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2005 - A Year of Labour Strife
Monday, January 24, 2005,
The year has not started off well for labour relations in
Cyprus - and its going to get worse. The country is
undergoing fundamental changes which are bound to bring
about further labour unrest. Until recently the priority
of government as regards labour relations has been the
preservation of labour peace. At times it appeared to be
peace at almost at any price, The main focus of
government attention was "the Kypriako". Government
opposition to union demands was usually short lived,
often followed by capitulation.
Membership in the EU has placed the government in a position where
this approach is no longer viable. Many Cypriot
organizations come to the bargaining table having
enjoyed in years past a high level of protectionism.
This includes not only tariffs, quotas and state
industries but also numerous subsidies on everything
from water to football.
A New Bargaining Environment
The new wage bargaining environment has been demonstrated in the
deal concluded with the semi-government unions. The
recent settlement, reflecting a much stronger stance by
the government and a dose of realism by the unions, is
as welcome as it is necessary.
As regards agriculture - last years’ tractor strikes were only the
beginning. Agriculture in
Cyprus has long operated within an environment, almost a
culture, of government protectionism, grants and
subsidies. These have been so pervasive that it would be
difficult for anyone to estimate the true cost of
Cypriot farm products. To glimpse the future, one has
only to look at the similar problems the EU agricultural
policies have caused for farmers in the "older" EU
member countries. Tractors on the highway have long been
a familiar site on the roads of France, Greece and
Italy. Under the EU Common Agricultural Policy these
countries, all with much larger more efficient farms,
have nevertheless suffered a dramatic decline in the
number of agricultural workers and farms. Can we really
expect that Cyprus will be any different%3f
The lowering of tariff barriers and the opening up of freedom of
movement of industry and labour across national borders
also brings pressure on private industry. Private
compnies cannot afford high wage settlements and labour
conditions which make them uncompetitive relative to
other European companies. Private employers have already
stiffened their bargaining stance in anticipation. As
for state managed industries such as Cyprus Airways, the
impact of EU regulations restricting subsidies are just
beginning to be felt in Cyprus.
Would we be better off outside the EU%3f
As members of the European Union the above changes mean that there
is little choice but to continue in a direction which
seems certain to lead to more labour strife. This raises
the question: Would we be better off economically
outside of EU%3f The entire question may be academic,
since most would agree that politically we are better
off within this organization. Nevertheless, the question
is an interesting one for those interested attempting to
anticipate something of our economic future.
A recent economic report in the Financial Mirror on the comparative
performance of EU countries over the years 1995 to 2003
can shed some light on this question. The report makes
disturbing reading. Compared to the other 25 EU
countries, the economic standing of
Cyprus during this eight year period has declined. In
1995 Cyprus enjoyed a per capita income that stood at
86% of the EU average. By 2003 this figure had declined
to only 83% of the EU average. In other words Cyprus has
grown slower than the average of the EU countries.
Particularly interesting is the comparison with Greece.
In 1995 the Greek per capita GDP stood at only 72% of the EU
average, substantially below that of
Cyprus. Eight years later
has almost caught up with Cypriot economic performance.
It has improved its per capita income to 81% of the EU
average, almost equal to that of Cyprus (83%). If the
trend continues Cypriot income per person will soon be
below that of Greece. Since this report only covers up
to the year 2003, this may already be the case. (These
comparisons are based on data compiled by Eurostat.
National GDP figures are adjusted to reflect actual
The point is that the EU economic environment has been
good to Greece. Contrary to the expectations of many,
Greece has done much better in the EU than outside.
Pursuing EU policies relating to the reduction of
protectionism, privatization and the elimination of
subsidies, Greece has gained economically. Cyprus with
many similarities to
but until recently outside the EU and practising a quite
different set of economic policies has fallen behind.
This result simply confirms beginners class economics,
ie., a more open, competitive environment is more
efficient and provides greater consumer benefits than
one characterized by monopolistic practices. This is a
timely reminder when the government here is under
enormous pressure to revert to the "old ways". Greece
has in effect restructured its economy. This has not
been without considerable pain and labour strife. Cyprus
is just beginning the process.
By Dr. Jim Leontiades
Cyprus International Institute of Management
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