Filenews 20 March 2022
Interview of Marios Pelekanos with Socrates Ioakim / Photos: Dimitris Vattis
"The government has proven in previous crises that it intervenes with targeted measures giving solutions"
The sign of the two terms of the Anastasiades administration is clearly positive, argues the Government Spokesman Marios Pelekanos in Insider. Talk about the impact on the Cypriot economy after the Russian invasion of Ukraine, refers to the tax reform, the increase in corporate tax and the problem faced by thousands of businesses in relation to finding human resources. of the future.
In a year's time there will be a change of baton in the Presidency of the Republic of Cyprus. In your view, will you deliver an economy built on solid foundations?
First of all, I would like to point out that it is too early to take stock because the government has a whole year still ahead of it, dozens of programmes and a very ambitious budget to implement. Let me be quite optimistic that in this final stretch even more will be done. Most have already been or are in the final stages of implementation, such as, among others, the new plan to attract investment, the new housing policy, the reform of local government, the reform of the judiciary and the reform of the public service.
In any case, however, I believe that, undoubtedly, the sign of the two terms of office of the Anastasiades administration is clearly positive.
To have a clear picture of the progress that has been made, suffice it to recall the images from March 2013 when the economy was on the brink of disaster, the recession reached 7%, unemployment exceeded 16%, cash was only enough for a month of state payments. All the international rating agencies had classified our country in the category of rubbish, so that we could not borrow if we did not mortgage the country itself, while those who lent us did so at interest rates that made the cost to taxpayers unbearable. If these are compared with today's results, anyone can easily understand the magnitude of the achievement we have achieved as Cyprus and of which every citizen should feel proud.
Today it is considered self-evident that the economy will follow an upward course and the country will progress. But that is by no means the case. It has taken robust governance, unpopular decision-making and insistence on a programme in order to be able today to have a resilient economy that can not only stand up but also record high growth rates and excellent prospects.
Just think that for the past 2 years we have been managing a huge pandemic that has as an inevitable consequence serious economic consequences, unprecedented for the whole world. Nevertheless, our country has recorded in 2021 a growth rate of almost 6%, recorded an increase of more than 10% in the average monthly salary compared to 2008, recorded the lowest unemployment rates since 2009 and the highest number of vacancies also since 2009.
At the same time, important steps forward are being taken in terms of strengthening the welfare state.
At the same time, the rating agencies, which, as we all know, are both independent and strict judges, classifying our country in the investment grade with their ratings, which allows us to borrow at the lowest interest rates since the beginning of democracy, confirm our positive prospects.
This does not mean that we are complacent. We have major challenges ahead of us. That is what we are focusing on. Making full use of the amount allocated to us by the European Union's Recovery and Resilience Fund is one of the top objectives. The "Cyprus_of_Tomorrow" Plan. it will allow us to make use of a total amount of more than €4 billion, while at the same time we will strengthen the competitiveness of our economy, we will create thousands of quality jobs especially for our young people, we will lay solid foundations for the transition to a green economy and at the same time we will implement, as I said before, important reforms that the country needs.
IT IS NOT ONLY THE NUMBERS THAT PROSPER
What do you say to all those who accuse the government of prospering the numbers and not the citizens?
This is a very dangerous approach. It provides an alibi for political figures and groups to ignore realities and engage in populist approaches that in turn lead to undermining the credibility of the state and to an inability to serve its citizens effectively. We have experienced this in the past with dramatic consequences for citizens and especially for the most vulnerable.
Numbers are the most reliable way of describing reality, if of course they are read correctly and not with distorting lenses. And you can easily refer to the independent statistics and compare the fluctuation of key economic indicators from 2008 until today as one can easily compare the returns of Cyprus in relation to the rest of the EU states.
A country with high growth rates can only have the conditions for prosperity. A country with low unemployment rates will certainly also have smaller percentages of citizens at risk of impoverishment.
However self-evident some things may be today, it takes a great deal of effort, long-term, prudent financial management and targeted policies to achieve them.
That is why we, when we talk about social policy, mean something much broader than benefits, which of course will always be necessary for some of our fellow citizens, but the right social policy should focus on reducing to the smallest possible extent the number of our fellow citizens who will need the benefits to meet their basic needs.
Let me remind you that it is during the current administration that the safety net has been strengthened. Briefly, I would like to mention the introduction of a minimum pension, the new housing policy, the implementation of the UGS, the readiness of the state to implement a national minimum wage and the introduction of the GHS, which is the biggest reform since the beginning of democracy.
No state will ever have inexhaustible financial resources. What is important is that the state's capabilities are channelled to the economy and citizens in such a way as to ensure social cohesion, while at the same time the country will take steady steps forward, creating the best conditions for the well-being of its current and future citizens.
The finance minister recently expressed the government's intention to proceed with a series of tax reforms, which will be launched in 2022. We would like you to clarify for us when these reforms will be announced and to what extent the effect they will have on public finances has been costed?
This is an issue that is high on the government's agenda and announcements should be expected in the near future. The government's intention to proceed with tax reform is a given, as a lot has changed since the last time the Republic has done something similar.
One of the main objectives of the reform is a fairer tax system, with an emphasis on strengthening the competitiveness of our economy and in connection with our goals regarding the green and digital transition of the country.
The government has often proven that it is studying in detail before taking any next step. In this case, of course, an evaluation of all the data will be carried out, in order to draw safe conclusions, while it is a given that the Government will listen and consult with all the social partners beforehand.
Our minimum obligation is to deliver an economy with a present and a future.
FOREIGN INVESTMENTS AND CORPORATE TAX INCREASE
Will not raising the corporate tax to 15% negatively affect the effort to attract foreign investment?
First of all, we should note that the increase results from a marathon of consultations at a global level with the participation of more than 150 countries.
Beyond that, I believe that the relatively small increase in corporate tax from the current 12.5% to 15% will not substantially affect our effort to attract foreign investment.
We see this development, not as a threat, but as a new opportunity. Cyprus has many comparative advantages on which we should focus so that not only does not produce a negative impact, but on the contrary to take advantage of this opportunity to achieve even better results.
This is what we should focus on and I should say that the government's reaction was immediate in this case too, as a new attractive package for foreign companies has already been announced. If we want to face any impacts, we must target sustainable and long-term investments, which, in addition to economic benefits, will help the effort to upgrade the skills and skills of our human resources.
At the same time, a difference in compensatory measures, such as reliefs from other taxes or fees, will also be examined, so that the total tax costs of businesses remain at the same level, approximately, at the same level. At the same time, other policies that are being promoted, such as that of the digital transition, will contribute in addition, since they will reduce the cost of administrative burdens.
THE LACK OF HUMAN RESOURCES
Several companies, mainly in the tourism, construction and catering sectors, complain about the problem they face in terms of the lack of human resources. What are you doing to solve this problem? Should we not make use of asylum seekers who are currently only dependent on benefits?
It is precisely this question of yours that proves the steady and upward trend of our economy, especially in the midst of an unprecedented epidemiological crisis that has challenged the strength of economies that are much stronger than ours. What goes without saying in your question is that today our problem is not unemployment but a shortage of staff.
The relevant ministry has already come a long way in considering trophies with which we could deal with the phenomenon of lack of human resources and some tangible results have already begun to appear. In addition, the competent technical committees of the Ministry of Labour are currently examining the requests of employers in the hotel industry and will follow similar procedures for the rest of the economy.
In any case, we should continue with the same tactics that are being followed. In other words, we should proceed to a categorisation of vacant jobs, so that the vacancies can be combined with the registered unemployed, Cypriots and Europeans, who could pay for them. If vacant posts remain, alternatives to meet the needs should of course be considered.
I should also make it clear that as far as asylum seekers are concerned, the criteria have been broadened to enable them to be employed. Therefore, no allowances are granted in these cases.
INFLATIONARY PRESSURES
Inflationary pressures on the Cypriot economy have continued in recent months. Are you considering any new measures to relieve households and businesses?
Inflationary pressures have been recorded in recent months worldwide for very specific reasons related to the economic impact of the pandemic. The price increases result from the sharp increase in consumption, the increase in the prices of raw materials affected by both geopolitical developments and the distortions observed in the supply chain.
As Cyprus, compared to other countries in Europe or beyond, we have kept inflation at controlled levels. However, we already have before us a new negative development with the unpleasant things that are happening in Ukraine, following the invasion of Russia.
We are closely monitoring developments and planning the next moves, both at local level and in cooperation with our European partners to limit the impact on the metro as much as possible.
In Cyprus, targeted measures were taken with a clear emphasis on vulnerable households, while the Government has repeatedly expressed its willingness to take additional measures to mitigate the problem. With the same logic and seriousness we will continue to proceed, always within the framework of the capabilities of the state, and always taking into account that we must hand over to the next generations a viable economic model that will have as a foundation stone the social state.
HOUSING POLICY
You have also served as a President of the Cyprus Land Development Organisation and we would like you to comment on the housing policy followed by the government and whether you consider it feasible for this policy to curb property prices in areas where prices are galloping.
The policies in place are not aimed solely at containing prices. Most importantly, they aim to provide solutions and the opportunity to acquire a homeowner to those who for various reasons are unable to do so without the contribution of the state. At the same time, other policies are being promoted, such as, for example, the fight against urbanisation and the revitalisation of the countryside, the border, the mountainous and the remote areas or the reduction of the maintenance costs of residential units while promoting the protection of the environment through the 'Save and Upgrade' project.
It is a holistic approach, which covers geographically the whole of Cyprus and that makes the vast majority of the population eligible, while new solutions have been offered or are offered that target our most vulnerable fellow citizens, through, for example, the opening up of the affordable rent market promoted by KOAG or the Home and Hearth Plans, which provide solutions to our fellow citizens who have faced financial difficulties in servicing their loan obligations, because of the effects of the mismanagement that led us to the financial crisis of 2013.
As you will be aware, the total budget for the implementation of housing policy is €125 million for 2022, double the expenditure for 2018 and an increase of 22.4% compared to 2021.
Again I will refer to the timing, as this is happening at a time when we are going through the biggest epidemiological crisis since the beginning of democracy. In fact, the amount I have mentioned does not include non-monetary benefits such as the free allocation of land to young couples.
THE STANDSTILL ON THE CYPRUS ISSUE
The quagmire observed on the Cyprus issue, what impact does it have on the Cypriot economy and society?
The first and biggest problem caused by the occupation is the undermining of the citizens' sense of security, which you know is the litmus test for development in a country.
In recent years, with our accession to the EU, this feeling has been reinforced, but we are still a country with more than 1/3 of their territory being occupied for more than 47 years.
As far as the economy and society in particular are concerned, the continuation of the occupation does not allow the exploitation of the potential of our country in their entirety. Our ports, tourism with hundreds of kilometres of beaches from Apostolos Andreas to Akamas, the land, the primary factor of the economy etc.
And of course, I do not omit the sense of injustice caused by the loss of property imposed by the occupation, a reality which, despite the enormous efforts made over time by the state since 1974, is still a wound in Cypriot society.
Therefore, a solution to the Cyprus problem is a priority. The President of democracy did not stop working in this direction for a moment by taking initiatives and submitting proposals, in order to break the impasse. There have been periods of stagnation on the Cyprus issue from time to time, but never because of the intransigence of our side. The effort will not stop until the reunification of our country, which will create great economic prospects for the benefit of all citizens.
ECONOMIC IMPACT OF AN INVASION OF RUSSIA
What economic consequences do you think there will be from Russia's invasion of Ukraine?
Russia's invasion of Ukraine is a game-changer and it is expected that in the short and medium term, consequences will arise for our economies. Already, before the developments in Ukraine we were in the midst of a period of inflationary pressures, arising due to the effects of the pandemic. Now comes a new, complex and multidimensional crisis.
Product prices are expected to be affected to a greater or lesser extent due, inter alia, to the increase in energy and raw material prices. At the same time, there are concerns about the impact on tourism and services. To this we must also add the consequences of any new sanctions imposed by the EU and other states, which will have to be monitored in an evolutionary manner.
The data in any case require vigilance, both at local and European level, to mitigate the expected impact. The Government has proven in previous crises that it intervenes with targeted measures by providing solutions. There are, in addition, the tools that the Member States of the European Union can use through the collective decisions required. A set of measures that should take into account, as a priority, the principles of social justice and the need to safeguard economic stability.
Do you fear, after the government's clear support for Ukraine, the withdrawal of Russian companies from Cyprus?
As I've often publicly stated, we should evaluate the data calmly. The glass is not always, either half empty or half full. What is needed is to make a proper assessment of the real data, which will allow us both to make the right choice of measures to limit the risks, but at the same time to evaluate the new opportunities that may arise, so that we can take advantage, in the good sense, of any margins that may be created.
THE POLITICAL FUTURE
How do you envision your political future after the end of the government's term?
In politics, one cannot make long-term planning, for many reasons. The actions of each one, either as a professional or as a politician, are there for each of our fellow citizens to judge. Politics is something that has always interested me and will continue to interest me. So, with that in mind, I am answering you by saying that at this moment I remain committed to my duties and the challenges we have as a Government to face.
Moreover, always within the framework that my institutional position allows me, I feel deeply the need as a member of DISY, to continue unhindered the planning for the next day of our country. The Cyprus of Tomorrow. Stepping on the solid basis of the achievements of President Anastasiades' term of office, we can safely take the necessary step for the country towards the future. Something that I am convinced is guaranteed by the Democratic Rally and the candidacy Averoff Neophytou.
