AKEL on the 2018 State Budget 11 wounds inflicted by Anastasiades’ economic policy
Statement by Aristos Damianou, member of the Political Bureau and AKEL MP
AKEL C.C. Press Office, 16th October 2017, Nicosia
Just as on the Cyprus problem, so on the Economy too, Mr. Anastasiades is sticking to his own narrative about a “success story”. The question is whether this narrative on the economy is experienced by all of our fellow citizens or just by a privileged few.
The Anastasiades government’s last budget follows once more a narrow-minded monetarist approach, aiming solely to balance revenues with costs, ignoring the needs of the real economy.
The 2018 state budget reflects the 11 wounds inflicted by Mr. Anastasiades’ economic policy:
- In the area of growth, while on the one hand positive growth rates are projected, the benefits are channeled however to the privileged few. The boom in tourism and in the luxury housing sector is uneven and fragmented, as a result of the economic and geopolitical circumstances, and not the outcome of comprehensive strategic planning.
- In the real economy, Mr. Anastasiades has shrank the middle strata and made Cyprus top the table as regards growth in income inequality. In 2012, out of € 19.5 billion of the total income (GDP at current prices) in the economy, € 9.4 billion concerned wages and social contributions, € 7.5 billion was an operational surplus (mainly profits and to a lesser degree incomes of self-employed persons) and the € 2.6 billion tax in production. In 2016 this ratio changed dramatically. Total income fell to € 18.1 billion, but the reduction was transferred entirely on to wages. Wages fell sharply to € 8 billion, while total earnings remained unchanged at € 7.5 billion, as well as taxation at € 2.55 billion. The gradual restoration of total production over the next few years will increase the total profits in the economy compared to 2012, while wages will have suffered a significantly cut.
- It is obvious that the government is adhering to an accounting logic with regards the economy, given that it is interested in the restoration of economic indicators and not in the qualitative upgrading of the Cyprus economy.
- The implementation of the developmental budget remains meagre, despite the government portraying a picture of an increase in spending in the budget. For the period January-August 2017, the implementation of developmental spending stood at 33%, even further down from the 36% in the corresponding period of 2016.
- The Government’s vision for growth continues to focus on the privatization of the profitable semi-governmental organizations and the selling off of public wealth and property.
- As far as public revenues are concerned, although the improvement of the economy creates expectations for an increase in public revenues, nonetheless the Government is unable to effectively stamp out tax evasion, which will significantly increase the flow of revenues to the state budget.
- At the same time, Anastasiades’ policy has proceeded to untargeted tax concessions, which are much more beneficial to the rich income strata (for example, the universal abolition of the real estate tax), thus exacerbating the already rising income inequality in Cyprus.
- With regards the question of expenditures, despite improved budgetary margins, the 2018 state budget continues to keep development spending and social benefits down to fixed levels.
- Cyprus holds the last position in the table concerning expenditure on social protection and one third of the population is in actual fact below the defined poverty line.
- In the labour market as a result of his political decisions, N. Anastasiades has become the creator of the “€600 generation”. For the first time, those entering the labour market have fewer prospects than their predecessors. Thousands of young people have migrated, while thousands of young scientists who want to return to Cyprus can’t find jobs
- The banking sector continues today too to confine itself to managing non-performing loans. Non-performing loans are a major problem for the Cyprus economy and the real danger of the foreclosure of primary family homes is real, while the provision of new loans to support the real economy is limited.
This is the history of failure of Mr. Anastasiades’ economic policy.
