FinancialMirror.com
December 5 - 11, 2012
6 | OPINION
Mr Shiarly: You’ll need the president’s jet EDITORIAL Our soft spoken, low-key Finance Minister will probably have to issue a requisition and take command of the presidential jet for the next few days, hopping from one EU capital to the other to ensure that the Troika bailout request is approved by as many governments and parliaments as possible. This is where the wise words of Euro MP and former Foreign Minister Ioannis Kassoulides start to make sense, advising Vassos Shiarly to visit member states
where approval of the bailout may find some resistance or countries that are hostile to Cyprus, mainly for political reasons. The Euro MP, who has extensive experience in globetrotting, either for Cypriot or European business, suggested that our Finance Minister imitate the recent travel itinerary of opposition leader Nicos Anastassiades, who visited and met officials in Finland, Sweden and Germany. We would add the Netherlands, Poland, Spain and Denmark to the list of potential visits for Shiarly, leaving London last, once he has a near-full hand of cards to lay out on the table.
These are critical times for our sinking ship and any campaign to save the near-bankrupt economy ought to be pushed, first and foremost to ensure that civil servants are paid on time at the end of the month and to prevent the government from screeching to a halt if they are not. Cyprus can then hope to secure a bailout deal by the middle of this month and the first money to shore up our banks and inject much-need cash into the system by the end of January. So, Mr Shiarly, hop on the presidential jet and get going. After all, you’re paying for it.
If only we could listen-in on the Troika The last members of the Troika to leave Cyprus must have had quite a bit to talk about on the plane home. You can almost hear their conversation: 1st Troikan: Interesting little country. Too bad it’s in such a mess. 2nd Troikan: Yes, but you can see why. A Communist party which doesn’t believe in capitalism is trying to run a capitalist economy, a sure recipe for confusion. 3rd Troikan: But it provides a handy excuse. When things go wrong, blame it on capitalism, the new liberalism, etc. 2rdTroikan: And plenty of things have gone wrong. The chubby little guy who governs the country seems to have a certain native cunning but as for economics, he’s on another planet.
UNIONS
1st Troikan: The strong unions in Cyprus have not helped things either. They seem to have considerable influence with the government. Some say they are the government. 2nd Troikan: They struck me as something from another era. How about that guy Hadji- , Hadji- something ? 3rd Troikan: Hadjipetrou, the one that always looks like he is crying. What a face! He could hire out as a professional mourner. 2nd Troikan: Don’t underestimate him or the other union leaders. They have done well for their members. That’s what they are paid for. 3rd Troikan: Maybe they have done too well. The quickest way for a country to lose competitiveness is to give in to unreasonable wage demands not related to productivity. 1st Troikan: That “Cola” which the president is so fond of is a good example of that. Wage increases for everyone are sure to be popular but they reappear afterwards as price increases, such as those which have made the Cypriot tourist industry lose competitiveness. 2nd Troikan: Yes, their tourism has still not regained the levels of 12 years ago and the small recent improvements are largely due to civil disturbance in the Arab Spring countries.
PUBLIC SECTOR
3rd Troikan: And look at their public sector. I know of no
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other country where public sector wages and benefits so far exceed those of the private sector. 1st Troikan: Well, we did what we could to trim some of their “out of this world” benefits and compensation, but we have not really succeeded in placing their civil service on a healthy footing.
By Dr. Jim Leontiades Cyprus International Institute of Management 2nd Troikan: These are the people the government keeps referring to as “the workers”. 1st Troikan: Workers? Can you believe their office hours? I wish we had such working hours. 3rd Troikan: Well, you can’t beat their life style. Don’t waste your time trying to contact anyone after 2pm. And on a sunny Friday afternoon, don’t bother after 1pm – it seems the whole island heads for the beach. 1st Troikan: Nice life, if you can afford it. 3rd Troikan: That’s the problem – they can’t. Not any longer. 2nd Troikan: The real tragedy is that the public sector pays salaries which attract many of the island’s best and brightest, only to waste them. I met a number of civil servants who were
working very hard in demanding jobs. But they are the exception, most are wasted in dead-end situations which they can’t afford to leave because of the high salaries and benefits they enjoy. 3rd Troikan: It’s not just the hours, its plain obvious that no one has clear responsibility or accountability. That was made clear in the media accounts I read of the recent Mari disaster. 1st Troikan: If the island hopes to improve its productivity, this would be a good place to start. Just improving the title deeds situation on housing would bring huge benefits, not to mention simplifying the bureaucracy on foreign investment. 2nd Troikan: Too bad the default on the Greek sovereign debt sank their banking system, probably the most competitive industry on the island. Yes, and if the government’s attempt to “correct” matters gets out of hand, they may finish the job.
NATURAL GAS
3rd Troikan: Some people are pinning a lot of hope on the recent discovery of gas. 1st Troikan: Let’s hope it works out but it’s a bit like a bankrupt business man going to the racetrack to recoup his losses. 2nd Troikan: Perhaps, but Cyprus seems to be a lucky island. They struck gas with the first well, a couple more and there would be a quick influx of foreign investment 3rd Troikan: Well, we have done the best we could. There was some hard bargaining but its clear they are heading toward a few difficult years of recession. 1st Troikan: That seems to be the case in all of the countries we have visited. Do you think we may be doing something wrong?
Spurred by crisis, euro zone is shaping up The euro zone is turning into a more balanced and potentially more dynamic economy thanks to market pressure and the constant demand for structural reforms, according to a recent study. The three-year-old sovereign debt crisis, started by unsustainably high debt in Greece, has forced Athens, as well as Ireland, Portugal, Spain and Italy to embark on ambitious economic reforms to win back market confidence. The reforms, while painful and at times a blunt instrument, have driven labour costs down and helped bring about an “internal devaluation” that has sharpened competitiveness. The annual report, prepared by the Brussels-based Lisbon Council think-tank and Berenberg bank, said Greece was now the leader in economic reforms towards healthy economic fundamentals, followed by Ireland, Estonia, Spain and Portugal. “Almost all countries in need of adjustment ... are slashing their underlying fiscal deficits and improving their external competitiveness at an impressive speed,” the report said. Greece, Ireland, Portugal and Spain have all applied for euro zone loans to help them cope with the effects of the sovereign
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debt crisis. “All of the four eurozone countries that have been granted external assistance … have strengthened their adjustment efforts over the last 12 months,” the report said. “In other words, under the pressure of crisis, the countries that need to shape up fast are doing so. The results reveal no trace of a ‘moral hazard’, that is of a hypothetical risk that outside support could blunt the readiness to adjust,” it said. The report, called the 2012 Euro Plus Monitor, showed that external imbalances, which were one of the reasons for the debt crisis, were diminishing. It said real unit labour costs were falling sharply in Greece, Ireland, Portugal and Spain. On the other hand, wage moderation, long seen as holding up internal German demand, has ended - suggesting that the private sector in the euro zone’s southern half was moving to catch up with Germany in terms of competitiveness. “More than anything else, this shows that serious structural adjustments can happen - and are happening - within the confines of the monetary union,” the report said.
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