Work starts on new 2021 budget; search continues for consensus (Updated)

President Nicos Anastasiades and ruling Disy on Friday launched a new round of contacts to convince party leaders to approve an amended 2021 state budget following its rejection on Thursday, while the state services foresee problems due to lack of cash flow.

After the bill on the state budget for next year failed to garner enough backing, the government warned that this would lead to several problems, including the delivery of vaccines and freezing of procedures concerning important construction projects such as the Paphos dialysis unit.

Despite rejecting the budget, MPs did authorise expenditure for the month of January, a contingency that allows the state to keep functioning. In the meantime, work has already started on drafting a new text of the state budget for 2021, finance ministry officials told the reports Cyprus News Agency on Friday.

The government to submit another budget bill in January when parliament reconvenes.

“If by February or March there is no approved budget, the state will collapse, since no expenditure can be carried out,” finance ministry officials warned.

According to government spokesman Kyriacos Koushos, however, there was no issue of the president resigning over this.

“It is a presidential democracy, not a parliamentary democracy. Also, there is no way the government will not act and leave our fellow citizens without the necessary support,” Koushos told Alpha TV.

The government has now launched a new round of contacts with parties in a bid to forge consensus but not with Diko, which Anastasiades blamed on Thursday for “seeking through blackmail to substitute the lawfully-elected government and neutralise other independent institutions.”

The president took a swipe at Diko on Thursday evening right after the budget was voted down at the House plenum. Diko vetoed the budget because the government would not grant the auditor-general access to files relating to the controversial – and now defunct – citizenship-by-investment programme.

Anastasiades said that while he understands political parties may have genuine disagreements over economic policy, he could not fathom Diko’s negative vote.

As the blame game continued, Diko head Nicolas Papadopoulos has written to the president asking that he give instructions for documents on Cyprus’ passport scheme be given to the audit service. Papadopoulos sought to shift the blame for the impasse on the government, telling the president not to insist on burdening the people of with a crisis. “It is your decision, the responsibility rests with you,” he said.

Koushos said later on Friday Anastasiades would respond within next week to all the issues raised by Papadopoulos in his letter, “thoroughly and with full documentation.”

Finance Minister Constantinos Petrides is said to be continuing contacts with political parties while Disy leader Averof Neophytou met Akel general secretary Andros Kyprianou, and Anastasiades had a meeting with Edek’s Marinos Sizopoulos.

The Edek leader said he submitted to Anastasiades a package of proposals concerning foreclosures, the upgrade of healthcare services, improvement of the quality of life of people in rural areas and refugee estates, and support for working women and their children, and people affected by the economic crisis and the pandemic.

Sizopoulos said he stressed to the president that the government should make a move as regards Edek’s standing request for the transfer of all the files of the scandals that have afflicted the Cypriot society for the last 20 years and make public the results of all the probes concerning these cases.

“How constructive this meeting will be and how much it will help Edek to reconsider its decision to vote against the budget and to vote in favour of the new revised one, will also depend on the meetings that will take place next week with the respective ministers,” Sizopoulos said.

Anastasiades is meeting next week with head of the Citizens’ Alliance Giorgos Lillikas. The party said it has prepared the proposals it will present to the government, in an effort to make the budget yield significant benefits for vulnerable groups of the population.

Both the Akel and Disy leaders said after their meeting that they agreed that the budget issue should not be allowed to negatively affect the Cypriot people.

Andros Kyprianou, whose party Akel traditionally downvotes the state budget, said after the meeting he made clear that “we are ready to discuss policies that are beneficial both for the people and our country.” He added that he mentioned to Neophytou “some basic principles that need to be included in the state budget,” concerning workers, people with low income and those who are facing many difficulties with banks.

The bill was defeated by 29 votes against to 24 in favour. It was the first time ever the House voted down a state budget since independence in 1960.

Akel, Diko, Edek, the Greens, the Citizens Alliance and Independent MP Anna Theologou vetoed the bill. Voting in favour were ruling Disy, Solidarity, the Democratic Cooperation, and Elam.

In the meantime, problems are expected due to the lack of cash flow.

Health Minister Constantinos Ioannou said that though the rejection of the 2021 state budget by parliament will not affect the first stage of the vaccinations, there might a problem with subsequent deliveries in January.

Transport Minister Yiannis Karousos too, said that the tender bid procedure for the renovation of the Paphos general hospital’s dialysis unit has now been frozen. The contracts were to be signed in January, he said.

The downvote of the budget also means inability to proceed with the construction of new wings at the Athalassa psychiatric hospital, and signing of the contracts for other infrastructure such as the Polis to Paphos road, the minister said.

“In the months of February and March, we will not be able to proceed with the scheduled signatures for the breakwaters in Chloraka, Oroklini and Pervolia. Unfortunately, we will not proceed with the announcement of the construction of the Larnaca to Dhekelia road, neither works on Tseri Avenue at the municipality of Tseri,” Karousos said mentioning some of the projects that will be affected.

The public service commission too said it has decided to postpone all the hiring procedures that were scheduled to take place within January 2021.

Finance ministry officials told CNA that the most important issue was the distribution of expenditures for January.

The ministry, is understood to be examining how to prioritise expenditures in view of potential serious problems, as regards works that are underway.

There is also concern about planned expenditures of the health ministry due to the expiration of contracts related to the coronavirus pandemic and the arrival of the vaccines.

This means the finance ministry will have to prioritise expenditures in order to meet some more pressing needs, possibly at the expense of other expenditures, the same sources said.

The expenditure approved by parliament applies to payment of regular expenses, and not just salaries, pensions and other operating expenses, thus covering contracts that are in progress, but not contracts that have expired.

Ministry officials also said that the issue of the European Fund for Recovery and Resilience from the pandemic was also frozen, since the €100 million provided for the promotion of the national recovery and resilience plan has been frozen with the budget vote.

Another official of the finance ministry said there was no question of default in terms of servicing the public debt as the payments are made from the permanent fund and do not depend on the approval of the parliament.

He warned, however, that a vote against the state budget would have indirect consequences, such as affecting economic activity and the functioning of the state and “possibly jeopardising the Republic’s ratings.”