Speech by the General Secretary of the C.C. of AKEL S.Stefanou in the debate on the 2024 State Budget

 

18 December 2023, House of Representatives

The debate on the annual State Budget in the House of Representatives always develops into a debate embracing a wide range of issues. This is inevitable as the economy affects all aspects and facets of our lives. It is influenced by existing conditions and policies being pursued, both inside and outside Cyprus. It is the principal arena of the application of government policies where the current administration’s vision for our country’s current state of affairs and future is reflected.

This debate is focused on our citizen’s quality of life and the obligation of those elected by the people not just to govern, but to create conditions for a healthy development in a modern state governed by the rule of law.

This is the philosophy with which AKEL approaches the debate on this year’s state budget: with a profound sense of responsibility stemming from our institutional role as an opposition. We are not overwhelmed by ideological obsessions, nor do we judge the government’s choices in a short-sighted manner.

Our responsibility, however, is to act as a bastion of resistance to any anti-social policies and to intervene in a corrective manner where the interests of the many demand it.

The new international environment

The debate on the 2024 budget is taking place at an extremely difficult time for the international and European economy, which renders the outlook bleak. We are unquestionably in the midst of an unprecedented general crisis, in the sense that it presents, along with the usual characteristics, new elements in relation to the three previous global crises of capitalism.

The present crisis has been triggered, but also regenerated by crisis situations in general and in specific areas of life on our planet.

Firstly, there is the ecological crisis, which was triggered by a socio-economic system which, by its very nature, imposes the constant and ever-increasing acute exploitation of natural resources, causing enormous damage to the environment. It is a nightmare reality that today threatens life on our planet.

The current crisis is accompanied by the energy crisis and the crisis regarding the supply and food chains. The crisis is adversely affecting the financial system and private debt.

The crisis is increasing social and economic inequalities that plague humanity. Indicative of the whole situation is the fact that the twenty-six richest people on the planet have assets equal to the incomes of four billion people in the poorest countries.

Across the world untold wealth has been accumulated in the hands of a privileged few, whist almost half the world’s population is suffering from abject poverty. This shameful situation for contemporary civilisation has become more pronounced in recent decades, primarily as a result of the global imposition of neoliberalism. Neoliberalism is a model of aggressive capitalism that shifts the consequences of the system’s deadlocks and problems on the many, while strengthening the privileged few, with the result that inequalities have become enormous.

The crisis is accompanied by a political crisis, which is expressed on the one hand by the growing democratic deficits observed and on the other by the inability of governments to draw up a realistic and effective plan for a way out.

The greatest weakness is noted in the EU. The ruling elites in Brussels are taking decisions which in fact force the consequences of the crises on the popular strata. With these decisions, basic problems are regenerated, perpetuated, mutated or reappear in another form. It is precisely for this reason that the EU continues ever more distant from the peoples.

Instead of changing course, the EU leadership is seeking to promote social consensus by controlling information and manipulating people’s consciences. We live in the age when the internet has removed almost all barriers to freedom of expression. However, the same is true regarding the range and effectiveness of the methods used to impose restrictions on freedom of thought and its control.

The exacerbation of socio-economic problems and deadlocks, together with the inability to manage the migration issue in a rational and humane manner, are fuelling the far right, which is dangerously strengthening its social base. Forces from the Right, at the same time as they invoke the danger of the far right, compete with it in expressing intolerant, xenophobic, nationalist and anti-communist rhetoric and sometimes do not hesitate to cooperate with the ultra-right. We have experienced this kind of behaviour here in Cyprus as well.

It is obvious that there is also a crisis of leadership in the EU. The present leadership is not only unable to confront the political problems, but, trapped in its ideological obsessions and contradictions, it is indeed exacerbating them.

A characteristic example is the case of the war in Ukraine where instead of working for the benefit of its societies, the EU is dogmatically aligned itself with American interests. Despite the fact that the US is profiting from the war, the Europeans are paying huge costs with soaring prices for energy and essential consumer goods, while the EU is in danger of going into recession.

The EU’s invocation of international law is not convincing, since in other cases, such as Cyprus, occupied Palestine, Libya, Syria and other countries, it either violates international law itself or remains silent and is indifferent. The culmination of the EU’s hypocritical stand is the massacre being committed by the State of Israel against the Palestinians. Here Europe is silent as it is guilty.

The state of the Cyprus economy

It is in these conditions, then, characterised by numerous uncertainties, that we are debating the 2024 state budget. To be able to conduct this debate rationally, we need to answer two fundamental questions:

• What kind of economy do we have?
• What kind of economy should we have?

The Cyprus economy’s growth is slowing down. From the 3% forecast for this year, growth has fallen to 2.4%.

The slowdown is due both to external factors (energy and transport costs, high interest rates, difficulties in supply chains, sanctions on Russia, etc.) as well as to the structural problems, distortions and weaknesses noted in the Cyprus economy. In recent years, our country’s productive base has not increased in proportion to the economy’s growth, thus fuelling inflation and foreign trade deficits. While in 2006-2010 the rate of utilisation of profits for investments was around 85%, today it is barely 60%.

Growing inequalities

Since 2013, a process of a major devaluation of labour and a reduction in working people’s real incomes is underway. These reductions can be observed in two dimensions: real wages and the share of labour. The average real wage has fallen in 2022 due to inflation by 3%, while the labour share of the national income has fallen by approximately 4% of GDP. A reduction was noted during the 2013-2015 period because of the imposition of the Memorandum. On the other hand, the share of profits is up by 7.5% of GDP compared to 2011.

This plus for capital income was deducted from labour income, which explains the sharpening of economic inequalities, which is even more pronounced due to the fact that the average wage increase is below the average increase of prices (7.1% increase in wages, 8.4% in price increases).

The transfer of generated wealth from wages to profits occurs because of the deregulation of labour and the increase in employment through cheap labour. It also occurs because there are no adequate policies for redistributing the wealth produced in favour of wage labour, low-income earners and vulnerable groups in society. The government needs to intervene on all these issues, but we do not see it doing so.

Instead the government chooses to continue on the path of the previous government which consciously imposed or encouraged policies for the deregulation of labour.

Work/labour relations

Labour must be re-regulated and supported, as well as working people’s earnings. This can be done. For example, through the restoration and extension of the Cost of Living Allowance to cover the whole spectrum of the private sector. By extending collective agreements and increasing the minimum wage.

Given that certain circles are constantly trying to blame working people’s incomes for the problems the Cyprus economy faces with regards its competitiveness, I would like to note that relevant statistics show that the reduction of wages in recent years has not led to a reduction in production costs, nor has it led to competitiveness being boosted.

Increases in working people’s incomes not only do not affect the ability to finance productive investment, but have positive effects on demand, stimulating production and employment.

That said, I point out the great need for economic growth to be socially-oriented. That is how a strong economy acquires a meaning. Otherwise, it is just numbers that prosper, which must of course prosper, but on the condition that people prosper too. We want a robust economic growth for strong social prosperity. We can achieve both.

Getting rid of obstacles

To achieve this goal, the Cyprus economy will have to free itself from the obstacles that constrain and sometimes hinder its dynamism. What are these obstacles?

The first obstacle is the negative impression that has been formed internationally in recent years for our country because of the ‘golden passports’ scandal, a product of the Anastasiades – DISY government. The Cyprus state across the world is considered to be corrupt. They tell us so when we are on parliamentary missions abroad. That’s the conclusion Cypriot businessmen make when they try to bring serious investors to our country. How corrupt do they consider us to be? As the title of a BBC World documentary on corruption in Cyprus states. “The offshore President” was the title referring to Nicos Anastasiades.

The stamping out of entanglement/interwoven interests and corruption is a major challenge facing the government. We await to ascertain in practice how it will respond to this challenge, starting with the investigation and bringing to justice of the protagonists of the huge ‘golden passports’ scandal. This is the starting point that will change the erroneous impression Cyprus has internationally. The government is also called upon to put an end to the impunity which is damaging and undermining the authority of institutions.

The second obstacle is the practices pursued for anarchic growth, “get-rich-quick” policies and short-term profiteering that have prevailed in recent years at the expense of the sustainability of the economy and in many cases, to the detriment of the environment.

What kind of economy do we want?

Having said all of the above, we are called upon to answer the following question: What kind of economy do we want?

We reply: we want an economy that doesn’t depend the needs of country and society on an accounts-based approach. We want to see an economy that ensures stability in public finances and supports a developed welfare state.

We need a new developmental model that ensures the growth of the economy through productive investment of a lasting nature and that decisively supports scientific innovation and technology, which are the main driving forces of an economy in 21st century.

We need an economic model with a trustworthy financial system that works for the benefit, not to the detriment, of the economy and society. A financial system whose relationship with businesses and citizens is not based on blackmail and the exploitation of its dominant position, but on cooperation. Banks should help reduce the cost of borrowing by putting an end to over-indebtedness and facilitate, through prudent banking practices, the financing of growth and social change.

We need a model State that should be working with the private sector for the benefit of the many, with a significant state presence in strategic sectors.

Our economy needs meaningful tax reform that distributes the burden more fairly, supports entrepreneurship by providing logical incentives and, of course, ensures that the State has the necessary resources.

Price increase/inflation

Speaking of price increases/expensiveness which is draining the incomes of households and small and medium-sized enterprises, I must submit AKEL’s assessment that the government has so far performed far below any expectations, it has not and continues to not demonstrate the necessary responses.

Without underestimating the importance of the measures that the government has taken belatedly and after much political and social pressure has been exerted, we believe that these are mainly temporary and secondary in nature. If the government was moving at the level of the European average with regards the provision of support measures, it would have had to spend half a billion rather than two hundred million Euros. In addition, the government has not taken corrective measures to shield the economy against external pressures.

AKEL insists that far more substantive measures are needed to address the problem of poverty. We have submitted specific proposals, such as the abolition of double taxation on fuel, targeted interest rate subsidies for housing loans, the provision of emergency allowances to cover family needs, etc.

At the same time, we have proposed ways to increase government revenues to provide further support to society. We recommended the taxation of exorbitant profits that has been implemented in various EU member states.

The government stubbornly refuses to do so, although there were initial statements to that effect. It is clear that the government here too is pursuing the same policies of the previous administration, avoiding any confrontation with powerful interests, oligopolies and cartels that are plaguing the economy and households.

Increased revenues can also be attained by stamping out tax evasion. According to the European Commission’s Report, Cyprus alone in 2021 lost almost €200 million from tax evasion and avoidance.

The government must act decisively to crack down on profiteering keeping in mind two phenomena that are observed: First, the fall in global prices is not followed by a corresponding fall of prices in Cyprus. Secondly, in several cases the reduction in VAT rates on consumer products is benefiting middlemen instead of consumers.

Social policy:

The problem of poverty is made even worse for households because of the deficits and inadequacies of the state’s social policy. Usually the discussion surrounding social policy is limited to citing numbers and statistics. This is what the Christodoulides government has done in presenting its budget. Of course, numbers have their own significance, but if they are not grounded in reality, they are frequently misleading.

So I will avoid quoting numbers, but I think it is worth mentioning that in many key social policy indicators Cyprus lags far below the EU averages. And as far as some social indicators is concerned, Cyprus ranks bottom of the table, such as for example with regards people with disabilities, the provision of family support, health benefits, pensions, etc.

So there is a lot of work to be done. Work mainly in the direction of creating structures and establishing infrastructures, applying specific policies and actions, adjusting allowances and grants. Much could be said, but due to time constraints I would like to mention just two very critical areas in relation to the young people of our country, who are under the greatest pressure as a result of the negative economic and social developments.

The first is housing. Housing has become an unattainable dream for a large section of the young generation. The state does not have a comprehensive housing policy. Nor does it have one for refugees, since the previous government dismantled most of the programmes that existed. State programs to provide and finance housing are very limited in scope.

It is imperative that a comprehensive housing plan is elaborated and a centralized state housing agency is created to implement it. As far as lending for the acquisition of a home is concerned, since the Housing Finance Corporation in 2017 was converted into a bank, it cannot fulfill this role. So either the Corporation will revert back to its original character or the government will have to create a new one.

The second area concerns young families. One of the main reasons, perhaps the key reason, for the low-birth rate in our country is the problems relating to childcare and support for parents. This requires the creation of structures and the development of programmes and actions. On both issues, AKEL has elaborated and submitted specific proposals through the two nation-wide campaigns it is currently conducting.

The areas of public health and education are prominent on social policy issues, which I will not go into as they will be covered in a well-documented manner by our MPs. But I feel the need to repeat an appeal AKEL issued to the President on public health, which I outlined in a letter to him on 21 November. We haven’t had any response from the President – just like other letters I have written. Apparently this is how the President and his government understand the new fresh approach they had promised during the election, ignoring the opposition.

In any case, public health needs immediate action – both to save public hospitals and to correct problems and meet needs and resolve shortcomings in the National Health Scheme. Developments are critical and actions and decisions are demanded before it is too late.

Energy/green transition

Another big chapter for our country is energy. Apart from the cost and Cyprus’ almost complete dependence on fossil fuels, we must be aware of the major risks our country faces in terms of energy security and sufficiency.

The Anastasiades-DISY government which with its incompetence and addiction to serving powerful interests, has left Cyprus unprotected on energy issues and bears grave responsibilities.

The non-arrival of Natural Gas for electricity production, the reduced penetration of RES in our energy mix, the delay in the improvement and renewal of the networks of the Cyprus Electricity Authority (AHK) which causes the inability to manage the energy produced, the absence of planning for energy storage in line with the global situation surrounding fuel prices, lead to ever increasing costs in the production of electricity.

This cost is even greater because of the penalty we pay on pollutants: 350 million in 2023, half a billion in 2024. These are the “gifts” of the DISY government to Cypriot taxpaying citizens. There is also a problem with the lack of transparency regarding the tender of pollutants and the resulting revenues for the state.

If we add to this pessimistic situation the long delay in the completion of the infrastructures needed for the arrival of natural gas, the inability to exploit the Cypriot deposits [in Cyprus’ Exclusive Economic Zone], the long delay in the opening of the competitive market, then we can comprehend the mountain we have to climb without even having the luxury of time. This is the negative legacy of the previous government. But this is also the challenge which the government is called upon to respond.

To reduce energy prices, AKEL’s proposal is to use part of the revenues from the tendering of emission rights to abolish the renewable energy and public utility charges paid by consumers, as well as to tackle the worsening energy poverty. This is in line with EU guidelines and legislation for the allocation of at least 50% of the revenues from tendering towards this end.

There is a need to formulate a comprehensive long-term strategic energy plan covering all aspects of energy: electricity, natural gas, transport, renewable energy penetration, energy efficiency and energy storage.

The challenge for the green transition is immense. It must aim to protect and enhance our country’s natural asset, to protect the health and well-being of our citizens from the impacts associated with the environmental crisis. Green transition must be equitable and accessible to all. We are very concerned about the green taxes that will start to be imposed as of next March and which will further burden households and businesses. The government must demand relief from the EU and discuss measures to offset the costs – especially for the lower income groups in society.

The migration issue

Another major challenge is migration. Cyprus has been a host country for refugee and migrant flows in recent years. The previous government failed miserably to meet the challenges. While it had consented to EU policies that essentially trap thousands of people in frontline countries such as Cyprus, it did not take the necessary measures to handle these flows. Thus the problems accumulated and became a first-class pretext for the far right to pour its poison of racism and xenophobia into Cypriot society, even to the point of organising pogroms.

Cyprus must at long last pursue a comprehensive immigration policy. This is another big challenge for the government. Such a policy must not be confined to managing asylum applications, which must of course be processed quickly, fairly and efficiently.

The creation of a Deputy Ministry for migration alone will not address the problems. Structures with appropriate and adequate staffing, policies that improve access to rights, information about obligations and the integration for those who are granted asylum are needed.

We must decisively crack down on human trafficking and smuggling rings and promote bilateral repatriation agreements with other countries with the contribution of the EU. There is a need to implement a comprehensive human resources development policy so that migrants and asylum seekers are not victims of undeclared work, but can work with dignity where regulated labour relations will be in place. In this way, there will be no unfair competition in the labour market and the creation of conditions of destitution and “ghettoization” will be avoided.

The government urgently needs to put to the EU institutions the promotion of a policy of sharing the migratory flows among all member states, according to their population and capacities.

The Cyprus problem

In the closing remarks of my intervention on the challenges our country is facing, I cannot but refer to the critical issue for our country’s future. Namely, the solution of the Cyprus problem. The ongoing pending issue is undermining the future not only of the Cyprus economy, but of our country as a whole.

Its non-solution not only perpetuates the prevailing insecurity, but at the same time, it also limits or even deprives the economy of opportunities for growth. Just think if the Cyprus problem were resolved, how much easier it would be for us to achieve our country’s energy connectivity, instead of settling for difficult or even unprofitable, from an economic point of view, plans. Imagine where the energy programme of the Republic of Cyprus might have been. What additional investments could be allocated for growth in our country and what new prospects would open up for us all.

This is a period when expectations for a solution are almost zero and pessimism prevails. But we are convinced that the prospects for a solution to the Cyprus problem have not been lost. There is a glimmer of hope, which we must seek to strengthen:

By assuming initiatives on our part to break the longest deadlock ever recorded.

By remaining consistent to the agreed basis for a solution of a bicommunal, bizonal federation with political equality.

By constantly demonstrating our readiness to continue the negotiations on the basis of the Guterres Framework from the point where they had remained at Crans Montana in 2017 and preserving all the convergences that have been registered so far.

By formulating and promoting a positive agenda towards Turkey and the Turkish Cypriot community by taking advantage of energy issues without going beyond and violating our “red lines”.

By announcing measures on behalf of the Republic of Cyprus towards our Turkish Cypriot compatriots who are our natural allies for the achievement and functioning of the solution.

The aim is to create a dynamic to break the deadlock, which Turkey is exploiting in order to consolidate the de facto partition through the imposition of new occupational fait accompli.

Why AKEL will be voting against the budget:

As we have already announced, AKEL’s decision is to vote against the government’s budget. As we have already announced, the government budget is not just about figures. It is the expression of the values and priorities of each given government.

In our view, the first budget of the Christodoulides government is a management budget. Basically, the government is picking up from where the budgets of the previous government of N. Anastasiades left off. After all, the President frequently stresses that he is continuing the previous government’s economic policies.

In AKEL’s view, the budget does not respond to the main challenges our country faces.

AKEL is voting against the budget, because:

• It does not provide for the return to society of at least a portion of the unexpected revenues of hundreds of millions of euros that the state is accumulating due to the ongoing price increases/expensiveness. These revenues come out of people’s pockets. The government prefers to heap pressure onto society rather than do what many European countries are doing and support people against the rising tide of the cost of living and high interest rates.
• Very little is included in the budget that addresses the major structural distortions that plague our economy. It also includes very little for the formulation of a sustainable and strong developmental model that unleashes and harnesses the country’s potential. A developmental model that produces dignified quality jobs and prosperity for all, always with respect for the environment.
• It does not provide for policies to at long last enable the state to confront powerful interests, the oligopolies and cartels that are all profiteering at the expense of citizens, to confront the interests of the established order in the economy, the market and the banking system so that solutions for society, the middle strata, households and small and medium-sized enterprises can be promoted.

4. The budget is devoid of policies which give depth and sustainability to economic growth while policies that can substantially boost society’s income to address inequalities are absent.
5. The 2024 state budget does not respond satisfactorily to the acute problems facing society, such as price increases/expensiveness, housing, the lack of modern social policies focusing on the young generation, working parents and the family. It has not responded satisfactorily to the issue of foreclosures, but has in effect continued the policies of the previous government.

We cannot give a vote of confidence:

AKEL is voting against the budget for an additional reason: it cannot give a vote of confidence to a government which, in its first ten months in office, has managed – for it is indeed a feat – to disappoint with its poor performance and behaviour even many of those who voted for Christodoulides.

Society is facing serious, big and pressing problems that need substantive answers, strategic choices and radical solutions. Instead, and despite all the promises and announcements made during the election campaign, we note that the government is absent from the problems and following developments with unease and nervousness.

Although it promised a fresh beginning and change, it has spread disappointment. Expectations were dashed early on with the appointment of the Ministerial Cabinet. We subsequently witnessed the grotesque appointments of advisors with no or dubious degrees, the payment of overtime for government officials, the pension and benefits issues that touch even the President himself. And on matters of order, meritocracy, transparency, good administration, mentalities and perceptions, the Christodoulides government is copying the previous administration.

There is a widespread sentiment in society that the government does not govern. It wanders, hides, and is usually content to engage in the communication management of the various issues that arise.

AKEL will continue to act as the only consistent opposition force, responsibly and, above all, in a creative way. We do not criticise at will. Where we agree, we back our policies so they can yield results. After all, history has vindicated us, as we have done so in the past, as in the case of the National Health Scheme.

Accordingly, where we disagree, we submit proposals, suggestions and elaborate positions. We propose solutions that are realistic and well-founded, to serve the needs of society and the economy, of working people, of the vulnerable groups of the population, of the young generation and the majority of Cypriot society, which still believes that this country can and must take steps forward.

If only the government would change course, forcing us to reconsider our attitude in the future. Until then, however, we will continue to exercise our role as an opposition force with a profound sense of responsibility towards our country and people.