Modernising CoLA is the only viable path forward.

It is true that in recent years the Cypriot economy has shown impressive performance and is on a growth trajectory, achieving—among other things—the creation of a business environment capable of attracting high-quality domestic and foreign investments.

However, it is equally true that the economy and the business sector are once again facing enormous challenges. These include operating in a climate of uncertainty fueled by the ongoing trade war, rising energy costs, persistent inflationary pressures, and a range of other factors that by no means guarantee a smooth course in the short, medium, or long term.

It is in this climate of uncertainty that, in the coming period, the discussion around the Cost of Living Allowance (CoLA), as well as other labour issues—such as the minimum wage and the expansion of collective agreements—is expected to open within the framework of social dialogue.

Ahead of this discussion, it is unfortunately evident that the trade union movement is preparing to enter the dialogue with maximalist and precarious positions, disregarding the painful consequences that any potential satisfaction of their demands would bring to the structure of the Cypriot economy, to enterprise, and consequently to all employees.

Unions want CoLA 100% restored

One such approach from the unions concerns the CoLA, for which they demand 100% restoration and an extension of the mechanism to all public and private sector employees.

This aim has been highlighted repeatedly in recent weeks by union leaders, including the Secretary-General of public servants’ umbrella union PASYDY, Stratis Matthaiou, as well as the secretary generals of unions SEK (Andreas Matsas) and PEO (Sotiroula Charalambous).

Putting forward a vague and unsubstantiated line of reasoning, the unions are essentially putting a gun to the government's head—waving the threat of strikes—seeking to pressure the state into satisfying their demands, regardless of the significant cost this would have on the economy and with disregard for the consequences such a development would have on businesses.

Government must rise to the occasion

This is exactly the point at which the government is called to rise to the occasion, to reaffirm its commitment to one of the fundamental pillars of its economic policy: fiscal discipline and stability. It must not succumb to the unions' blackmail or one-sided demands.

A clear indication that the government will not adopt the unions’ demands without resistance was given by President Nikos Christodoulides this week at the PASYDY conference, where he emphasised—among other things—that what matters, especially today, in relation to CoLA, is a fairer distribution that genuinely supports those who are in real need.

Whether the government will act accordingly and follow this rational course will become clear soon during the ongoing discussions.

From our perspective, however, the situation is more than clear. The CoLA mechanism is outdated. If it cannot be abolished, it must at the very least be modernised and should only apply to those who have agreed to it through individual or collective employment contracts.

It must be updated in a way that aligns with new realities, does not fuel inflation, and does not widen the wage gap between high and low earners.

Mutual respect among social partners must be reciprocal and genuine

The end goal of this effort should be to replace CoLA with a mechanism that takes into account not only inflation but also productivity, economic growth, and other macroeconomic indicators—such as the unemployment rate.

The unions should also not forget that the employer side agreed roughly two years ago to raise the CoLA rate from 50% to 66.7%, based on assurances that a new, modern system would be agreed upon by June of this year.

Therefore, unions must remember that mutual respect among social partners must be reciprocal and genuine. One cannot invoke social dialogue and tripartite cooperation only when it serves their own demands—whether related to the CoLA, the minimum wage, or any other issue.

Such a self-serving and unreasonable stance clearly contradicts labour norms and disrupts rather than ensures industrial peace.

At the same time, for a government that champions reforms, the upcoming CoLA debate presents a first-rate opportunity to reaffirm its commitment to reform, by supporting the modernisation of an outdated and increasingly harmful institution for the economy and business sector.

If this institution continues as it currently stands—or worse, is expanded in line with the unions’ extreme demands—then what inevitably awaits the economy and businesses is suffocation, a destructive step backward.

We must all understand that under the new circumstances and emerging realities, the economy and entrepreneurship must be left alone. Modernising CoLA is the only viable path forward.

And while we do not expect this realisation to come from the unions, we hope it will emerge from the responsible mediation of the competent minister and the government as a whole. As the saying goes: "Here is Rhodes, jump here!”.

(Source: InBusinessNews)