The government could not have made a bigger mess of the negotiations on the Cost-of-Living Allowance (CoLA) if it had planned it. It has managed to alienate the unions by refusing to honour the promise for full restoration of CoLA that President Christodoulides made to Sek union in exchange for its support in the presidential elections and ten days ago it also lost the employers’ organisations by coming up with ludicrous idea of ‘CoLA for all’.

Last week, Labour Minister Yiannis Panayiotou had meetings with both sides to explain the ‘four parameters’ of the government’s proposal. These were ‘CoLA for all’, a graded granting of CoLA depending on the wage (on high wages only a percentage of CoLA would be added) in order to help the lowly-paid, the meeting of certain conditions for activating CoLA and the setting of limits on its level so that it does not push up prices in a time of high inflation.

Neither unions nor bosses were impressed with the four parameters. Right from the start, the unions had opposed the idea of proportioning CoLA in accordance with wages, arguing that it was not a tool for social policy – helping the lowly-paid – but a tool for protecting the purchasing power of wages. Although nobody mentioned it, such a measure, over a period of time, would also reduce wage differences, bringing the reward of low-skilled workers closer to that of skilled workers. Unions would not mind this imposition of equity but cannot accept that a large number of workers would receive only a percentage of CoLA.

Bosses had backed the government’s position against full restoration and the idea of linking the proportion of CoLA to the level of wage, but they immediately rejected the newly proposed universality. Some 70 per cent of private sector workers are not entitled to CoLA, so its universal application would drive up labour costs in many businesses. The rate of inflation may be close to zero this year but there is no guarantee it will remain at this level indefinitely. And the view expressed on Friday, in this context, by Finance Minister Makis Keravnos, was incredibly superficial. He said that it was inconceivable that with zero inflation there had been no agreement on CoLA. Did he seriously believe that inflation would always be zero?

Meanwhile, to make matters worse for the government, a legal opinion obtained by Oev and Keve said that imposing CoLA on all wages by law, would be unconstitutional as it would violate existing work contracts as well as collective agreements. Apart from constitutionally, ‘CoLA for all’ is also politically suspect as it allows state intervention in an agreement freely reached by two parties, the terms of which are in a contract. By what authority does the state of a free and democratic country dictate the terms of a freely agreed contract? Unions and the government seem to believe that this can be done, citing the minimum wage as an example of a work arrangement fashioned by legislation.

Even if the government carries out its threat of enacting legislation for this, in the event there is no agreement would the law stand? The bill could be approved by a majority in House but a single employer could file an appeal against the universal CoLA law and it could be ruled unconstitutional by the supreme court, which has already ruled against state interference in agreed wages and pensions. What would happen then? The government would have another big mess to deal with in a year or two, caused by its badly thought-out solution to the current mess it has created.

The fact is that two of the four parameters presented by the government are aimed at preventing CoLA fueling inflation at a time of rising prices by setting limits on its implementation, conclusive proof that it recognises the damage it could cause the economy. Yet, stupidly, it wants to impose it on all wages, ignoring the danger that, before long, the unions would force the removal of the controls the government would impose to limit the inflationary effects of CoLA. There is only one way of clearing the mess it has created – leave things as they are. It can keep the 67 per cent of CoLA currently paid in the public sector and for 30 per cent of the private sector, via collective agreement and forget everything else. This is bad enough and there is no need to make things worse for the economy, because the president wants to keep unions happy.