Bloomberg News

Cyprus May Cut Public Payroll With Civil Servant Transfers

December 15, 2011

Dec. 15 (Bloomberg) -- Cyprus’s parliament passed a law yesterday aimed at curbing the country’s rising public wage bill by allowing the transfer of civil servants from one ministry or department to another.

“There are many cases of government departments that hired staff to carry out projects for whom they have no use any more”, economist and former undersecretary Symeon Matsis, who advises the Cyprus Chamber of Commerce and Industry, said in a telephone interview. These people would then remain in position and would not be transferred, he said.

Overall public-sector personnel costs of the euro area’s third smallest economy are projected to rise to 2.7 billion euros ($3.5 billion) in 2011, a 25 percent increase from 2008, according to the finance ministry. The new law is part of an approved fiscal consolidation package worth 855 million euros over three years.

The key for Cyprus’s fiscal consolidation is the cost of its public sector, Marinos Gialeli, general manager of the Hotel Employees Provident Fund, said in an interview today. He said the the introduction of transferability and a two-year wage freeze in the public sector also passed by the parliament wouldn’t be enough on their own.

As long as salaries of civil servants are not linked to performance, they can neither be evaluated nor fired; the source of Cyprus’s fiscal problems lies in a lack of proper human resource management in the government sector, said Gialeli, who manages assets worth 271 million euros.

“Unless we introduce proper management to the public sector we shall have a problem down the road again, even if Europe overcomes its debt crisis,” Gialeli said.

--Editors: Chris Peterson, Peter Branton

To contact the reporter on this story: Stelios Orphanides in Athens at sorphanides@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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