The European Commission has called on Cyprus to keep public spending within agreed limits, speed up reforms and address long-standing weaknesses in justice, energy, housing and the labour market under its 2026 European Semester recommendations.
Although Brussels acknowledged Cyprus’ strong fiscal position and general government surplus, it urged Nicosia to respect the agreed path for net expenditure set out in the medium-term fiscal framework. The relevant ceilings are 6.0% for 2025, 5.0% for 2026, 5.4% for 2027 and 4.3% for 2028.
The Commission also called on Cyprus to make full use of Recovery and Resilience Facility funds, strengthen research and innovation, improve the business environment and address delays in the judicial system.
For the first time, the recommendations place particular emphasis on the efficiency of the justice system. Brussels points to the need for further digitisation of court procedures, the full operation of the new Commercial Court and Admiralty Court, and a reduction in the backlog of cases and the time needed to process them.
Cyprus has so far received slightly more than 50% of its €1.02 billion Recovery and Resilience Facility allocation. A further 85 milestones and targets remain to be submitted, while 27 are already under assessment. The deadline for implementing projects is August 30, with certification expected in December.
On energy and climate, the Commission repeated its call for Cyprus to reduce dependence on imported fossil fuels, accelerate the development of renewable energy sources, upgrade electricity networks and storage, and move ahead with energy interconnections. A European official also referred to the Greece-Cyprus electricity interconnection.
The Commission also urged Cyprus to improve water, wastewater and waste management, with particular emphasis on local authorities. It called for stronger investment in infrastructure, better staffing and administrative capacity, sustainable water-use practices and wider separate collection of municipal and packaging waste.
On the labour market, Brussels highlighted shortages and the need to improve job quality, with explicit reference to gender equality and decent employment opportunities for women. It also called for greater participation by vulnerable groups, stronger vocational education and training, more adult learning and a more effective Public Employment Service.
The recommendations also call for stronger early childhood education and care, better basic skills, increased participation in science, technology, engineering and mathematics, and wider access to long-term care services.
Housing is also singled out, with the Commission pointing to the lack of social housing in Cyprus. It urged the authorities to improve social protection for vulnerable groups, provide targeted support to households affected by energy poverty, ensure adequate minimum pensions and increase the availability of affordable housing.
Cyprus is also asked to strengthen defence spending and readiness while ensuring spending remains efficient. At the same time, any measures introduced to offset higher energy prices should be temporary, targeted at vulnerable households or energy-intensive businesses, and consistent with EU fiscal commitments.
The Commission further noted that Cyprus did not activate the national escape clause under the Stability and Growth Pact, citing its already strong fiscal position.
Source: CNA
