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President Is Blocking Urgent Austerity Measures - Papadopoulos

cyprus economyPresident Demetris Christofias is blocking urgently-needed austerity measures to reduce government spending and raise its revenue, said DIKO MP Nikolas Papadopoulos in comments to state radio.

A new package of cost-cutting measures had been expected last week but never made an appearance amid trade union resistance to Cost of Living Allowance (CoLA) reforms and an increase in the retirement age.

The communist president is known for his anti-austerity stance which has resulted in foot-dragging from the state on cutting down on expenses even amid a reduced GDP. The delay in checking state spending was ultimately more costly as the island's deficit grew and grew until it reached 6.1 percent in 2011.

Without urgent cost-cutting in bloated and inefficient state services, countries like Cyprus and Greece will be unable to earn the trust of international investors, say most analysts, including the world's leading investor rating agencies.

Christofias is also keen to avoid blame in the current economic crisis especially following criticism from former Central Bank Governor Athanasios Orphanides who said that the president's administration spent the government's entire surplus of 500 million euros within two years. This 'spending party' left the government without the financial resources to bail out Laiki Bank, which was heavily exposed to Greek debt holdings after it merged with Marfin Bank in Greece.

Christofias is still smarting from Orphanides' criticism and earlier this week said that "my experience with my friend Thanasis was traumatic.”

“From our first meeting Mr Orphanides wanted to set aside and abolish the rights of the working people which they won through struggles over many decades. This created a distance between us even though we used to meet and speak frankly and boldly,” he said.

The power struggle is triggered by the different economic approaches between the two men. Orphanides is a fiscal conservative who tried to raise the alarm about the approaching economic crisis. His warnings were ignored by Christofias, who advocates keeping privileges and benefits enjoyed 'the working people' - aka trade unions - in the name of growth.

Orphanides is not the first economist to hear communist ideology in the form of vague economic theory from the president. Former president Vassiliou also got the sharp edge of Christofias' tongue. He always had a disagreement with Vassiliou with regard to measures for the economy “because of his neoliberal views,” adding that this philosophy has failed as far as tackling the economic crisis is concerned, according Christofias' latest statements.

Nonetheless, money talks, as they say. The government is short of 150-200 million euro in order to meet the public deficit target of 2.5 percent. According to Christofias, this amount can be covered without civil servants losing their retirement bonus or thirteenth salaries.

But skeptics point to the fact that the island's economy shrank for three consecutive quarters and is in a double-dip recession, a fact that is blithely whitewashed by the president's latest 'analysis'.

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