Lebanon's cabinet still dithering on wage-hike

Lebanon's cabinet still dithering on wage-hike
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Published December 10th, 2012 - 10:07 GMT via SyndiGate.info

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Wage hike would increase inflation by 2 to 3 percent and would push the balance of payments deficit above $2 billion each year
Wage hike would increase inflation by 2 to 3 percent and would push the balance of payments deficit above $2 billion each year
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Riad Salameh
,
Nicolas Nahas
,
Johannes Jooste

Economy and Trade Minister Nicolas Nahas said that the Cabinet has yet to make a decision on whether to pass the proposed wage hike to Parliament, despite mounting pressure from both labor organizations and the private sector to address the issue.

Nahas told The Daily Star Sunday that ministers will discuss the controversial salary scale during a Cabinet meeting Monday but added that no decision has been made yet on whether to refer a draft bill to Parliament.

“The government comprises representatives of different parliamentary blocs and I cannot speculate whether an agreement will be reached over the issue,” he said.

The UCC, which groups private and public school teachers as well as civil servants, plans to stage a protest Monday to press the Cabinet to pass the proposal to Parliament as soon as possible.

The committee of Air Traffic Controllers at Rafik Hariri International airport also issued a statement Sunday, urging the government to include them alongside public sector employees who will benefit from the new salary scale, once enacted.

At odds with the UCC, the Economic Committees, which represent leading bankers, merchants and businessmen in Lebanon, will hold an urgent meeting Monday to discuss the possibility of closing all businesses across the country if the draft bill is sent to Parliament for ratification.

The Economic Committees argue that raising taxes to finance the salary scale would further worsen the already-stagnant economic situation and deal a final blow to all sectors.

Central Bank Governor Riad Salameh has warned that the wage hike would increase inflation by 2 to 3 percent and would push the balance of payments deficit above $2 billion each year.

Instead, Salameh has proposed enacting the salary increase in installments over the next three to five years.

Johannes Jooste, head of Strategy for Europe, Middle East and Africa at Merrill Lynch Wealth Management told The Daily Star in an interview Thursday that the government should have a plan to stimulate growth if it is to enact the hike.

“Otherwise, the increase in expenditures would eventually push bonds yields higher,” he said.

As of the end of 2011, Lebanon’s debt stood at 134 percent of GDP in 2011, the highest debt-to-GDP ratio among Arab countries.

If enacted, the salary scale will cost the treasury $2 billion annually that the government will have to finance through the issuance of new debt if it is to avoid any increase in taxes.

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