting international pressure to work for a Cyprus settlement, he has come to power at a time when the world economy is slowing down and crude oil and food prices are soaring. These will have negative effects on the domestic economy which faces its own problems after a year of impressive growth fuelled by the construction boom. The sector is already experiencing falling demand while the tourism market, the traditional mainstay of the economy, has been in steady decline.
Can election promises about increasing social spending by €600 million every year be kept given the current economic climate, considering the president had banked on financing state largesse, not through higher taxes, but increased growth rates. Now the forecast growth rate of 3.5 to 4 per cent for 2008 is looking rather optimistic and with the inflation rate at 5 per cent in February, increasing state expenditure does not seem the smartest idea. With the battering of CSE share prices, to an extent reflecting investors’ uncertainty about the new government’s plans for the economy, it was imperative for Christofias to reassure the business world that economic stability was his priority.

The president should have bided his time instead of getting his Finance Minister to announce that a 14th pension would be given at Easter. A proposal has not even been prepared and no decision has been taken about the amount that would be paid out. Was it really necessary to announce the intention, without any preparation work being done? A more sensible approach would have been to put the plan on hold until next year – nobody would have accused Christofias of failing to keep his promise – when the new government would have drafted its own budget and would have been better-placed to manage its finances.

The exercise of caution is no bad thing for a newly-elected government as it inspires public confidence. People expect a cautious approach from a new president, especially on the economy, as this suggests seriousness and a commitment to rational, as opposed to rash and reckless, decision-making. The announcement about the Easter pensions, before plans had been drawn up and without knowing where the money would come from, would fall in the ‘rash and reckless’ category of decision-making, creating the impression of a slapdash approach by the government on economic matters.

And Christofias, given his ideological background, cannot afford to give such an impression, in such an economic climate. A difficult year for the economy has been forecast, the Central Bank Governor has advised against increasing state spending so as to check inflation, share prices have been getting a battering and the European Commission was disapproving of the government’s measures to reform its pensions policy which were deemed inadequate. Despite all this, the first economic measure the government announced was an extra pension payment, which was not budgeted or costed.

The message was clear – Christofias would pursue his misguided spending promises, oblivious to economic conditions and whether the state could afford it. This is hardly going to reassure the twitchy business world or inspire confidence in the prospects of the economy at a time when it is desperately needed.

(Source: Cyprus Mail)

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