Filenews 30 January 2023 - by Nicoletta Kouroushi
Thousands of citizens have found themselves in a dire financial position lately, as while their disposable incomes remain at the same levels, they have to face on the one hand the punctuality, due to the large increase in the prices of hundreds of products and on the other hand the increase in loan instalments after the rise in interest rates, which creates a blow to the individual, family and business budget.
The new rulers will have to take immediate measures to deal with inflation, while the issue of interest rate risk also exists, while the issue of the restoration of automatic indexation (ATA) remains unresolved.
So, in order to get an idea of how they intend to manage these hot issues of the Economy, after communicating with the staffs of Averoff Neophytou, Andreas Mavrogiannis and Nikos Christodoulides, we gathered and recorded the positions of the three main candidates, around the issues of dealing with punctuality, raising interest rates and restoring the ATA.
Averof Neophytou
Asked to comment on how he intends to deal with the issue of inflation, the president of DISY and presidential candidate, Averoff Neophytou, initially said that "the punctuality we are experiencing today is part of the inflationary crisis after the pandemic, which intensified due to the illegal Russian invasion of Ukraine".
He commented that "by keeping the Economy strong, we have created the reserve and the capabilities to implement what we consider our priority, namely policies that support the family, the household and the middle class, which over time bears the burden of crises, without in any way jeopardizing the sustainability of public finances".
He added that "we achieve this with ongoing policies, such as the General Health Plan and the subsidy of most of the tuition fees in kindergartens. Institutions that relieve families of significant expenses."
He added that "as part of a comprehensive broader tax reform, the taxation of the income of middle-class workers will be transferred from the personal level to the basis of 'Family Income'. He argued that "'Family Income' concerns only the middle class, with the aim of combating inequalities and supporting the family according to its composition and how vulnerable it is."
As he also mentioned, the gap in the monetary poverty line for each type of household has been calculated and accounted for and in cases where the disposable income of the household is below the at-risk-of-poverty threshold, then, according to Mr. Neophytou's proposal, the state through the benefit policy will cover the difference, in order to ensure the decent living of all Cypriots.
In addition, it proposes the construction of new housing for refugees without title deeds by land developers in exchange for state land or with the granting of an additional building factor, therefore, as it claims, without financial burden for the state. At the same time, it promises a wider increase in housing supply, which will lead to price moderation to the benefit of every young couple.
"The increase in interest rates should be taken for granted"
Asked to comment on the issue of raising lending rates, Mr. Neophytou said that "the increase in interest rates should be taken for granted". He noted that "minimum interest rates are set by the European Central Bank and their increase is a declared policy of the ECB as the main measure to tackle inflation at the European level" and argued that "for certain candidates or parties to say that they will halt the increase in interest rates is fallacy."
He added that "the fortunate thing is that despite the expected increase, the consolidation of the banking system of the last decade has drastically reduced interest rates, which are and will remain at lower levels than in the period before 2013".
He stressed that maintaining a strong and healthy banking system is something that can help, while the best thing a government can do is to maintain a strong growth rate, so that both households and businesses are able to manage the - hopefully temporary - increase in interest rates, concluding that "this is exactly where we focus our own efforts".
"To find the right balance for ATA"
Regarding the issue of the ATA, Averoff Neophytou said that "there is on the one hand the view of the complete abolition of the ATA and on the other hand the view of its complete restoration as it was before 2012, when it was differentiated from the AKEL government". He expressed the position that the right balance must be found through social dialogue: neither the abolition of the ATA, but the definition of regulations that will make it fairer, more targeted and economically viable. He stressed that "it is necessary for an arrangement that does not undermine the competitiveness of the Economy, does not lead to a vicious circle of inflationary pressures, but is a measure of social support for those who really need it".
Andreas Mavrogiannis
With the declared goal of "decent living for all", the independent candidate Andreas Mavrogiannis cites in his programmatic positions specific proposals for dealing with punctuality, emphasizing that "it is the obligation of the State to stand by its citizens, especially those with low incomes".
It stresses that, in addition to caring for people, who by object are unable to provide for their survival, especially in times of crisis, states must also turn their attention to all those who see their obligations increase and their incomes either stagnate or decrease.
In the candidate's programmatic positions we identify the following suggestions for dealing with inflation:
- Universal installation of photovoltaics in residential units, on the basis of a tiered subsidy, which will reach up to 100% for vulnerable households. The aim is to simplify procedures on the basis of EU guidelines, for rapid deployment for the benefit of citizens by reducing energy costs.
- Claiming an EU exemption to further reduce cumulative taxation on fuels for as long as the energy crisis lasts
- EU demands reinstatement of VAT reduction on electricity from 19% to 9%
- Taxation of unexpectedly excessive profits of companies operating in the energy sector
- Sustainable model of urban transport and public transport in general
"All the measures we propose," Mr. Mavrogiannis said, "are costed." He noted as an example the financing of photovoltaics by the Pollutants Fund, which must be used by 50% for Renewable Energy Sources and for the green transition, while part of the Fund can finance the modernization of the EAC network and the creation of energy storage units.
-Mortgage subsidy scheme, based on criteria
Regarding the issue of increasing lending rates, Mr. Mavrogiannis proposes the implementation of a Mortgage Interest Subsidy Scheme, based on criteria, which will cover 50% of the increase recorded in the last year.
According to the provisions of the Scheme, the eligibility criteria of the beneficiaries will be determined after a relevant study, on the basis of the family income and the terms of the loan agreement, while the Scheme will have a duration of twelve months, with the possibility of renewal, if necessary.
At the same time, the candidate promises to consult with commercial banks, credit institutions and the Central Bank to discuss their own actions to alleviate borrowers, in order to avoid the risk of an increase in Non-Performing Lending, such as the absorption of part of the interest rate increase and loan restructurings within the framework of the Code of Conduct and the Central Bank's Guidelines.
-Full return of the ATA on the basis of median salary
Regarding the institution of the ATA in particular, Mr. Mavrogiannis is in favour of its full performance, based on the fluctuation of inflation.
Among its immediate objectives is the extension of the ATA, through social dialogue, to cover all workers, with priority given to low-wage earners and those receiving the minimum wage.
Subsequently, the A. Mavrogiannis government intends to initiate a social dialogue, with the aim of improving the institution, in order to further support low- and middle-income workers. In this dialogue, the recommendation of his financial staff for the calculation and performance of the ATA on the basis of the country's median salary will also be raised.
Nikos Christodoulides
With reference to social liberalism and aiming, as he argues, at a fair balance between the economy and society, which will promote economic growth and social cohesion, the independent candidate Nikos Christodoulidis, through his Governance Program, proposes the implementation of a targeted social policy, always within the framework of fiscal discipline.
Among other things, it recommends the exercise of effective Economic Diplomacy, which is also addressed to new markets to attract economic activity and high added value investments, which will expand the productive base.
At the same time, it emphasizes on the strengthening of the primary sector, the completion of reforms that increase the competitiveness of the Cypriot economy and the interconnection of education with the labour market, with the aim of upgrading the human resources of our country.
In this direction and in the context of the Action Plan for the first months of his rule, he states that he will implement specific measures for the relief of citizens such as:
· the increase of the tax-free income threshold to €24500, which entails an annual benefit of €1000 for those affected,
· an increase in low pensions by 5%, resulting in an annual benefit of €420 for low-income pensioners;
- the payment of part of the CTA contributions for low-wage earners;
· the start of the gradual restoration of the shift allowance and compensation for overtime, which affects police officers, nurses and prison guards,
· the restoration of the employment status of employees in the programs of the Ministry of Education to a status of paid employment, which entails an increase in their incomes of up to 40%.
"The above support measures aim to support our fellow citizens, who have a real need and are costed according to the fiscal capabilities of the state", argues Mr. Christodoulides.
At the same time, in order to reduce the cost of electricity and fuel for households and businesses, it proposes to accelerate the path to the green transition, with the zeroing of VAT on photovoltaics and the subsidy of 50% for all and 100% for the vulnerable, subsidizing thermal insulation, the replacement of energy-intensive appliances and conventional vehicles.
-Effective management of interest rate risk is high on the agenda
Regarding the increase in lending rates, the effective management of interest rate risk is, as Mr. Christodoulides mentions, high on his priorities.
It notes that immediately after coming to power, if the people honour them with their vote, they intend to call on the banks with the help of the Central Bank of Cyprus to make full use of the financial tools at their disposal to protect borrowers, such as where it is advantageous to readjust loan contracts at fixed interest rates.
It also says it will engage in a dialogue with the banks to make use of their margin flexibility in addition to the interest rate hike imposed by the European Central Bank. Among other things, it promises that it will also appeal to the Central Bank of Cyprus to immediately advise banks to swiftly address the examination of loans, which are in stage 2, i.e. one step before they become Non-Performing Loans, and to proceed with the appropriate handling in cooperation with borrowers.
-Commonly accepted agreement on ATA
-In relation to the ATA, Nikos Christodoulides says that he is closely following the consultation process and expresses the hope of reaching an agreement between the social partners, noting that if the dialogue does not end, one of his first actions, if the people honour him with their vote, will be to continue the dialogue and ensure labour peace.
It makes it clear that it supports the maintenance of the institution of the ATA, a top social conquest, given that no beneficiary will stop receiving it.
At the same time, however, he argues that according to the current fiscal data, the immediate, full payment of the ATA for all beneficiaries is something that according to the financial capabilities of the state cannot be considered feasible. Therefore, as he says, the dialogue will continue within these specific variables, with the aim of reaching a mutually acceptable agreement. He concludes by stating that "we maintain confidence in the social partners, whose maturity and seriousness has maintained to this day, in very difficult times, labour peace".
