The Cyprus 2027 state budget has received a mixed response from political parties, which acknowledged the country’s positive economic performance while questioning the government’s spending priorities and economic policies.
The reactions followed Finance Minister Makis Keravnos’s presentation of the budget to the House Finance Committee on Monday.
Criticism centred on the rising cost of living, energy prices, public sector salaries, delays in development projects, the Great Sea Interconnector (GSI) and growing social inequalities.
While parties broadly recognised improvements in public finances, they differed over whether the government’s policies were doing enough to improve living standards and address structural weaknesses.
DISY: Economic stability but insufficient reforms
Democratic Rally (DISY) acknowledged the positive trajectory of the economy but argued that the government’s priorities did not adequately address current challenges.
DISY vice-president and MP Savia Orphanidou said public debt was falling and public finances remained healthy, partly because of difficult decisions taken in previous years.
However, she argued that high living costs, expensive housing and elevated interest rates required a different policy approach.
“Real structural reforms, innovation, development projects, digitalisation, investment and proper prioritisation of targeted support measures should have carried much greater weight in the government’s budgets,” she said.
Instead, Orphanidou accused the government of increasing inflexible expenditure and the public sector wage bill through across-the-board pay rises and recruitment.
On defence, she welcomed increased expenditure but said it remained insufficient, with spending still close to 2%, compared with countries such as Greece, where it had risen above 3%.
Turning to the Great Sea Interconnector, Orphanidou referred to President Nikos Christodoulides’s statement that Cyprus would pay its €25 million annual instalment once the relevant NAVTEX was issued.
She said DISY therefore expected the government not to raise further questions about the project’s financial viability.
DISY accuses government of lacking vision
DISY parliamentary spokesperson Dimitris Dimitriou accused the government of lacking vision and boldness in its development planning.
He said the administration was capable of managing the budget and responding to emerging problems but had shown reluctance both to plan new projects and to complete existing ones.
He cited the Paphos–Polis Chrysochous road, Larnaca marina and the Vasiliko natural gas terminal as examples.
“We see a lack of planning that responds to people’s needs,” Dimitriou said.
AKEL: Economic growth is not reaching everyone
AKEL MP Aristos Damianou acknowledged the positive economic indicators but argued that they had not translated into corresponding improvements in living standards.
He said approximately 17% of the population was at risk of poverty or social exclusion, while one in three people over the age of 65 faced a risk of poverty.
“At the same time, social inequalities are growing,” he said, arguing that the benefits of economic growth were not being distributed equally.
Damianou said living costs continued to place pressure on households, small and medium-sized enterprises and businesses more broadly.
He also warned that falling inflation did not necessarily mean prices would return to previous levels.
Some businesses, he suggested, had become accustomed to higher prices and might maintain them.
He further argued that the government’s financial support to address rising prices was substantially lower than the revenue it had collected through indirect taxation.
Housing, golden visas and banking concerns
Damianou identified housing pressures, energy dependence and distortions in the electricity market as structural weaknesses in Cyprus’s economic model.
Regarding the GSI, he insisted that Cypriot taxpayers should not be left to bear the cost of problems associated with the project.
He also expressed AKEL’s concern about the economy’s continued dependence on property investment linked to the golden visa scheme, connecting the issue to the government’s plans for Cyprus to join the Schengen Area.
On housing, he criticised the slow implementation of announced support schemes.
AKEL MP Andreas Pasiourtides referred to studies by the Central Bank and Fiscal Council, arguing that they supported his party’s position that tax reform had benefited higher-income groups.
He also criticised the banking sector, describing banks as the “overindulged child of the system”.
Pasiourtides asked the Finance Minister whether the government intended to address what he described as an imbalanced legal framework governing property foreclosures.
He noted that borrower relief schemes introduced since 2018 had originated from government initiatives, arguing that this demonstrated that appeals to banks were ineffective.
ELAM welcomes defence spending but seeks more family support
ELAM MP Marios Pelekanos welcomed the fact that the 2027 state budget recognised potential risks to the Cypriot economy.
He also viewed the increase in defence expenditure positively.
However, Pelekanos argued that considerably more could be done to address housing shortages, with increasing the available housing stock identified as a key priority.
He placed particular emphasis on the declining birth rate, calling for additional budget resources to support families.
He described the demographic challenge as “a matter of survival for Cypriot Hellenism”.
On energy, Pelekanos argued that high costs could only be addressed through permanent solutions, including the introduction of natural gas and greater use of renewable energy sources.
DIKO calls for extended support measures
DIKO MP and House Finance Committee chairwoman Christiana Erotokritou expressed satisfaction with the positive state of public finances.
She attributed the results both to sacrifices made by the Cypriot public and to responsible economic management.
On tax reform, Erotokritou argued that the changes benefited middle- and lower-income groups, to the extent possible through such a reform, particularly through the increase in the tax-free income threshold.
She proposed accelerating the introduction of the heating oil subsidy so that it could take effect before 1 November, as originally announced.
Keravnos responded that the relevant bill had already been submitted to Parliament and that the measure could be implemented immediately after its approval.
Erotokritou assured him that the legislation would be examined as soon as possible.
She also proposed extending existing support measures and examining additional interventions used in other European countries to assist lower-income households.
Furthermore, she called for substantial one-off financial assistance for young couples having children, as a measure to address the declining birth rate.
ALMA proposes wage adjustment cap
ALMA leader Odysseas Michaelides raised concerns about structural weaknesses in the operation of the state.
Regarding public sector salaries and the Cost of Living Allowance (COLA), known in Greek as ATA, he proposed introducing a cap for higher-paid employees.
As an indicative threshold, he suggested twice the median salary.
Michaelides said that between 2022 and 2026, COLA had increased the President’s monthly salary by €360 and an MP’s monthly salary by €207.
He announced his intention to submit amendments to the budget but clarified that ALMA would vote in favour of the Cyprus 2027 state budget regardless of whether those amendments were approved.
He argued that Parliament’s role was to exercise oversight rather than obstruct the normal functioning of the state.
On tax reform, Michaelides cited a Central Bank study which, he said, showed that taxable individuals in lower-income groups would receive an average annual benefit of €5, compared with €1,057 for higher-income groups.
Direct Democracy seeks public involvement in budgeting
Yiannis Laouris, representing Direct Democracy, questioned how positive fiscal indicators could translate into genuine improvements in people’s lives.
He highlighted unaffordable rents and low pensions as examples of continuing financial pressure.
Laouris called for greater public participation in managing state finances through participatory budgeting, allowing citizens to influence spending decisions and understand how public money was allocated.
He also expressed dissatisfaction with the level of family benefits provided to address the declining birth rate.
On energy, he reiterated the movement’s proposal for a permanent reduced VAT rate of 5%.
Regarding the GSI, he questioned why citizens should bear the cost of what he described as a private project.
Laouris also said Direct Democracy was awaiting answers from the Finance Ministry concerning debts owed to the Social Insurance Fund, the repayment agreement and the interest being paid.
Finance Minister defends government’s record
Responding to DISY’s criticism of delays in reforms and development projects, Keravnos argued that the current administration had inherited numerous problems from its predecessor.
He referred to the Vasiliko natural gas terminal, where legal proceedings remain pending, as well as the Paphos–Polis road and port projects.
“This government had to understand the structure of these problems and find solutions,” he said.
“We inherited many problematic projects from the previous government.”
Keravnos acknowledged that the administration had been in office for three years but maintained that the inherited difficulties were substantial.
“We are doing a great deal and making every effort, but you understand that these projects are particularly problematic and that there were dozens of failures by the previous government,” he said.
Public sector wages and recruitment
On the government wage bill, Keravnos acknowledged problems within the public sector, including promotion procedures, and said reforms were being prepared.
He defended recruitment across general government, explaining that additional personnel had been necessary in response to climate change, including firefighters.
The minister also noted that the government had granted COLA increases twice, adding that he had not heard any political party object.
He said the public sector wage bill had historically reached 30% and even 35% of GDP, whereas it currently stood at 27%.
Keravnos points to external causes of inflation
Addressing the cost of living, Keravnos maintained that no previous government had allocated as much funding to support citizens and mitigate rising prices.
He attributed inflation largely to external factors, particularly geopolitical instability and wars that had increased living costs.
The minister said the government had reduced tax rates to the minimum levels permitted by the European Union.
He added that Cyprus had already initiated discussions at European level about allowing further reductions and introducing measures involving infrastructure that could lower energy costs.
GSI viability remains a key concern
On the Great Sea Interconnector, Keravnos said the government’s position was the one expressed by President Christodoulides.
However, he emphasised that, under fiscal responsibility legislation, the Finance Minister was obliged to assess projects worth more than €15 million and request viability studies.
“The project has recognised geopolitical value and should be promoted in the right way, without placing a disproportionate burden on consumers and the economy,” Keravnos said.
His response underscored the continuing debate over how the electricity interconnection should proceed and how its financial risks should be managed.
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