Finance Minister warns of danger of destabilization of economy

0 Comment(s)Print E-mail Xinhua, February 21, 2019
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NICOSIA, Feb. 20 (Xinhua) -- Cyprus's economy faces the danger of destabilization as it still struggles to fully recover from the 2013 crisis, as a result of recent court decisions declaring illegal cuts to salaries and pensions of public servants, Finance Minister Haris Georgiades said on Wednesday.

"Fully restoring cuts in the salaries of public employees in compliance with the court decisions involves a potential danger of destabilization of the economy", Georgiades said.

Public servants had their salaries, pensions and one-off payments at retirement cut by as much as 25 percent as part of austerity measures demanded by international lenders in return for a 10 billon euro bailout in March, 2013, provided to Cyprus to avoid a complete collapse of the economy.

Cyprus's Supreme Court accepted recourses by several serving and retired public employees against both the cuts in salaries and one-off retirement payment.

The government has already paid a total of 2 million euros to the applicants to comply with the judgement of the court.

The court ruling is not automatically applicable to all employees who had their salaries and pensions reduced, as each one has to file an individual recourse to the court and obtain a decision.

However, the reasoning of the judgments in the cases adjudicated so far means that future applicants will also obtain a court order for the restoration of their pecuniary loss.

The Court said that the law under which the cuts were imposed was not in line with the provisions of the constitution which sets down specific reasons for restrictions or limitations to the salaries or other pecuniary benefits of public employees.

It also said that these benefits are considered part of the individual's property, which cannot be encroached upon, pointing out that public servants had a vested right to have the state protect their standard of living as they planned it under the terms of their employment.

Georgiades said the government has not yet decided its line of action on the issue.

He said that a gradual restoration of cuts until the end of 2013, as has already been agreed with trade unions, would be manageable.

"The cost of an immediate mass restoration of the cuts to the benefits of public employees would seriously undermine the economy", Georgiades added.

Cyprus exited its three-year bailout memorandum with the Eurogroup and the International Monetary fund in 2016 and its economy has since picked up, with a 13 percent economic growth since 2016.

However, international rating agencies have warned that there are still inherent dangers to the Cypriot economy, coming mostly from a high rate of non-performing loans held by banks. Enditem

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