An economy in transition

Decisions regarding the co-operative banking sector in Cyprus might have been different, a senior European Commission official told MPs on Tuesday, but noted that the final solution was not too bad.

“Now with the benefit of hindsight we might have made things differently and decided differently but I think all in all the solution does not look too bad” said Manfred Bergmann of the Directorate General for Economic and Financial Affairs of the European Commission.

He was meeting with MPs of the House Finance and Labour Committees, in Nicosia, following the European Commission’s 2019 report for Cyprus, published in February.

“It is not really a solution” he said, adding that “the only thing that happened is that what was non performing in the banking sector is now non performing in the public sector via the special entity we have created for this”.

In his remarks Bergmann warned that Cyprus has the “major disadvantage” of being a small open economy, which makes it “very vulnerable to shocks” and “not really resilient”. The Cypriot economy, he went on, is based on tourism, construction and the golden passport regime and “these are issues which might be very fragile” he stressed.

Bergmann also said that public servants in Cyprus seem to enjoy both high salaries and protection of their positions, unlike in other EU member states where public servants have their positions secured but get lower wages. “In Cyprus they have both high wages and protection, sounds like having the cake and eating it too. And when we talk about lack of qualified labor in the private sector one reason might be this and another reason might be the education system” he noted, adding that “the economy is in a transition phase and the private sector and education hasn’t caught up yet. Cooperation between the private sector and education is needed” he stressed.

On privatizations he told MPs that “we don’t make it a mantra and we don’t make it a religion” but added that “if you don’t want to go for privatization in the fields that you have monopolies, such as telecommunication or energy, you need a plan B so that at the end of the day the result is good” and “you have a very efficient telecommunication sector, transport or energy sector”.

Barbara Kauffmann, Director for Employment and Social Governance in DG Employment said that Cyprus has seen a “significant increase” in part time employment and in atypical labour which “is a concern”. She also said that the rate of employees that earn less than the minimum wage in Cyprus is relatively low compared with other EU member states.