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Need for drastic measures, economists say

20/05/2004 09:44
Two eminent economists, members of the Council of Economic Experts recommended on Thursday more drastic measures for the settlement of the “structural problems of the state expenditure”, questioning the effectiveness of the measures proposed for a fiscal consolidation. The proposed measures aim at restraining the state payroll through the reduction of the number of civil servants and restructuring of the civil service.

FINMIN measures

According to sources, the measures reviewed by the Finance Ministry include, among others, the freezing of the pay rises to the civil servants for a few years (but not the freezing of the surcharges and the index-linked benefits). Finance Ministry circles told StockWatch that the freezing in the creation of new job posts in the civil service and the freezing in pay rises will restrain expenditure and will reduce fiscal deficit below 1% for the next few years.

The government’s economic advisors, however, were not satisfied. Member of the Council of Economic Experts and General Manager of the Commercial Banks’ Association, Giorgos Hadjianastasiou, said that the “automatic increase” in the state payroll is still one of “the most serious structural problems”.

Surplus and retirement of civil servants

Mr. Hadjianastasiou said that the restraint of the rate that the state payroll increases demands the introduction of an “early retirement scheme” for the reduction of the number of the civil servants in combination with the abolition of the large number of job posts. “The launch of new technologies has created a “surplus” in staff, which must be reduced. More than that, the creation of a new job post in the civil service must entail the abolition of two existing posts. The abolition of job posts can be carried out among the departments, the Ministries and the Ministers”.

Evaluation and promotions

The lack of merit criteria on promotions and the existing remuneration system of the civil servants have kept productivity in low levels. All civil servants enjoy the pay rises and the surcharges, irrespective of their performance in their posts, Mr. Hadjianastasiou said.

Therefore, Mr. Hadjianastasiou suggested the introduction of remuneration systems for the civil servants, which will depend on their performance. “Trade unions must support this system. The annual surcharges must be granted to civil servants that have a good performance. This can be an incentive for other civil servants as well”.

Pasiardis: Nothing changed in the civil service since 1960

Academic economist Panos Pasiardis, member of the Council of Experts, agreed with Mr. Hadjianastasiou and stressed the need to reexamine the structure of the civil service which “does not correspond to the needs of the Cyprus economy”. “Few things have changed since the establishment of the Republic in 1960”, Mr. Pasiardis noted, emphasizing that technology aimed at reducing the costs in the civil service, but this never happened. “Trade unions must reconsider their role, which is to maintain employment in a more productive environment”, Mr. Pasiardis concluded.