By Ioannis Tirkides*
To assess accurately the structural integrity of Cyprus’s contemporary political economy, we must look beyond surface-level macroeconomic indicators and the smooth, procedural conduct of elections. Despite having a modern legal framework and exemplary electoral processes, everyday life in Cyprus is seriously undermined by deeply entrenched nepotism, widespread collusion, networked clientelist systems and the capture of the state and its institutions by elites.
In this environment, the boundaries between public policy and private profiteering are effectively abolished. As a result, economic success depends primarily on informal, reciprocal ties cultivated between state officials and business interests, rather than on meritocracy, genuine innovation or free competition.
To uncover this invisible dynamic, which conventional economic indicators fail to capture, the Varieties of Democracy (V-Dem) project of the University of Gothenburg proves to be an invaluable tool. Using hundreds of indicators and expert assessments, V-Dem measures the de facto functioning of institutions in practice, going beyond their theoretical design.
The empirical data emerging from this analysis are particularly revealing, as they show that Cyprus effectively operates as a clientelist state. This system is characterised by a strongly cartelised party landscape, where the traditional parties of power – with the exception of the Left – set aside their historical and ideological differences and function as a single alliance. Instead of acting as a neutral arbiter that guarantees fair rules, the state has been transformed into a deliberately designed mechanism for concentrating wealth in favour of elites.
At the same time, the country’s formal compliance with European Union directives is often used as a mere façade, concealing serious structural transparency gaps that ultimately erode the entire democratic system.
The clientelist state
At the core of this “crony capitalism” lies transactional politics. In this system, state goods, regulatory favours and public sector positions are directly exchanged for electoral support and financing. The “Clientelist State Index” captures precisely this reality.
On a scale from 0 (universalistic democracy) to 1 (fully clientelist state), leading countries such as Denmark, Sweden and Germany record impressive scores below 0.10, maintaining a meritocratic, almost automated public administration governed by universal rules. At the second tier are countries such as France and Spain, with scores between 0.12 and 0.25.
Cyprus, however, falls into the bottom third tier, with a score between 0.35 and 0.50, alongside countries such as Greece, Bulgaria, Malta and Croatia. In these states, the clientelist mechanism is vital to the long-term survival of political parties, which essentially operate as socio-economic intermediaries, fundamentally distorting both the economy and democracy.
Party cartel
The toxic consequences of this system permeate business leadership and extend all the way to the legislative branch. Under this party cartel model, where ideological differences fade, parliament is often transformed into a “closed circuit” whose primary objective is the allocation of state privileges rather than political deliberation.
Legal loopholes, special planning regulations and anti-competitive exemptions are enacted solely to protect the establishment. This reality is clearly reflected in the “Legislative Corruption Index”. While leading European states, thanks to open registries and transparency, achieve scores of 0.85 or higher, Cyprus remains stuck at 0.40–0.55, trapped in the lower tier alongside Malta and Bulgaria.
Institutional capture
These legislative distortions have a direct and destructive impact on the allocation of public resources. The “Public Goods versus Particularistic Spending Index” assesses whether public funds are invested in universal goods – such as green energy networks that benefit all citizens – or in “particularistic” goods that serve influence networks, such as wasteful local projects, targeted tax exemptions and tailor-made public contracts.
While Scandinavian countries consistently approach 0.90, Cyprus records only 0.65–0.75, aligning itself with Balkan and Mediterranean models. In effect, the party cartel systematically channels public resources to elites, shifting political competition away from ideology and towards the struggle for lucrative government privileges.
The capture of the Electricity Authority
One of the most characteristic examples of this “institutional capture” can be found in the energy sector, and specifically in the Cyprus Electricity Authority. Through the mechanism of “avoided cost”, private renewable energy producers are paid prices based on the expensive cost of imported fossil fuels, including European emissions penalties.
The Electricity Authority is forced to purchase clean energy at these inflated prices, allowing private producers to reap excess profits of up to €0.20 per kilowatt-hour – a scandalous transfer of wealth from the state and consumers to private cartels.
The peak of this inefficiency was recorded in the case of the Liquefied Natural Gas terminal at Vasiliko. In 2019, the executive branch rushed through the approval of a €300 million contract, completely ignoring clear and documented warnings from the Auditor General about serious problems in the original tender process.
As a result, the project remains unfinished, faces massive delays and is now under criminal investigation by the European Public Prosecutor’s Office.
Closed policy-making
The collateral damage of this entrenched nepotism is a profound democratic deficit. Society’s deep dependence on state services has generated extreme wage inequalities, concentrating wealth and power in a narrow elite.
According to the “Participatory Democracy Index”, Cyprus stands at an alarming score of 0.645, indicating that national policy-making is an extremely closed process, lacking broad public consultation.
Media self-censorship
The situation is further exacerbated by organised and institutionalised hostility towards any form of independent oversight, which dramatically depresses Cyprus’s performance in the “Liberal Democracy Index”. The media landscape is tightly controlled by the same political and business interests, leading to deep self-censorship around corruption scandals.
Any oversight authority that dares to challenge this system faces severe confrontations, while the state often punishes whistle-blowers. Resistance to scrutiny recently culminated in the unprecedented dismissal of the independent Auditor General by the Supreme Court, following intense clashes with the establishment over public contracts linked to clientelist networks.
‘Egalitarian democracy index’
This entrenched crony capitalism fundamentally destroys social equality. In the “Egalitarian Democracy Index”, Cyprus is confined to a mediocre 0.685, as elite capture of the regulatory state widens wage gaps and traps political power at the top of the social pyramid.
As a result, civil society organisations and marginalised groups are effectively excluded from decision-making.
Conclusion and necessary reforms
In conclusion, while Cyprus maintains the façade of a stable electoral system, V-Dem data unequivocally demonstrate that the political allocation of resources more closely resembles models of structural corruption in Eastern Europe than the transparent Scandinavian standards.
The empirical evidence makes clear that crony capitalism is not merely a temporary failure or anomaly, but the deliberately designed and fully entrenched operating model of the Cypriot state.
For Cyprus to become a genuinely just state within the European Union, superficial adjustments are not enough. Radical structural reform is required. Without it, economic benefits will continue to serve narrow interests.
The necessary reforms include the complete dismantling of clientelist networks, the enforcement of transparency in lobbying, the establishment of an automated and meritocratic public administration, and the absolute safeguarding of the independence of oversight institutions from any political interference.
Economist and candidate in the parliamentary elections with the Volt Cyprus party. This article is available on the author’s personal Substack
