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Seven Years Later, Cyprus High Court OK's Crisis Pay Cuts

Αssociated press

(Nikos Litsardis/ikariaki.gr via AP, CROPPED)

NICOSIA – It took a while – seven years – but Cyprus' Supreme Court ruled that salary and pension cuts imposed on workers and beneficiaries when a 2013 economic crisis forced the government to seek a 10-billion euro ($10.92 billion) international bailout were legal.

The court said it was necessary to prevent the country's bankruptcy at a time when banks were also teetering after they brought on the crisis with bad loans given Greek businesses who didn't repay and with big holdings in Greek bonds devalued during that country's crisis too.

The decision upheld an appeal by the Attorney-General against a lower court ruling in March last year which would have required the government to pay back workers and pensioners who now have to suffer the losses while no bankers were held to account.

According to estimates, the government would otherwise would have had to repay civil servants some 800 million euros ($873.78) to compensate them for the lost wages after President Nicos Anastasiades broke campaign vows in imposing austerity.

Finance Minister, Constantinos Petrides told The Cyprus News Agency CNA,) Petrides the decision “legally consolidates the government’s policies that safeguard fiscal and macroeconomic stability and enable compliance with the fiscal rules of the European Union.”

He said the decision, “is particularly important in this period of economic crisis, where the economy is striving to tackle the consequences of the pandemic,” referring to the COVID-19 Coronavirus lockdown that has shut down almost the entire economy.

Anastasiades tweeted his satisfaction with the “independence, credibility, integrity of the judiciary” and congratulated Attorney General Costas Clerides for his “flawless handling of the case,” effectively congratulating himself for cutting salaries and pensioners without, as he promised, going after bankers who brought the crisis.

The Administrative Court had ruled that pay cuts imposed on Cyprus civil servants as part of an austerity drive were unconstitutional, said The Cyprus Mail, and that a pay rise freeze, a 3% contribution toward pensions, and a reduction in civil servants pay were in violation of Article 23 regarding the protection of the right to property.

In March 2019, the Administrative Court ruled that the legislation adopted during the year of the financial crisis was unconstitutional. Under the right to property, it considered salaries as property items.

The Supreme Court said that in case of an emergency the state may partially reduce wages but didn't say if there was any limit on how much that could be in a decision that the government now could cite to cut pay again over the effect of the COVID-19 Coronavirus.

The ruling means that could be done with a simple House majority, instead of the two-thirds needed for an amendment on a constitutional article, the paper said.

The Federation of Employers & Industrialists (OEB) said it was glad workers pay could be cut while the Chairman of the Fiscal Council Demetris Georgiades told CNA that, “The decision of the Supreme Court does away with a significant uncertainty that hovered not only over public finances but over the economy as a whole.”

Georgiades noted that possible ratification of the first instance decision, “would have made things difficult for Cyprus to cover future financing needs as the cost of borrowing would increase significantly”.

Without explaining why it wasn't a contradiction, Attorney-General Costas Clerides said the decision upheld the right to property which the lower court said wasn't done and as he said salary rights were upheld despite pay cuts having been made.

He added, however: “With the condition that the core of this right is not affected, the state may impose some restrictions, which of course must be fully justified and proportionate, that is, in terms of the purpose for which they are aimed.”