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Antonis Antoniou: The doubling of interest rates is a double-edged sword

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Next Previous Antonis Antoniou: Double-edged sword raising interest rates HOME • INSIDER • CYPRUS • Antonis Antoniou: Double-edged sword raising interest rates

& Alpha; & nu; & tau; ώ & nu; & eta; & sigmaf; & Alpha; & nu; & tau; & omega; & nu; ί & omicron; & upsilon ;: & Delta; ί & kappa; & omicron; & pi; & omicron; & mu; & alpha; & chi; & alpha ; ί & rho; & iota; & eta; & alpha; ύ & xi; & eta; & sigma; & eta; & epsilon; & pi; & iota; & tau; & omicron; & kappa; ί & omega; & nu; </b> </p> <p> <b>In view of the general assembly of OEB, on May 25, the president of the federation, Antonis Antoniou, answers questions from Phileleftheros on important financial, business and labor issues, amid unprecedented inflation and problems in the supply chain. Given the prevailing uncertainty, Mr. Antoniou avoids forecasts for the course of inflation in the coming period. Recognizes that </b> <b> </b> <b>Rising interest rates – to which the ECB is heading – are commonly used as one of the monetary policy tools to tame inflation, but stresses that today's inflation is not caused by overheating of the economy and growth in the demand side </b> <b>. </b> <b> For this reason, he expresses a personal opinion that any increase in interest rates, under the current conditions </b> <b>, </b> <b> could seemingly reduce the continuous increase in inflation but, in the medium term, it will have rather negative consequences for the citizens and the EU countries themselves </b> <b>. </b> <b>In Cyprus in particular, says Mr. Antoniou, the increase in lending rates </b> <b> </b> <b> will lead to an increase in investment costs and from there will be transferred to </b> <b> </b> <b> consumers, likely to </b> <b> feed back further inflationary pressures </b> <b>. </b> <b> At the same time it will lead to an increase in the cost of servicing loans, with the risk of causing an increase in non-performing loans. </b> </p> <p> <b>Interesting is the position of the president of OEB that this crisis came to remind us how fragile the global food supply chain is and how important it is for a country to be self-sufficient in food production. </b> <b> «</b> <b> Cyprus must re-invest in the Primary Sector, whose contribution to GDP has declined dangerously in recent years </b> <b>» </b> < b>, emphasizes </b> <b>. </b> </p> <p> <b> Where is inflation going? </b> </p> <p> <b>The Ministry of Finance estimates, Mr. Antoniou, that inflation in 2022 will average 4.5% while the Central Bank sees annual inflation at 6.8%. What are the estimates of OEB? higher </b> <b>; </b> </p> <p>It is a fact that since May 2021, inflation in Cyprus, as recorded by the Consumer Price Index, has shown an increasing trend, to the point that in the last two months it has reached record levels for the Cypriot data, with the highest being recorded last April. and reach 8.8% – the highest rate since 1982. </p> <p>The continuation of the pandemic in 2021 and 2022 has undoubtedly created inflationary phenomena, not only in Cyprus but throughout the European Union. The reasons are purely exogenous. The galloping rise in inflation & nbsp; observed since February this year is mainly due to the war in Ukraine and rising oil and gas prices. It is also due to the sanctions imposed by the EU, with the result that about 30% of the grain production goes out of the world market. </p> <p> <b> READ ALSO: & nbsp; tackling inflation </b> </p> <p> Once the war continues and new sanctions packages are imposed from time to time, we can not make accurate estimates or simulation exercises to predict inflation realistically and safely. . </p> <p> <b> We are not threatened by stagnant inflation </b> </p> <p> <b> To what extent do you find that accuracy has affected consumption or economic activity and how real do you consider the risk of stagnant inflation or recession in Cypriot economy; </b> <b> & nbsp; </b> </p> <p>Inflationary pressures are intensifying due to the ongoing war in Ukraine, while the disruption in international prices and the international supply chain of food and raw materials is not escalating in the foreseeable future, data that are of particular concern to OEB. It is true that during the pandemic there was an increase in savings deposits, due to reduced demand, with the result that there is temporarily a “cushion” available to cover part of the observed increases. </p> <p>In terms of the accuracy of consumer goods available in supermarkets, fruit shops, etc., based on data for the first quarter of 2022, compared to the first quarter of 2021, traffic is maintained at the same level, the volume of purchases decreased by 4.3%, while their value increased by 0.8%. Also, data on the movement of credit cards, which compare the period of October 2021 with April 2022, show reductions mainly in the categories of hotels, car rentals, nightclubs and duty-free shops. At the same time, however, there were increases in the purchase of airline tickets, professional services, services from hairdressers and barbers, DIY items, etc. </p> <p>The phenomenon of stagnant inflation is not visible for Cyprus, as in addition to the increase in inflation and the decrease in economic growth, which is not projected to reach negative levels, it should be accompanied by an increase in unemployment, which does not apply to the Cypriot data today. According to recent Eurostat data, the unemployment rate for the first three months of 2022 was 6.9% while in the corresponding period of 2021 it was 8.6%. In fact, there is an increase in labor demand, especially in view of the upcoming summer season. </p> <p> <b> Was the government's response to inflationary pressures satisfactory or do you think there is room for other measures? If so, list some. </b> </p> <p>The government acted immediately and decisively, with the aim of mitigating the consequences, especially for the most vulnerable groups. It proceeded to a temporary reduction of the excise tax on fuel, horizontally and for all, as well as a temporary horizontal reduction of the VAT on electricity, from 19% to 10% and in addition to the vulnerable groups of the population the VAT on electricity was reduced to 5 %. </p> <p> It also increased by 50% the allowances in the mountainous areas and in aid of 8 million euros for livestock, in order to face the increases of the prices of feed and cereals. </p> <p>OEB is in constant contact with the Ministry of Finance and we have submitted suggestions for measures that we believe the state could adopt. Immediately after the invasion, we suggested that the European Union be asked to create a new financial instrument within the framework or standards of the Recovery and Sustainability Plan, as it would be extremely difficult for each country on its own to finance support for the national economy. p> </p> <p>In addition, at the request of the Office of the President of the Republic, we have submitted thirteen proposals aimed at reducing inflation, which concern reduced VAT rates, acceleration of licensing for energy saving projects, etc. At the same time, a number of proposals aim to avoid with proposals for postponement of planned new taxes and charges. </p> <p> <b> Rising interest rates and inflation </b> </p> <p> <b>What impact do you think the expected ECB decisions on raising interest rates in the second half of 2022 will have? Is it necessary to increase interest rates at this stage or will it work in the direction of stagnant inflation? </b> </p> <p> The period we are going through is characterized by low or negative interest rates, which due to inflationary trends are expected to increase by monetary authorities. </p> <p>More specifically, the recent increase in interest rates by the US Fed and the Bank of England and the statements of members of the Board. of the ECB, such as Louis de Guidos and Olli Rehn, for a similar move in interest rates in the Eurozone, proposing an increase in the key interest rate by 0.25% in July, so that in the autumn we have reached 0%, indicate that the cube has probably fallen definitively in the staffs of the major central banks of the planet. Rising interest rates are used as one of the tools of monetary policy to tame inflation, to cause a slowdown, especially when the economy is overheating. However, in the current conditions, inflation is caused by the artificial spike in international energy prices and the distortion of supply, due to the disruption in the production process, due to the sharp rise in raw material costs and the disruption of the supply chain due to pandemic and Ukrainian. In other words, it is not caused by the increase in the demand side. </p> <p>Personally, I belong to the group that believes that any increase in interest rates, under the current circumstances, could seemingly reduce the continuous increase in inflation, but in the medium term, it will have rather negative consequences for the citizens and the EU countries themselves. & nbsp; </p> <p>Especially in Cyprus, the increase in lending rates will lead to an increase in investment costs and from there it will be transferred to consumers, with the possibility of & nbsp; feeding back further inflationary pressures. At the same time, it will lead to an increase in the cost of servicing loans, with the risk of causing an increase in non-performing loans. </p> <p> <b> How do you assess the consequences, current and future, in the Cypriot economy from sanctions? Will the close relations of Cypriot professionals and companies with Russian companies pass in the past? </b> </p> <p>Obviously, the markets of Ukraine and Russia were important for our country, since the Cyprus-Russia business relations were an important part of the local economic activity, in the service sector, in investments, in trade, in real estate, etc. </p/> <p> But the state of war, international sanctions on Russia and Russian retaliation, have created new data, which have caused deep market turmoil. However, despite the significant blow, I hope that our country will not enter a recession, as the growth rate for 2022 is estimated to reach 2.7%, significantly lower than the initial estimate of 4% growth. </p> <p>Cyprus remains an attractive investment destination, with significant infrastructure and developed services, significant tax and other incentives, introduced as part of the new integrated strategy for attracting foreign companies. A very important step is the bill recently approved by the Council of Ministers, which provides favorable tax arrangements for attracting foreign and Cypriot professionals to a high standard of living and specializing in and promoting the establishment of the headquarters of foreign companies in Cyprus (headquart) . </p> <p> Despite the current tragic state of the war, our relations with the peoples of both Russia and Ukraine remain excellent. However, as geopolitical realities evolve, the field remains blurred and uncertain. </p> <p> <b> OEB for bank layoffs </b> </p> <p> <b>What is OEB's position on the crisis in one part of the banking sector and the risk of strikes? Do you agree with the intention to lay off redundant banks or do you think that the practice of voluntary retirement plans with additional compensation should be continued? </b> </p> <p>It is not an end in itself for any employer to terminate the employment of staff and in particular to proceed with large-scale layoffs. The need for surpluses is usually a consequence of the downsizing of activities or the reorganization of tasks. Surpluses remain a legal right of the employer to deal with situations that have been shown to reduce staffing needs, unless of course other, less painful, solutions can be found. For the cases that lead to redundancies, the system has provided with the creation of the Surplus Personnel Fund, which is financed exclusively by the employers, in order to pay compensation to the redundant people. </p> <p>In the case of the banking sector, which has gone through enormous difficulties over the last decade, the right to redundancies has not been exercised even once, despite the fact that in most cases it would be perfectly legal. In other words, no compensation has been given from the Surplus Fund to any bank employee. Employers and unions, on the other hand, have in any case chosen to proceed with voluntary retirement plans, which, however, presuppose the existence of a relevant fund and the availability of the required number of employees, in the affected specialties, to utilize them. If one of the above conditions is not met, then the voluntary withdrawal plans do not serve their purpose. </p> <p> OEB believes that through dialogue, consensual solutions can be found in this crisis as well and the strike measures, as such a development, perhaps in the most critical period for the economy, would be catastrophic. </p> <p> <b> The signing of collective agreements and its non-implementation by all </b> </p> <p> <b>How do you respond to the criticism leveled by trade unions for the improper implementation of collective agreements, despite the fact that they are agreed in dialogue and with employers' associations? Is the influence of employers' associations on companies that are called upon to implement the agreements reduced? </b> </p> <p>Through the successive crises of the last decade, the voluntary labor relations system applied in Cyprus has shown its resilience and its limits. He proved that he can adapt to any difficulty and through the flexibility provided to overcome it. It is also a system that is recognized worldwide as one of the most successful and for this the OEB and the trade unions that implement it are credited. </p> <p>Of course, in a system where stakeholders often have conflicting interests, differences and disagreements are to be expected. In these cases, there are labor dispute resolution procedures, namely the Industrial Relations Code and the Essential Services Dispute Settlement Agreement. Thus, through the institutionalized procedures, the unions can seek the implementation of the collective agreements where they consider that they are not implemented or are not implemented properly. And they have succeeded in many cases with the tools we made together, building the labor relations system of our place. </p> <p> <b> OEB fraternal relations with CCCI </b> </p> <p> <b>What are the relations of OEB with the CCCI today, after their dissolution a few months ago? </b> </p> <p>OEB and KEVE are connected by fraternal relations and together we fight for the promotion of entrepreneurship and the protection and strengthening of the national economy. We do not always agree on all issues and from time to time we have issues, as happens in every family. At the same time, however, as in any family, we find ways to overcome them and move forward in harmony and camaraderie. Next Wednesday, the President of KEVE, friend Christodoulos Agastiniotis, will attend our General Assembly and will address the members of OEB. </p> <p> <b> Inadequate conditions for minimum wage – Fragile supply chain </b> </p> <p> <b>Mr. Antoniou, how satisfied is OEB with the social dialogue around the determination of the national minimum wage and the decisions that are expected to be announced soon? Would you rather postpone these decisions or do you finally agree that the minimum wage will help working classes to strengthen their activities, giving impetus to their growth and improvement of their standard of living? </b> </p> <p>OEB has accepted the introduction of a national minimum wage with legislation, despite its firm position that the determination of wages through free negotiations is the most appropriate system for our country, due to the flexibility it offers. This huge reform, which will now affect every worker in every sector of economic activity and not the nine individual occupations as it stands today, must be done in a way that does not adversely affect business competitiveness and does not increase unemployment or undeclared work. work. </p> <p>In particular, in an unstable economic environment, with the painful consequences of the Russian invasion of Ukraine, the constant rise in prices and the gallop of inflation, are not the most suitable conditions for the introduction of a national minimum wage. When introduced, it should be done conservatively and gradually, with safety flaps and evaluated through an impact analysis study and adapted to the real resilience of the economy. </p> <p> <b>Does OEB agree with the promoted decision for exemption from the minimum wage of agricultural workers and domestic workers? Is it not an oxymoron not to protect the specific categories of workers, for whom there is a lot of talk about low wages, long working hours and poor living and working conditions? </b> </p> <p>OEB agrees with the exclusion of domestic helpers and agricultural workers, which is also favored by expert studies. These categories of workers have peculiarities in relation to the terms and conditions of employment, since a large part of them are accommodation and food and can not be counted in absolute numbers. In relation to any complaints about overtime and poor living conditions, it is the responsibility of state inspection mechanisms to ensure that these categories of workers also have a healthy working environment. & nbsp; </p> <p> In addition to the above two categories, seafarers should also be excluded, as this category is covered by specialized international terms of employment. </p> <p> <b> Introduction of staff </b> > </p> <p> <b>Prior to the Russian invasion of Ukraine, a dialogue was in the final stages of importing large numbers of workers from third countries to fill the thousands of vacancies that exist, at least according to companies. Has this dialogue stopped? Were staffing needs different or is the dialogue still going on behind the scenes? </b> </p> <p>The invasion of Ukraine has created enormous uncertainty in business and the prolonged duration of hostilities is exacerbating the situation. However, forecasts for the flow of tourists expected to visit the island remain optimistic. As a result, staffing needs, especially in the hospitality industry (hotels, restaurants, etc.), have not only not diversified but may have increased. </p> <p>At the same time, staffing needs continue to exist in all areas of economic activity. It is worth noting that the phenomenon of lack of human resources is a pan-European problem and it is no coincidence that initiatives have been taken to address it at European Union level. & nbsp; </p> <p> The dialogue for the modernization of the Employment Strategy for Foreigners in Third Countries remains pending, but the priority at this time is the timely staffing of companies with the appropriate staff. </p> <p> <b> There is a real risk of a food crisis, which could affect the European area, including Cyprus, or do you consider the concerns internationally excessive? There may be shortages of basic products </b> <b> </b> <b>in Cyprus? </b> </p> <p> In addition to the energy crisis and its aftermath, there is indeed concern about a food crisis. In Cyprus at the moment there is no significant problem, nor is it expected. Typically, large trading companies hold stocks for 30 to 40 days. In addition, orders are placed much earlier, as there is the experience of serious delays in ports, which began due to a pandemic. </p> <p> Of course, as we all know, the situation remains fluid and as long as the war continues no one can to rule out the possibility of temporary shortages in a product or group of products. </p> <p> This crisis has come to remind us how fragile the global food supply chain is and how important it is for a country to be self-sufficient in food production. Cyprus must re-invest in the Primary Sector, whose contribution to GDP has declined dangerously in recent years. </p> </p> <p><noindex></p> <div class=Source: www.philenews.com

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