The Government, said C. Georgiadis, will give more oxygen to development
The interpretation of Min. Of Finance in Parliament for the EU report: "As absurd as it may seem to you, Cyprus was judged not to have a production gap, that it is going through a phase of overheating and we must impose taxes to stop growth."
The disagreement of the Government, regarding the assessment of the Commission in relation to the overheating of the Cypriot economy, was expressed by the Minister of Finance, Haris Georgiadis, noting that, on the contrary, the Government wants to preserve and give more oxygen to development, and that this The conclusion is not adopted by either the IMF or the Eurogroup and ECOFIN.
The Minister of Finance was answering questions from MPs in the Parliamentary Audit Committee.
Poverty and social exclusion
Regarding the EU indicators for the position of Cyprus on issues of inequality in Europe, Mr. Georgiadis stated that, "in 2008, the poverty and social exclusion index was 23,3% of the population, in 2013 it had risen to 27,8 "1% of the population, at a time when the state was spending € XNUMX billion a year more than it was getting." In other words, he continued, "we were spending recklessly and the risk index of poverty and social exclusion really skyrocketed at that time."
Today, he said, "it is there, at 28%", adding that it reflects the situation "a year back". So, the years of recovery still need to be reflected in the index. When they start to be reflected, you will see that this index will also fall below the level it had reached in 2013. He clarified that it essentially follows the unemployment index.
The unemployment
Regarding the Commission's report, the Minister of Finance said that it shows that not only unemployment is decreasing, but also employment is increasing. The increase in employment in 2016 was 2,7%. So, he added, the flight of labor was reversed. We lost 10% of GDP from 2009 to 2014, he said, adding that fortunately on the other hand the growth of the economy has begun and we are covering the lost ground.
According to Haris Georgiadis, in 2016 very important taxes were abolished and we closed the year not only with an improvement, but with a marginal surplus compared to 2015.
"With everything that happened, we closed the year with a balanced budget and our forecasts for 2017 are about the same," he said. And if it were, he added, in 2016 with a marginal deficit it would be fine again, because even with a marginal deficit the primary surplus would be of the order of 2 - 2,5%.
Asked about the reduction of social benefits, the Minister of Finance stated that the real expenditures of the Ministry of Labor, Welfare and Social Insurance were € 912 million in 2015 and € 960 million in 2016. Despite the large increase, we closed the year with balanced expenditures and revenue, he noted.
The structural deficit and the gap
Regarding the point of disagreement between the Government and the Commission, he stated that it concerns the "structural deficit, not the real deficit which is zero".
"That is - explained Ch. Georgiadis - states that have a large deficit, outside the limits, is considered acceptable because it is judged that they have a production gap (output gap), that is, their economy can grow and produce more. Some other states - he added - in theory can meet the fiscal conditions but it is considered that they do not have a productive gap, that they can not grow further, that is, that in short, they are going through a phase of overheating and therefore, regardless of whether the "Their budget should, based on this logic, pursue a restrictive policy, to impose taxes, for example, not to cover a deficit but to cut the growth tax, to stop a revival of the economy."
"As absurd as it may seem to you, Cyprus was judged to have no production gap, that it is going through a phase of overheating and we must impose taxes to stop growth," he said, adding:
"We do not agree and we will not do it. "We must preserve growth, develop it further and, if ways are found, give more oxygen to the economy, that is what we must do," he said.
At the same time, he added that this conclusion is not adopted by either the IMF or the Eurogroup and ECOFIN, which refers the issue for later because it is precisely this paradox.
He also said that another reason that the phenomenon of overheating can not apply is the level of unemployment, which is at 12%. "Unemployment," he said, "is a key indicator of whether an economy has a productive gap or not."
Source: SigmaLive