The Supreme Court on Friday ruled that cuts imposed on the pay and pensions of public servants in 2013 were legal.
In a decision, the full bench by majority upheld an appeal submitted by the attorney general against an administrative court ruling earlier this year which would have required the government to dig deep to reimburse the cuts.
The decision will come as a huge relief to the government amidst the coronavirus outbreak which has effectively brought the economy to a standstill.
The Finance Ministry had been working on a Plan B should the Court of Appeals uphold the earlier ruling which had according to estimates carried a fiscal impact of some €844 million over a four-year period.
In March, the Administrative Court had ruled that the legislation adopted during the 2013 financial crisis cutting pay and pensions in the wide public sector was unconstitutional.
It had found that the laws violated article 23 on the right to property.
This has now been reversed.
In statements immediately afterwards Attorney General Costas Clerides said “all appeals brought on behalf of the Republic and other public law bodies have been allowed, resulting essentially in the first instance judgments by the Administrative Court to be overturned.”
In short, he added, it was judged that cuts on salaries and pensions as well as on automatic wage adjustments and salary increases of public servants “are constitutionally allowed and legal.”
Since the core exercise of the right to property has not been compromised, the state can go ahead with certain reductions, which must off course be fully justified and proportional, that is to say as to the aim they seek to achieve, he added.
“This is the key message which arises from today’s ruling,” he said.
Replying to a relevant question, Clerides pointed out that the ruling of the Supreme Court sets a precedent so that under similar circumstances the state could act in the same manner legitimately and in full accordance with the Constitution.