Nicosia, Cyprus. Former Disy leader Averof Neophytou said Cyprus’ economy is being undermined by an unsustainable surge in the state payroll, which he argued could instead fund 15,000 affordable homes.
State payroll growth described as unprecedented
In an analysis, Neophytou said the size and cost of the state machine have long been a “black spot” on public finances, but that recent growth is unprecedented in the Republic’s history.
He said that even in the years leading up to the 2013 economic disaster, increases were more modest, with the payroll standing at €2.86 billion at the end of 2012. He noted that between 2008 and 2012, the total increase was €348.00 million, or 13.8 per cent.
Rising costs under current trajectory
Neophytou described the current trajectory under the present government as “particularly alarming,” with costs rising from €3.16 billion in 2022 to €3.87 billion by the end of 2024.
He said this represented a jump of €709.00 million, or 22 per cent, in two years, which he said showed a lack of fiscal control and a trend that had “not occurred before” since the country’s founding.
Projections to 2028 and cost-of-living allowance assumptions
Citing Ministry of Finance projections, Neophytou said the state payroll is expected to reach €4.89 billion by 2028, which he calculated as an increase of €1.72 billion, or 54 per cent, over five years.
He said “this is not sustainable,” adding that the projected increase was four times larger than the one that previously led the country into a memorandum of international creditors.
Neophytou also said the government estimates were based on a cost of living allowance of 67 per cent rather than the 100 per cent rate due to be implemented by 2027, and he predicted that the actual state payroll would likely exceed €5.00 billion by 2028.
How should the government balance state payroll growth with spending on affordable housing?
