Our View: Ignoring IMF warnings should worry everyone

Pasydy, the public servants’ union, issued an announcement last Thursday “expressing satisfaction” for the agreement with the finance ministry for a 1.5 per cent pay rise in the civil service from October 1. Why would it not be satisfied? The across the board pay rise, over and above CoLA and annual pay increments, will not be given at the beginning of 2025, as is the usual practice, but kicks in from October, so it would boost 13^th salaries as well.

All civil service employees – plus contractual and pensioners – and workers of the broader public sector will get the rise, which will add an estimated €60m to the public payroll annually. The public payroll is expected to exceed €4 billion in 2025 when all the other pay increase are added to it.

The last time a general pay rise was given to public sector employees was 2009 and, “since then because of the economic crisis and fragile economic climate there were zero pay rises,” said Pasydy, which “aware of the adverse conditions and the needs of the Cyprus economy kept a responsible and serious stance, avoiding staking any claim for the granting of general rises.”

Given the improvement of the economic climate and the high growth rate now recorded by the economy, it was “deemed that conditions were now favourable to seek a pay rise,” said Pasydy. It is a disingenuous argument, considering civil servants have been receiving pay rises thanks to CoLA and by moving up the pay scales. And even without a general pay rise since 2009 public sector wages, on average, remain significantly higher than those of the private sector.

Finance Minister Makis Keravnos seemed as satisfied as Pasydy with the agreement, “which was to the benefit of workers, society generally, but also within the framework of the capabilities of our economy.” That the finance minister sees nothing worrying about the annual public payroll hitting €4bn and believes it is to the benefit off society for the gulf between public and private sector wages to grow defies belief.

Just a few months ago Keravnos had said the government would seek the help of experts to reform and rationalise the public payroll by linking it to productivity and growth. Has he abandoned the plan because it did not meet with the approval of Pasydy and the other unions? The employers federation (Oev), which does not have the clout of the unions, warned about the high rate of growth of the public payroll in recent years, expressing fears that the it was heading for unmanageable levels of the pre-crisis years.

In its report on Cyprus the IMF had also warned the government about the growth of the public payroll, identifying it as one of the dangers facing the economy. The experts of Pasydy and the other unions issued a joint statement at the time threatening dynamic action if the government adopted any of the suggestions of the IMF. The government appears to have given in to these threats, completely ignoring the advice of the IMF. Its decision should worry everyone.