Published On: Sun, May 17th, 2020

Brutal package of conditions leaves government little choice

Government Building Closed - 20200224 JH

PHILIPSBURG – The Kingdom Council of Ministers had presented a brutal package of conditions for the release of continued liquidity support. Prime Minister Silveria Jacobs has labeled these conditions as an ‘indecent proposal’ but State Secretary Knops has made clear that continued support depends on “agreements and results.” The Kingdom Council will review on July 3 whether St. Maarten has put the required measures in place.

The kingdom is prepared to release 53 million guilders in liquidity support, of which 24 million can be released immediately while payment of the remaining 29 million is earmarked for salary-subsidies “after St. Maarten has implemented the requested contribution of employees.” The support comes in the form of interest-free loans “as long as the Netherlands is able to borrow against zero percent.”

What are these ‘indecent’ conditions? St. Maarten has to increase the retirement age from 62 to 65 years per July 1 and switch from the final salary to the average salary as the basis for these pensions. Entitlement to the old-age pension will also have to begin at the age of 65. Draft legislation to increase the retirement age has been at the parliament for handling since 2018.

Furthermore, the remuneration package for ministers and parliamentarians has to be lowered by 25 percent until further notice. Currently, the Council of Ministers has agreed to a 20-percent cut, while parliamentarians have agreed to a 15 percent cut (providing the Duncan-motion to cut 5 percent comes on top of an earlier agreed voluntary 10-percent salary cut).

Employees in the (semi) public sector – including government-owned companies – will have to give up 12.5 percent of their income, while the remuneration for top officials cannot be higher than 130 percent of the adjusted salary of the prime minister.

The prime minister’s basic gross salary is 15 percent above the highest salary scale for civil servants: 18,517 guilders per month. That puts her gross salary at 21,295 guilders; a 25 percent cut would bring it down to 15,971 guilders ($8,922).

Top officials cannot earn more than 130 percent of this amount, therefore 20,762 guilders or $11,599 per month. This calculation does not include the required 25 percent cut in the total remuneration package.

Financial supervisor Cft notes in its advice about liquidity support that St. Maarten has cut payroll support for local businesses by 1.7 million guilders by taking the airport out of the equation. Furthermore, the package now allots 60 percent payroll-subsidy to companies that suffered a 20 to 50 percent decrease in turnover, 70 percent for companies with a 51 to 80 percent decrease, and 80 percent for companies with a turnover decrease of more than 80 percent.

The Cft advises to grant these subsidies on a 1:1 basis: 20 percent subsidy for companies with a 20 percent turnover decrease, 50 percent for companies with a 50 percent turnover loss, and so on.

The Cft has also advised to reduce the working hours for employees by 20 percent and to grant the 29 million payroll support only after the government has taken this measure.

The financial supervisor furthermore notes in its advice that St. Maarten is unable to finance the support package for the month of May and that it will have to resort to salary cuts, introduce a solidarity tax, and/or decrease expenditures.

The International Monetary Fund has pointed out that the salaries in the public sector are the highest of all economic sectors in St. Maarten and that public sector employees “feel little from crisis situations.”

The Cft also suggests that St. Maarten uses the reserves of social and health insurance SZV to co-finance its support package. At the end of 2018, SZV had 64 million guilders in reserves.

Based on projected expenditures and lower revenue, the government’s bank balance will be approximately zero by July 1 according to the Cft.


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