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Building defences for troika

28/06/2012 07:05
Cypriot government is building a seven-point line to moderate the demands of its European partners for fiscal consolidation and structural reforms.

For each one of the seven European Commission’s recommendations, the Finance Ministry has prepared answers that highlight the efforts made to adopt the changes.

The “red line” for the Ministry is the single Coop supervision and the increase in the retirement age.

Measures for deficit of 2.5%

With regard to the first recommendation of the Commission for a deficit cut in 2012 and in order to achieve the middle-term fiscal target in 2014, the Ministry said in its document that the Republic of Cyprus reiterated its commitment for a deficit below 2.5% in 2012, despite the difficult macroeconomic conditions.

The Stability Program includes measures of structural character.

To reduce the deficit, the FINMIN has prepared a number of measures. Also, the Treaty for the Stability, the Coordination and the Governance in the Economic and Monetary Policy has been approved by the Parliament.

The Parliament has also approved a number of measures against tax evasion.

Single supervision

The Ministry reassured that the supervisory framework of the Coops is fully in line with the banking system framework.

The number of the Coops has been reduced significantly while checks are carried out on a daily basis after the system’s automation.

Overall, twenty new professionals have been appointed in the past two years.

Pensions

Cyprus has adopted a number of reform measures consisting of both structural changes in the general pension system and changes in the professional pension plans of public and semi-governmental sector.

It is noted that those measures are expected to have the same if not greater financial impact than the adoption of measure to link retirement age to life expectation.

At this stage, an actuarial study is carried out to reform the social security system to examine alternatives ensuring a balance between financial sustainability and the adequacy of pensions in the long term.

National health plan

For the national health plan and recommendations for preparing a road map of implementation, the Ministry replied that the national strategy for the plan has been completed by the Health Insurance Organization, which was submitted to Cabinet and has been approved.

Improving workforce skills

As for the improvement of the workforce skills, the measures against unemployment and the strengthening of business innovation, the Finance Ministry stressed that a number of measures of total €34 million with an ECB co-funding aim at maintaining employment, creating new job posts and improving employability.

Those measures include incentives to businesses, work placements, training of the unemployed, in-house training programs, modernization of public employment services and subsidized employment a plan targeted at young people and long-term unemployed.

Special emphasis has been given to measures to promote youth employment, training, creation of new modern apprenticeships and a plan for improvement of youth entrepreneurship. Additionally, Post-secondary Vocational Education and Training Institutes will operate from 2012.

Opening service sector

For the opening of service markets and the recommendation for improving the implementation of relevant EU directive, Cyprus compared with other Member States has a limited number of closed professions. "There is no legal obligation to go beyond the provisions of Directive on services”.

Competitiveness

Finally, on the recommendation of the European Commission to improve competitiveness, through COLA reforms, the Ministry pointed out that COLA is not a key factor affecting competitiveness.

"The industrial relations system in Cyprus and the union contract procedures allows taking account the current economic conditions when determining the salaries”, it said.

Cyprus has committed through the Euro Plus Pact to make a social dialogue with social partners on how to pay the COLA so as to become more balanced and fair. This dialogue has begun and is expected to be completed soon.