Trade unions in Cyprus have expressed strong concerns over President Nikos Christodoulides’s plans to “modernise” the cost of living allowance (CoLA) system, setting the stage for potential labour tensions.
During his presentation of the 2025 annual programming, Christodoulides outlined plans to reform CoLA alongside broader labour market measures, including expanding collective agreements, adjusting minimum wages, and addressing undeclared work.
The reform signals have met resistance from unions, who oppose linking CoLA to productivity, viewing such proposals as attempts to weaken the mechanism. Union leaders maintain that the cost of living adjustment cannot be considered either a wage increase or a productivity bonus.
Finance Minister Makis Keravnos’s recent statements supporting the link between CoLA and economic productivity prompted swift union backlash, forcing him to issue a clarifying statement emphasising his support for the system while maintaining neutrality in ongoing negotiations.
The current transitional CoLA agreement, reached in 2023, increased payments to 66.7% of the inflation rate, with the enhanced rate taking effect from June 2023. Social dialogue on a permanent agreement is set to conclude by June 2025.
Former SEK union economist Christos Karydis described CoLA as a “defensive mechanism” that restores purchasing power lost to inflation, albeit with a one-year delay.
He emphasised that between 2018-2023, the restoration was partial, initially at 50% of the Consumer Price Index before rising to 66.7%.
“The philosophy is singular: restoring the purchasing power of wages eroded by inflation. Nothing more, nothing less”, Karydis wrote in a recent article, referencing the transitional agreement’s commitment to restore CoLA based on its original principles.
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