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South could go broke if SGO’s not privatised

28 February 2014

A vote in the South Cyprus parliament yesterday to allow semi-government utilities (SGO) to be privatised was defeated by a vote, split 50/50 with five abstentions.

As part of the EU bailout deal, in order to repay its debts, the government agreed to privatise the Telecommunications Authority, the Electricity Authority and the Ports Authority.

An amendment, proposed by DIKO, which sank the privatisation bill, was to allow SGO employees to keep their civil service status despite being employees of a private company. The amendment split the DIKO party, one more vote would have seen the bill passed.

Offered as a sop to the unions, the proposed amendment would ensure former SGO workers would keep their salaries and benefits until they retired or were promoted. The workers would be allowed to keep their rights and not be made redundant despite being privately employed.

Meanwhile, outside the parliament building, riot police stood guard as protesters rallied against the privatisation bill.

If the government does not privatise then it is likely that the South will not receive its next tranche of 10 billion euro bailout money.

In an email sent to the finance minister in the morning, EU official Maarten Verwey said the amendment constituted a “material change” to the bailout deal that went “beyond what is applicable.”

Verwey added that if the privatisation bill was passed with DIKO’s amendment, the relevant requirement (privatisation of SGOs) “will be assessed as not being met.”

The Eurogroup was to have agreed to the next instalment on 5th March. Current events in parliament make that look unlikely.

President Anastasiades called a crisis meeting late Thursday, summoning the ministers of finance, foreign affairs, the interior, the under-secretary to the President and the government spokesman.

The government spokesman, Christos Stylianides predicted that:

“There exists a serious prospect that, should our lenders not disburse the [next] instalment, the government will next month, or the month after, be unable to keep paying salaries and pensions.”

It is possible that another vote will be held early next week before the 5th March deadline. This would violate parliamentary ruling which says that the same bill cannot undergo a second vote in the same parliamentary season if it has already been defeated.

DISY MP Prodromos Prodromou said that even if DIKO backs down and withdraws the proposed amendment, Cyprus will have lost its credibility with EU lenders.

“If the lenders don’t OK the next tranche, as they likely won’t as things stand, we’re bankrupt. The treasury may last for a couple of months. After that the government won’t be able to pay salaries, or will have to pay some but not others. I suspect that the other parties will then come back with their tails tucked between their legs and do the right thing,” he predicted.

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