Uncertainty Over House Vote on Austerity Package

There is uncertainty over the future of a package of economic austerity measures tabled by the government amid emergency negotiations between DISY President Nikos Anastassiades, Finance Minister Kikis Kazamias and state employee trade unions PASYDY, SEK and PEO.

The vote had been set for today, August 25th, but has been postponed for tomorrow instead, midst a delicate situation in which trade unions have threatened strike action if they are not consulted over changes to the public sector's working conditions. 

DISY MP Christos Stylianides said he hopes that the 'dramatically historic' negotiations succeed, in comments to state broadcaster CyBC.

"Foreign rating agencies are watching us. If we are cut to junk status, it will destroy our economic system and Cyprus as a financial services centre," said Stylianides.

Any measures passed by Parliament tomorrow will be just the beginning, he said. More measures will be needed to get Cyprus out of the economic crisis caused by a wider sovereign debt crisis in the EU exacerbated by an additional 700 million euros in damage to Vasiliko power station in the wake of the deadly explosion on July 11th. This year, GDP growth is expected to stagnate, given the additional burden on the economy.  

Opposition to government package

Many analysts do not expect the package to pass as it currently stands after the Democratic Party (DIKO) said it will not approve it because it does not go far enough and does not deal effectively with the key issue of public sector pension reform.

Democratic Rally party (DISY) spokesman Haris Georgiades said that it is well-known that parliament is expected rubber stamp the government's proposals, but that it has the right to amend or vote against them. The number of public employees has risen from 65,000 at the end of 2007 to 71,223 at the end of 2010 and it is clear that the public payroll has to be cut, he said.

But Finance Minister Kikis Kazamias and public sector trade unions have only agreed on a package which includes a 3% contribution from all government workers' salaries for the next three years. The measures have the approval of left-wing President Christofias who heads up a minority government whose strongest political support in the wake of the explosion at Mari naval base comes from the trade unions, which represent government employees.

Civil servants receive two pensions, and only contribute 3.4% instead of the usual 6.8% to one of them. Unwilling to give up their perks, civil servant trade unions PASYDY, PEO and SEK have pressured the government to agree to postpone pension reform and instead, increase VAT.