Reforms today to embrace the economic model of tomorrow

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By Christopher Pissarides and Omiros Pissarides

The coronavirus pandemic and the ensuing economic crisis have brought members of the European Union together in an unprecedented way. The agreement of the leaders of the member states on July 21 provides significant assistance to member states in the face of the deep recession caused by the pandemic and creates the conditions for sustainable recovery and growth in the years to come.

The funds made available open up huge opportunities that states can and should take advantage of. More than half of the 750 billion euros in the EU’s Next Generation program are provided in the form of grants, which is particularly important for countries like Cyprus, which face large debts.

In the past, our country has not been very efficient in the use of European funds, although they have been extremely beneficial. This is a new and greater opportunity not to be missed. The key question is what kind of recovery we are looking for. Major shock events, such as wars, natural disasters, and pandemics, such as Covid-19, create momentum to radically change the long-term course of an economy. In this context, any idea of ​​using EU funds only to cover losses and then revert to past practice should not even be considered. The world of tomorrow will not be the same as that of the pre-Corona era. When the existing economic and business model is challenged and ultimately changed by a crisis, the right choice is to lay the foundation for an efficient economy that can make the most of the new economic environment, not revert to old models.

The pandemic has accelerated the path to more automation and increased the use of digital technologies around the world. The Cypriot public sector and Cypriot businesses should get the message and make a rapid transition in this direction, which will lead to higher levels of productivity, new products and services and the penetration of new markets. The funds made available by the EU offer a unique opportunity to increase our digital infrastructure, both in the private and public sectors, to improve education and training programs and to make the country an attractive investment destination. on the basis of a sustainable and environmentally friendly environment. long-term sustainable economic model. Once this target is achieved, growth will return to a satisfactory pace, the economy will become more resilient and therefore less sensitive to shocks, and debt levels as a percentage of GDP will begin to decline without the need for recourse to new taxes.

At the societal level, the pandemic has also affected vulnerable demographic groups disproportionately, due to unemployment or loss of income. EU funds offer substantial possibilities to strengthen the social support framework within a long-term development budget.

Europe and our country are at a crossroads. Now is the time to show the will to support the recovery and invest in our future, through a three-pronged approach aimed at effective social cohesion, targeted education and beneficial reforms that will bring Cyprus to the new. green and digital development world.

Christopher Pissarides is Professor at the Universities of Cyprus and London, Nobel Laureate in Economics in 2010, and Head of the Greek Development Committee

Omiros Pissarides is the Managing Director of PricewaterhouseCoopers Investment Services


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