An agreement to bring to an end the months of wrangling between workers and employers over the cost-of-living allowance (CoLA) and set how it is implemented going forward is to be signed at the presidential palace on Thursday, government spokesman Konstantinos Letymbiotis said.

He said the agreement will be signed at around 2pm by representatives of trade unions and employers’ organisations, and that President Nikos Christodoulides will also be present for the signing.

According to trade union Pasydy leader Stratis Mattheou, agreement will bring about gradual increase in the amount of CoLA paid over the coming 20 months.

The amount of CoLA paid will rise from its current rate – 66.7 per cent of the rate of the increase of the cost of living as a percentage of a worker’s salary – to 80 per cent on January 1.

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This would mean that if the cost of living increased by four per cent, workers will receive a boost of three per cent to their salaries in CoLA payments, rather than the current 2.68 per cent.

The government’s proposal would see that rate increase to 90 per cent on July 1 next year, and then to 100 per cent on January 1, 2027, with payments being made once a year during years in which Cyprus’ real gross domestic product increases.

In addition, the agreement foresees the introduction of a ceiling of a four per cent increase in the cost of living as the maximum amount payable, and a stipulation that the economy’s average growth over the course of any given year must be positive.

If there is an economic crisis, the labour advisory board will convene and “provide recommendations”.

The agreement comes after employers’ and industrialists’ federation (Oev) and the Cyprus chamber of commerce and industry (Keve) had last week rejected the government’s proposal to resolve the matter, describing the proposal as “unsatisfactory” and saying that it “cannot be accepted and signed as it is”.

Their rejection of the government’s proposal had come shortly after trade unions had accepted it, with Union of Cyprus journalists leader Giorgos Frangos saying workers had acquiesced to the government’s proposal “in a spirit of prudence, consensus, and reconciliation”.

Thursday’s expected signing will bring to an end a bitter and longstanding dispute over the matter, which in September had seen workers engage in a three-hour general strike which saw the island brought to a standstill.

On that day, public services and public transport were the most affected, with more than 50 flights and 15,000 airline passengers impacted by the strike, while trade unionists across the island took to the streets.