Yesterday's discussion of the state budget in parliament highlighted the problems that Cyprus will face once it exits the memorandum.

On the fiscal side, Cyprus is on track for the last two years, with a deficit very close to zero.

The budget is expected to be approved with the votes of DISY and DIKO and the crucial vote of the European Party.

However, problems accumulated in the system remain, and in some cases, they expand. Unemployment, NPLs, institutional conflicts and uncompleted reforms make up a complex cocktail of issues brought forward by political parties.

The opposition’s criticism towards the government at the plenary session, on the last memorandum budget was especially severe with an early pre-election scent.

The ruling party acknowledged that unemployment remains a major problem in the economy.

"Our biggest problem is unemployment," said Averof Neophytou.

"High unemployment is indeed a sad reality. As is also true that - even slightly - employment is recovering and jobs begin to be created. "

The government was criticized on the deterioration of living standards of citizens, about the wages of €300 and €500 and the expansion of inequality – an issue also highlighted by DIKO.

NPLs

Once again the debate on the budget took place under the shadow of problems accumulated in banks.

"All systemic banks in Cyprus have capital needs and need money," said the president of the Democratic Party, Nicolas Papadopoulos.

"The Cooperative needs €200 mn and it is questionable whether it will survive in its present form".

"According to the Central Bank, the Bank of Cyprus has capital needs of approximately €1 bn but has only made provisions for €300 mn in its balance sheets," he said, questioning the government’s success story and wondering what levels will red loans reach.

Institutional conflicts

An issue that prevailed for the first time perhaps, in a discussion for the state budget, was the protection of institutions’ independence.

Opposition parties pounded the government on the successive confrontations of the executive authority with independent institutions.
DIKO president Nicolas Papadopoulos, pushed the government against the wall with lengthy reports, describing its attitude, especially in the conflict with the auditor general, as arrogant.

The recent rupture in relations between the presidential palace and the auditor general was also included in the speeches of other political opposition leaders.

"Those who were giving us lessons to respect independent institutions, they themselves are now in conflict with those they appointed", argued the general secretary of AKEL.

The president of the ruling party DISY Averof Neophytou tried to pass quite briefly the reference on independent officials.

More clear and supportive towards the presidency was the president of the European Party Demetris Syllouris, who was in favor of reducing the term of all independent officers, even calling on the government to abandon the Anglo-Saxon system of a single man and change the constitution.

He said that his party would vote today's budget, removing the shade of DISY criticisms that the European Party, being a participant in the government has not yet voted even one memorandum bill.

Yesterday from the parliament floor, the president of DISY Averof Neophytou speaking off text gave credit directly to the Democratic Party and to its president Nicolas Papadopoulos for the party’s responsible attitude towards memorandum bills, "an attitude" which, as Mr. Averoff noted "gives more points to DIKO."

At the same time the president of DISY addressing AKEL MPs, referred to the responsible attitude of the party on the issue of Cyprus.

Privatizations a red flag

The government accepted a powerful pounding regarding the issue of privatization of semi-governmental organizations, which are still on paper.

Allegations about a selloff of public wealth dominated criticism from the leaders of opposition parties.

AKEL by its general secretary accused president Anastasiades and the government for selling off public wealth and that the president did not keep his election commitment not to privatize semi-governmental organizations.

The opposition’s strong criticism expanded on the issue of the reform program in the public sector.

The president of DISY returned fire towards opposition stressing that we must not sacrifice the country, in order not to make any change in the right direction.

"We are not preserving the kingdoms of some," he said, "and will not preserve them. Some of you call us stubborn. Yes! We are stubborn reformers", he added.

Fiscal issues which are the very essence of the state budget remained at the sidelines, with the opposition referring to "prosperity of the numbers" without an impact on the real economy.

DISY president however, focused on this chapter giving credit to the government, which in 2013, as he said, received a crumbling economy and a banking system also under collapse and managed today, to have a Cypriot economy which is credible in international markets and a banking system which has stabilized.

EDEK MP Giorgos Varnavas noted in his speech that the budget from a development promotion tool turned into means of shrinkage of consumption, welfare state and liquidity in the real economy.

Ecologists referred to a recession budget and the MP of the Alliance of Citizens Nikos Koutsou wished that the memorandum be gone.

"There is no liquidity in the market and small and medium businesses are suffering" were some additional points made by the opposition.

The opposition also referred to the high lending rates offered to the market by banks, with Mr. Neophytou answering that it is the first time that lending rates in Cyprus have decreased to such an extent.

The debate on the state budget will be completed today with its adoption by the plenary of the House.