Sunday, 20 November 2011

Another Excellent Article on the economic travesty of Unions in Cyprus

I personally respect the work of three journalists working in two different fields: Stefanos Evripidou on social and issues, Antonis Polydorou on political issues, and Michalis Persianis on economic issues.

Michalis has been a breath of fresh air since he appeared on the scene with his online comments on www.kathimerini.com.cy and his deeper analysis on the sunday edition of the paper. His knowledge is not just on economics but also in many other fields, allowing a very spherical approach and understanding of our problems.

For example, he has been consistently calling for a Medium term Budget plan for over three years, but unfortunately no one listened to him and now we need to release in a hurry as it has been demanded by the European Union.

In the following article which you can see here in print or read it in his excellent blog, Michalis points out that the ideological division of the organised workers and of the cruel bourgeoisie does not hold when 91.8% of business in Cyprus is classed as SMEs (Small and medium size enterprises), while leaders of unions such as Pasidy take home a greater pay than most entrepreneurs.

Michalis is a breath of fresh air in the economic discussions that take place in printed media - I just hope that he is listened to more often. The article as published in Kathimerini is below:

Ημερομηνία: 20.11.2011 | 14:06
Τα φετίχ της «εργατικής» αριστοκρατίας
Του Μιχάλη Περσιάνη
Ένα από τα πιο αναπάντεχα φαινόμενα που βασάνισαν τον Λένιν, ήταν η στήριξη που παρείχαν τα οργανωμένα σύνολα που μετείχαν στη Δεύτερη Διεθνή, στις εκάστοτε κυβερνήσεις τους κατά τη διάρκεια του Α΄ Παγκοσμίου Πολέμου. Αντί οι προλετάριοι να στηρίξουν την εργατιά, στήριξαν τα έθνη, δηλαδή –κατά τον Λένιν– το κεφάλαιο. Φυσικά, ο Λένιν δεν ήταν κανένα τυχαίο κεφάλι και η εξήγηση ήταν απλή.

Την είχε, εξάλλου, εντοπίσει και ο Ένγκελς, ο οποίος συχνά έγραφε στον τρόφιμό του, Μαρξ, για τον συντηρητισμό των προλετάριων: Η «εργατική αριστοκρατία» αποτελείται από εκείνους τους προλετάριους που, μέσα από τον συνδικαλισμό, εξασφάλισαν καλύτερους όρους εργασίας και μετατράπηκαν σε μπουρζουαζία.

Αυτή η διαπίστωση οδήγησε τον Λένιν στη θεωρία του για τον ρόλο του ιμπεριαλισμού στη διεθνή καπιταλιστική σκηνή και δη στον Α΄ Παγκόσμιο. Ο ιμπεριαλισμός ήταν μια αθλιότητα που ευθύνεται για μεγάλο ανθρώπινο πόνο, αλλά ο Α΄ Παγκόσμιος μάλλον δεν οφείλεται σε αυτόν. Αυτό, όμως, είναι ένα άλλο θέμα.

Η δημιουργία, όμως, μιας εργατικής «αριστοκρατίας» (των «σκλάβων του σπιτιού», όπως λένε και οι μαύροι των ΗΠΑ), η οποία δεν θέλει να ταράξει τα νερά, δεν είναι πλέον το ουσιαστικό πρόβλημα για την Αριστερά. Σήμερα το πρόβλημα είναι πολύ μεγαλύτερο και εστιάζεται εντός των ίδιων των συντεχνιών.

Εντός της εκάστοτε συντεχνίας, υπάρχουν μεγαλύτερες ανισότητες παρά μεταξύ των «εργαζομένων» και των «εργοδοτών». Αυτός ο διαχωρισμός έχει αλλάξει ριζικά ύφος και, μαζί του, πρέπει να αλλάξει και η προσέγγιση της Αριστεράς.

Εάν η εκμετάλλευση ήταν αναπόσπαστο μέρος του πλούτου κατά τη βικτωριανή εποχή, σήμερα υπάρχει και μια άλλη παράμετρος – η άνοδος των μικρομεσαίων επιχειρήσεων (ΜμΕ). Λόγω των ΜμΕ, ο «πλούτος» είναι αποτέλεσμα σκληρής εργασίας και όχι της εκμετάλλευσης. (Υπάρχουν, φυσικά, εξαιρέσεις).

Αυτό μάλλον οφείλεται στην παγκοσμιοποίηση, παρά εμποδίζεται απ’ αυτήν. Στην Κύπρο, όλες οι επιχειρήσεις, με εξαίρεση 72, είναι ΜμΕ, ενώ το 91,8% των επιχειρήσεων είναι μικρές, οικογενειακές. Αυτός ο πλούτος, «η Κούλα η ράφταινα», όπως συνηθίζει να λέει αυτή η στήλη, μάλλον είναι ήρωες της βιοπάλης, παρά εκμεταλλευτές των εργαζομένων.

Αντίθετα, εντός των ίδιων των συντεχνιών, παρατηρείται μεγάλη ανισότητα. Γράψαμε πολλές φορές πως ο τρόπος με τον οποίο λειτουργούν οι συντεχνίες, αδικεί τα χαμηλόμισθα μέλη τους και ευεργετεί τους υψηλόμισθους. Μάλιστα, αυτή η στήλη διερωτήθηκε –και ακόμα διερωτάται– πώς υπάρχει τόση ανοχή από τα χαμηλόμισθα μέλη των συντεχνιών για την ηγεσία τους.

Ίσως η εξήγηση να βρίσκεται σε μια άλλη μαρξιστική ανάλυση. Ο φετιχισμός των εμπορευμάτων ήταν μία έννοια που ο Μαρξ τράβηξε από τα μεγάλα ρεύματα των ανθρωπολόγων που άνθιζαν στην εποχή του. Τα αντικείμενα, μέσα από τη διαδικασία παραγωγής τους –την εργασία–, αποκτούν μια σχεδόν μεταφυσική ιδιότητα, «σαν να είναι ανεξάρτητα, προικισμένα με δική τους ζωή». Κάτι παρόμοιο έχει συμβεί, φαίνεται, και με τις πολιτικές.

Στην Κύπρο βλέπουμε μια επιμονή των συντεχνιών, ακόμα και της ίδιας της Αριστεράς, σε μια σειρά από πολιτικές που είναι αντιλαϊκές.

Η ΑΤΑ εντείνει την ανισότητα αλλά η κάθε μεταρρύθμισή της αντιμετωπίζεται ως «κουτσούρεμα», ακόμα κι αν το «κουτσούρεμα» αφορά αποκλειστικά και μόνο τους υψηλόμισθους και όχι τις χαμηλές κλίμακες.

Παρομοίως, ως απώλεια των «κεκτημένων» (ένα άλλο φετίχ) αντιμετωπίζεται και η μείωση των επιδομάτων που είναι αφορολόγητα αλλά συντάξιμα. Ένα τρίτο φετίχ είναι και η συνεισφορά των δημοσίων υπαλλήλων για τις δικές τους συντάξεις, μια συνεισφορά που ουσιαστικά κάνουν άλλοι, συνήθως φτωχότεροι.

Εν τω μεταξύ, ίσως το μεγαλύτερο φετίχ να είναι και η φοροδιαφυγή, η οποία αντιμετωπίζεται ως «εναλλακτικό» της διόρθωσης των προνομίων της «εργατικής αριστοκρατίας». Η λογική των συντεχνιών είναι πως πρέπει να δώσουν χρήματα οι φοροφυγάδες για να μην κοπούν προνόμια από τους πιο εύπορους. Ουσιαστικά, λένε: «Αντί να τα τρώνε οι δικηγόροι και οι γιατροί, πρέπει να τα τρώμε εμείς».

Η φοροδιαφυγή, φυσικά, είναι κλοπή και πρέπει να πατάσσεται, όπως και να ’χει το πράγμα. Αλλά η λογική πως είτε οι Α προνομιούχοι είτε οι Β προνομιούχοι πρέπει να τα φάνε, αγνοεί τα όσα υποφέρει «η Κούλα η ράφταινα» για να πληρώνει όσα δεν πρέπει να κλέβουν οι μεν για να τα τρώνε οι δε.

Εν τω μεταξύ, η οικονομία έχει φτάσει σε σημείο όπου, μελλοντικά, η περικοπή μισθών είναι σχεδόν αναπόφευκτη. Τελικά, οδεύουμε προς μείωση μισθών για όλους, με στόχο να προστατευτούν τα «φετίχ» της Αριστεράς. Χαρακτηριστικό είναι πως, με τις πιο πρόσφατες αποφάσεις, το επίδομα τέκνου αποκόπτεται μόνο κατά 50% για μια οικογένεια με μέσο μηνιαίο εισόδημα 7.500 ευρώ.

Εάν κοβόταν στο 0, και με πιο χαμηλό όριο, θα ήταν πιο δίκαιο, ενώ θα μπορούσε να μας επιτρέψει να αυξήσουμε τη χορηγία των πιο φτωχών και να έχουμε, ταυτόχρονα, και εξοικονομήσεις. Αλλά μπαίνει στη μέση το φετίχ των «κεκτημένων».
Ίσως να ήρθε η ώρα να αξιολογηθούν εκ νέου αυτά τα φετίχ, ιδίως αν αναλογιστεί κανείς πόσο «αντι-αριστερό» είναι το αποτέλεσμα.

Επίσης, ένας αληθινός αριστερός θα τα έβαζε με το κεφάλαιο για να προχωρήσει το ΓεΣΥ. Και πρέπει να εκπονηθεί Μεσοπρόθεσμο Δημοσιονομικό Πλαίσιο (ΜΔΠ).

www.kathimerini.com.cy
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Relaunch of the Syndicated Blog: "Economists of Cyprus"

Back in December 2008 I noticed that there was a great deal of good economic analysis of the Cypriot economy, but it was disjointed on social networks and blogs. Thus I attempted to bring all this together through a syndicated blog of online commentators, In order to create a community of interested parties to the Cypriot economy.
Today the site "Economists of Cyprus" is being re-launched with additional material and help by Protesilaos Stavrou, a very active member not just of the Cyrpiot blogosphere but also in a European Context.
Please have a look at the website and subscribe and/or comment!

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Friday, 18 November 2011

Old comments... But like many other warnings, none listened.....

It was not just me who was warning that things would reach a crisis in Cyprus, but sadly no one listened. I was requested to repost the comments I made previously to the crisis and i take the opportunity to do so in this post.

Here is the Article on "The Economist" warning on the potential problems published on December the 2010. The interview was extensive but looking back the journalist was right to focus on this:

"Alexander Apostolides of the European University of Cyprus laments the lack of urgency. “There is not a feeling that we are on a slippery slope.”

On an non-related issue this is the comment I made and it was published on "The Economist" the real ideological debate within the ECB back in March 2009. This debate between Keynesian and Monetarist principles is now the focus point of the whole EURO project. If the ECB just accepted the principle of last resort or supporting the the EFSF then the Euro crisis would cease to threaten the fragile global economic recovery. Note that if the ECB believes in the ability to influence the real economy then it knows it can provide a solution (even if it is short term in nature). I finish with a quote back in 2009:

"While there might be a definite disagreement on what the monetarist solution is for Europe, both parties within the ECB accept that the ECB holds the answer and fiscal policies of the respective European countries are at best complimentary but at worst unhelpful."
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Thursday, 17 November 2011

Bad news for Cypriot Banks in the Greek Stock Market...

From www.imerisia.gr published date 16/11/2011.
Τορπίλισε» το Χρηματιστήριο Αθηνών η Morgan Stanley με τις αλλαγές στο δείκτη MSCI. Ο ξένος οίκος ...έδειξε την έξοδο σε τέσσερις ελληνικές μετοχές διότι η κεφαλαιοποίηση τους έπεσε κάτω από το 1,5 δισ ευρώ. Οι μετοχές που αποχωρούν είναι η Alpha Bank, η EFG Eurobank , η ΔΕΗ και η Τράπεζα Κύπρου.
Η είδηση έριξε στα Τάρταρα τις μετοχές. Η μετοχή της Τράπεζας Κύπρου έπεσε 15,65% διότι οι επενδυτές φοβήθηκαν ότι θα αυξηθεί κατακόρυφα η προσφορά τίτλων τις επόμενες συνεδριάσεις. Σύμφωνα με ασφαλείς πληροφορίες ο αριθμός των μετοχών που κατέχουν τα index Fund ανέρχεται σε 4,2 εκατομμύρια μετοχές ενώ η Morgan Stanley δεσμεύτηκε ότι δεν θα πουλήσει τα 46 εκατ. μετοχές που έχει στα χαρτοφυλάκια της.
Η EFG Eurobank έπεσε 12,35% αφού η προσφορά τις επόμενες ημέρες θα φθάσει τα 14 εκατ. μετοχές. Η Alpha Bank έχασε 11,67% και ο αριθμός των μετοχών που θα βγει στο «σφυρί» φθάνει τα 21 εκατομμύρια. Ο τίτλος της ΔΕΗ σημείωσε τη μικρότερη πτώση κατά 5,86% διότι ο αριθμός των μετοχών που θα αλλάξει χέρια ανέρχεται σε 4,9 εκατομμύρια.
Οι αλλαγές θα πρέπει να ολοκληρωθούν την Τετάρτη 30 Νοεμβρίου 2011.
Σύμφωνα με χρηματιστές για να ολοκληρωθεί η έξοδος των ξένων θεσμικών επενδυτών θα απαιτηθεί χρόνος που φθάνει ακόμη και τις 18 συνεδριάσεις με βάση τον ημερήσιο όγκο που κάνουν οι τέσσερις μετοχές. Πάντως η Εθνική Τράπεζα παραμένει στο δείκτη αλλά αυτό δεν εμπόδισε τους επενδυτές να προχωρήσουν σε πωλήσεις. Η τιμή της είχε απώλειες ύψους 4,30% στο 1,78 ευρώ.
Οι ίδιοι εκτιμούν ότι εξαιτίας των αλλαγών θα εκδηλωθούν πιέσεις στο ελληνικό χρηματιστήριο ενώ οι μετοχές που δεν επηρεάζονται δεν είναι σε θέση να απορροφήσουν τους κλυδωνισμούς που θα προκληθούν στο Χ.Α. Την ίδια στιγμή αναλυτές θεωρούν πλέον βέβαιο ότι ο γενικός δείκτης θα πέσει κάτω από τις 700 μονάδες. Προσθέτουν ότι η στήριξη των 680 μονάδων θεωρείται καθοριστικής σημασίας για την περαιτέρω πορεία της αγοράς. Σύμφωνα με τα στοιχεία της εταιρείας ZTrade.gr ο γενικός δείκτης έκλεισε με πτώση 2,41% στις 717,93 μονάδες.
Στο σύνολο της αγοράς με κέρδη έκλεισαν 48 μετοχές ,οι 113 με ζημιές και 131 παρέμειναν αμετάβλητες. Ο τζίρος ανήλθε σε 46,8 εκατ. ευρώ.

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Wednesday, 16 November 2011

Forecasts of the Cypriot Economy: Estimate still on Track

Back in the 14th September, I was asked to estimate the GDP of 2011 and 2012 for Cyprus. I was reluctant to do so since I do not consider myself a forecaster, nor do I have a formal model of the Cyprus Economy that is forward looking.

I do however understand national accounts and how they work, and having recently looked at estimates and with help of others revised the Mari disaster, I applied this knowledge to GDP. Yesterday the Government of Cyprus has released the latest quarterly estimates being negative at -0.6. So up to now total growth of GDP is just 0.7%.

I am aware that this is a flash estimate and I am sure once the additional cost of more expensive electricity gets updated the value added will drop and the GDP fall will be even larger (-0.1%/-0.2%)

Unlike the third quarter, which was considered universally poor from most available indicators and anecdotal evidence, there is a less clear picture for the fourth quarter. The SMEs in the construction sector and support services to construction seem to be recovering. Consumers are upgrading and repairing existing houses and cars rather than spending for new ones, providing substantial work for several repair and SME services such as plumbing, carpeting etc. One is unsure how much of such business is actually recorded since it is largely done in the shadow economy to avoid paying VAT.

At the same time the news from the most dynamic contributors of economic growth, such as the banking and the construction of housing are suffering. The need for the financial services sector to raise capital and prepare for exposures to Greece, and perhaps additional losses due collateral damage of the current turbulence of the markets (see the exposure to the receivership of MF Global) will reduce income generation.

I stand by my original predictions of September: Negative growth in 2011 (-0.1%), weak recovery in 2012 (0.8%) and negative per capita growth for both years. Any one willing to bet on a different number?


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Tuesday, 15 November 2011

The Euro crisis and democracy

I am troubled by the idea that Politicians are great during the good times, but in bad times one needs to hand out power to technocrats. I think it makes democracy sound like a luxury that prosperous persons can afford, and that politicians (and by proxy those who elected them) are in this way escaping their responsibility of creating the mess in the first place.

Another interesting issue is posted by Protesilaos Stavrou, who has been blogging constantly and with good insight on the economic issues of the Eurozone crisis. He highlights the lack of democracy of the European Central Bank and how this affects the decisions of handing to it the ability to impose both monetary policy (which it has) but also fiscal policy (in the form of control of finances). See the original article here.


ECB and democracy: The traps of debt monetization By Protesilaos Stavrou

Sooner or later the European Central Bank will have to monetize debts to pacify markets, who see the illiquidity of Italy and Spain as an underlying risk that might make their public finances unsustainable within the few years ahead or even sooner, depending on the overall conditions in the Eurozone first and the global economy second. What should be made clear is that the ECB is already buying sovereign bonds from the secondary markets, via its Securities Markets Programme (SMP), though the quantities it purchases are relatively insignificant to shape interest rates and send a clear message to international investors that there is a determined final backstop in the Euro Area. Having already stated on several occasions my belief that the ECB should take a more active role in combating the disintegrating dynamics of the crisis, I now need to point out some issues relating to democracy, transparency and equality with respect to euro member-states, that are often neglected by the vast majority of analysts, for whatever reason that may be.

First of all, the ECB has been given the unique task to issue and control a currency (the euro) without the existence of a counterparty treasury with jurisdiction over the exact same area. The eurozone is a currency union, an area with a single monetary policy (together with all the rest Community acquis), which lacks a unified fiscal policy, or in other words a single authority that would have the power to raise money from its constituent states, by imposing taxes or issuing bonds of its own. Regardless of what was the rationale behind this setting, the gist is that there is a significant institutional gap in the architecture of the euro that makes the management of the crisis ever more challenging. This currently leaves the whole euro with only one policy leg, implying that any efforts to introduce the missing "leg" would either require a cumbersome Treaty change that will take years to be concluded, given the complexity of law-making in the EU and the need for any Treaty change to be ratified by 27 parliaments, making the labor unfeasible within the rigid time frame of the crisis; or alternatively the introduction of ad hoc measures that would give the missing powers to some mechanism that would lack credibility and would most probably be undemocratic, just like the EFSF, or ultimately to assign to the ECB itself the twin task of monetary and fiscal policy.

Given that a credible Treaty change is practically impossible within the time frame available (what Merkel is saying all the time about changing the treaties is mostly to exert pressure on certain governments to pass the necessary reforms), the only real choice, should full scale monetization be allowed, is to either resort to half-measures undertaken by ad hoc mechanisms, or to give all power to the ECB. In either case we are dealing with an issue of democratic illegitimacy and most probably with the over-concentration of powers to unelected bureaus/bodies/agencies/institutions with basically little to no accountability. The ECB for instance is completely independent and no power can tell it what to do. This derives from Article 130 of the Treaty which states the following:
When exercising the powers and carrying out the tasks and duties conferred upon them by the Treaties and the Statute of the ESCB [European System of Central Banks] and of the ECB, neither the European Central Bank, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Union institutions, bodies, offices or agencies, from any government of a Member State or from any other body. The Union institutions, bodies, offices or agencies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the European Central Bank or of the national central banks in the performance of their tasks.
Given this legal framework, the transfer of considerably more powers to an institution that cannot be controlled by anyone, is certainly not a prudent choice. The institutional gaps of the euro make the ECB a supranational entity, not a federal one, like the Fed in the US, which is from a qualitative perspective quite different since the ECB will in fact be above any state and will therefore have the power to impose its own conditions for monetization and discriminate among the states it wishes to support. This might sound overstretched to some, yet there already exists an instance of such coercion back in August, when a letter dated August 5 was sent from the ECB to the Italian government demanding austerity measures to be taken prior to the intervention in the secondary markets that took place during that time. Who can guarantee that similar actions may not be repeated in the future, especially in the case the ECB is asked to perform the dual task of being the treasurer and the issuer of the currency imposing rules and conditions and making discriminations? This democratic deficit is indeed an important issue, one that needs be considered prior to any steps towards such a direction.

On the flip-side, one might argue that the EU as a whole is already suffering from a similar democratic deficit which of course exists from the national level and it increases as we move higher in the institutional hierarchy. For instance the European Commission is unelected, yet the powers it commands are impressive. The point now is not to raise the issue of democracy in the EU, but to add to the discussion the argument which suggests that since Europe already suffers from a structural democratic deficit and since all measures that have been taken so far to combat the crisis are in most cases democratically illegitimate (excessive powers to the monitoring mechanisms in bailed out countries, democratically illegitimate mechanisms such as the EFSF etc.), why not move deeper in to the hole by adopting in full the sort of Faustian policies that are already exercised?

Regardless of where one stands regarding the argument, the point remains the same. We as Europeans are found in a situation where we have restricted our selves by designing a flawed monetary union and we now come to the point where the ECB will, sooner or later, have to monetize debts to prevent the implosion of the whole project. Democratic or not, this seems to be the only path to safety (combined with a series of other measures of course). Given that our leaders have proven to be quite creative when it comes to devising all sorts of complicated plans and bizarre mechanisms, an optimist might suggest that we should expect them to come up with a way to circumvent the democratic issue that has been raised above. Failing to do so in an effective manner, might well lead to unpleasant consequences, suggesting that this issue requires carefully taken decisions, with full agreement by all parties involved. At any rate we are already walking on a very thin diving line between virtue and vice. Alas we brought our selves to this position.

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Some interesting juxtapositions: Cyprus and the Piri Reis

The republic of Cyprus and Turkey have increased tension on the Eastern Mediterranean due to the decision of the Cyprus to use its sovereign right of allowing drilling for gas its its economic exclusion area. Turkey has responded by sending the cartographic vessel "Piri Reis" not to the North of the island which is is under occupation by its military, but to the south, dangerously close to where the explorations are taking place.

Yes not many people do not know who Piri Reis was. His name and effort to build very accurate global map indicates the ambition of the Ottoman Empire at that time, when it began to dominate the Eastern Mediterranean through the conquest of Egypt and by forcing the Christian enclaves of the region into retreat or dismemberment. Detailed maps of the New world where commissioned as the empire looked not to the conquest of the Mediterranean which was seen as inevitable(but was eventually checked in Vienna, Malta and Lepanto) but in access to the riches of the New world shared by Spain, Holland, France and Britain.

It is clear that Cyprus was also an important expansion point, as the Venetian ruled island could dominate trade between the Ottoman Empires possessions of Anatolia, Greece, Palestine and Egypt. In its history Cyprus was always considered as a threat by the greatest power of the region, but after conquest it its value declined; it was always valuable to keep it from the enemy, but not so valuable to have it yourself.

I have no way to check if indeed this drawing is by Piri Reis as the source claims; However it puts into perspective that the island, as well as the sea around it has been a strategic concern of Turkey as far back of the 16th century.
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Wednesday, 9 November 2011

Lessons from History: Government Wages in Cyprus

In 1931 the British colony of Cyprus was facing a debt crisis. The very serious effects of the great depression, made worse by the worst drought the island had seen in 100 years, led to a lack of funds for the government. The government cut all public works spending, and argued that the situation would get better soon.

Politicians from all communities, discussing in the talking shop (bereft of real power) provided by the authorities (known as the Legislative council) were pointing out that the wished for surplus was not going to materialise, since the same wishful thinking occurred in 1929 and 1930; then the government increased taxation, only to see further deficits and the shrinking of the colony's reserve. They suggested instead:
1) a cut in surplus positions in the government (especially high ranking ones) starting by cancelling the newest appointments and or promotions.
2) A reduction to the COLA (Cost Of Living Allowance) increase (ATA was in Cyprus since 1878!) and performance related increase by 2/3 but not for those with income below 120 pounds
3) Reduction of government scales across the board especially of those who were created after 1914, which operated in a higher scale.

Of course in 1931 the demands were a statement of political intent as wall as an attempt to introduce fiscal austerity to the apparatus of government: The above measures would hurt the British working in Cyprus, forcing some of them to leave and thus weakening the British grip on power in Cyprus.

What is interesting to me however is how modern these demand are in regards to the current problems of Cyprus. ATA - our current COLA adjustment to wages is set to go in hiatus, and there have been calls for it to remain for the lowered income civil servants. At the same time the desire of the majority population to see more public works at the expense of an over-privileged government wage sector is facing resistance by the government itself, which like in 1931 , is worried about the repercussions in its ability to govern.

What is depressing is this is taking place not between a clash of nations but through a clash of vested interests: It is clear that the pay scales of some government appointments have to be re-aligned to the conditions of the demand and supply of the labour market - there simply is no reasons to have an 80% premium for government teachers as it starves the education system of new teachers and distorts the signalling of our graduates.

If history is our guide the results are not encouraging: the government refused to listen and managed to rack up a very large deficit, leading to a outside aid, increased taxation implemented by force and violent riots. Our government's inability/unwillingness to accept the need of similar measures is sadly leading us to the same direction.


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