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Cyprus News Agency: News in English, 12-05-30

Cyprus News Agency: News in English Directory - Previous Article - Next Article

From: The Cyprus News Agency at <http://www.cyna.org.cy>


CONTENTS

  • [01] Commission proposes series of recommendations for Cypriot economy
  • [02] Government hands over Cyprus Airways restructuring proposal

  • [01] Commission proposes series of recommendations for Cypriot economy

    Cyprus` economic activity is expected to contract by 0.8% in 2012, before regaining some momentum in 2013 to reach 0.3% of GDP, according to the European Commission.

    In twelve in-depth reviews for those member states, including Cyprus, that were identified as warranting closer inspection in the Alert Mechanism Report earlier this year, the Commission proposes that Cyprus takes additional measures to achieve a durable correction of the excessive deficit in 2012.

    The Commission adopted a package of proposals, concluding the second European Semester of economic policy coordination and giving guidance for national policies in 2012-2013.

    The policy recommendations of the Commission include guidance on how to address macroeconomic imbalances, according to the new mechanism implemented as part of the so-called 6-Pack legislation.

    Once these recommendations are endorsed at the June European Council and formally adopted by the Council of Ministers in July, they will help member states to prepare and adopt their national economic policies and budgets for 2012-2013.

    The Country-specific Recommendations are documents prepared by the European Commission for each country, analysing its economic situation and providing recommendations on measures it should adopt over the coming 12 months.

    The proposed recommendations for Cyprus 2012 note that in 2012 unemployment is foreseen to increase further to 9.8%.

    According to the recommendations, to ensure sound public finances, Cyprus has adopted a series of consolidation measures, committing to the reduction of its fiscal deficit.

    Legislation has also been put in place to accommodate, via public intervention, risks to the viability of banks or needs for recapitalisation that cannot be met by market operations. As a response to the economy`s contraction, the government also adopted a wide-ranging package of measure to enhance the country`s growth potential, employment, productivity, and competitiveness.

    Measures were taken to reform the pension system and a social dialogue is currently under way regarding the reform of the wage indexation system.

    Despite these efforts, it notes, "Cyprus is affected by sizeable and persistent current account deficits, large amount of accumulated private sector debt, widening annual deficits of public finances and the large exposure to Greece of the banking sector". It further indicates that tax collection is marked by inefficiencies that give rise to tax evasion.

    In addition, a comprehensive pension reform is needed to address the inherent sustainability as well as adequacy problems of the system, given the high poverty risk among the elderly.

    According to the report, the healthcare system is characterised by inequity and inefficiencies.

    Unemployment is on the rise, reaching historically high figures, especially for young people and the labour market is characterised by an inadequate supply of skills to match current and future labour demand. Obstacles in the services market and to the provision of professional services remain.

    In its recommendations, the Commission proposes that Cyprus takes additional measures to achieve a durable correction of the excessive deficit in 2012. "Rigorously implement the budgetary strategy, supported by sufficiently specified measures, for the year 2013 and beyond to ensure the achievement of the medium-term budgetary objective (MTO) by 2014 and compliance with the expenditure benchmark and ensure sufficient progress with the debt reduction benchmark".

    It should also "accelerate the phasing-in of an enforceable multiannual budgetary framework with a binding statutory basis and corrective mechanism" and take measures to keep tight control over expenditure and implement programme and performance budgeting as soon as possible, improve tax compliance and fight tax evasion.

    The recommendations propose that Cyprus should harmonise the supervision of the cooperative credit societies in line with the standards applied for the commercial banks and strengthen regulatory provisions for the efficient recapitalisation of the financial institutions in order to limit exposure of the financial sector to external shocks.

    It should further improve the long-term sustainability and adequacy of the pensions system and address the high at-risk-of-poverty rate for the elderly, aligning the statutory retirement age with the increase in life expectancy.

    Cyprus is also urged to complete and implement the national healthcare system without delay, on the basis of a roadmap, which should ensure its financial sustainability while providing universal coverage.

    In addition, Cyprus is asked to improve the skills of the workforce to reinforce their occupational mobility towards activities of high growth and high value added, take further measures to address youth unemployment, with emphasis on work placements in companies and promotion of self-employment and take appropriate policy measures on the demand side to stimulate business innovation.

    It is also urged to remove unjustified obstacles in services markets, in particular by improving the implementation of the Services Directive in service sectors with the most growth potential (including tourism) and by opening up the provision of professional services and improve competitiveness including through the reform of the system of wage indexation, in consultation with social partners and in line with national practices, to better reflect productivity developments.

    Furthermore, it is urged to take steps to diversify the structure of the economy and redress the fiscal balance by restraining expenditure.

    [02] Government hands over Cyprus Airways restructuring proposal

    Minister of Labour and Social Insurance Sotiroula Charalambous has handed over to the Cyprus Airways Board of Directors and the employees union the government's plan for the company's restructuring.

    A two day deadline, ending at midnight on Friday has been given to both parties in order to reply to the proposals of the Ministerial Committee.

    The proposal was drafted bearing in mind a series of meetings between all sides concerned with the mediation service of the Ministry of Labour.

    The government's plan provides for the redundancy of a significant number of Cyprus Airways employees, tiered salary reductions and a variation or elimination of a number of benefits the employees currently enjoy.

    In statements she made after delivering the proposal, Charalambous said it was a difficult process, remarking on the contribution and understanding shown on behalf of the unions.

    "It is not easy to ask for the alteration of conditions of employment", she said, adding that "I would like to think that all sides are committed to a common goal".

    She noted that the government's central aim is to help the company find a strategic investor, who will not only make it viable but will also turn it into a profitable one.


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