The European Commission issued five country-specific recommendations (CSRs) to Cyprus as part of the 2025 European Semester Spring Package, presented on Wednesday in Brussels, calling on Nicosia to ensure adherence to its agreed net expenditure path despite running fiscal surpluses, strengthen research, innovation and the business environment — with judicial efficiency singled out as a new priority this year, accelerate the energy transition and improve water and waste management at local level, address labour market shortages with a new focus on job quality and gender equality, and tackle the lack of social housing.
On fiscal matters, although the Commission acknowledged Cyprus's general government surplus, it called on the country to respect the agreed net expenditure ceilings under its medium-term fiscal plan — set at 6.0% for 2025, 5.0% for 2026, 5.4% for 2027 and 4.3% for 2028. Cyprus did not activate the national escape clause under the Stability and Growth Pact, given its already strong fiscal position.
The Commission also called on Cyprus to strengthen defence spending and readiness while ensuring spending efficiency and gradually adjusting the budget to support structurally higher defence expenditure. It further called on Nicosia to ensure that measures taken to mitigate the impact of rising energy prices remain temporary, target vulnerable households or energy-intensive businesses, preserve energy-saving incentives and remain compatible with EU fiscal framework commitments.
On recovery and cohesion, Cyprus is called upon to ensure continuity of reforms and investments under the Recovery and Resilience Facility. An EU official noted that Cyprus has so far disbursed slightly over half of its total envelope of €1.02 billion, with 85 milestones and targets still to be submitted and 27 currently under assessment.
The Commission is working on the basis of a full absorption scenario, while acknowledging that significant work remains on the ground. Cyprus is also called upon to maintain implementation momentum under cohesion policy programmes, making use where appropriate of reallocation towards strategic priorities and the flexibilities provided under the mid-term review of the cohesion policy framework.
On research, innovation and the business environment, the Commission called for increased public and private investment in research and development, stronger synergies between research and business, and the adoption of a long-term research and innovation strategy with indicators and multi-annual funding.
Further economic diversification is sought through improved access to alternative savings products and capital market instruments, a stronger supplementary pension system and improved financial literacy. The Commission also called for simplification of legislation to reduce the administrative burden and for improvements to state-owned enterprise governance through merit-based board appointments.
For the first time, the Commission included a recommendation on the efficiency of the justice system, noting long resolution times, low levels of digitalisation and delays in the enforcement of court decisions. Further digitalisation of court proceedings — partly advancing through the Recovery and Resilience Facility — is recommended, while a European official underlined the need for the admiralty court and the commercial court to become fully operational.
On energy and climate, the Commission called for a reduction in overall dependence on fossil fuels and further diversification of energy supply, in particular through the development of energy interconnections with neighbouring countries - with an EU official making specific reference to the Greece-Cyprus electricity interconnector (GSI) - as well as increased funding for energy efficiency, grid upgrades, energy storage and the expansion of sustainable mobility and public transport.
On water and waste management, the Commission called for strengthened infrastructure investment and increased administrative capacity of local authorities, with clear emphasis on staffing, following a reform that granted them greater responsibilities in this area. The improvement of the institutional framework governing climate change adaptation remained unchanged from the 2025 recommendations.
On labour market and social policy, the Commission called on Cyprus to address workforce shortages and promote quality employment through stronger participation of vulnerable groups, expanded vocational education and training, adult learning, a more capable public employment service and active labour market policies. Further increases in early childhood education and care participation, improvement of basic skills and greater STEM enrolment are also requested.
The Commission called for broader availability of long-term care services, wider eligibility criteria and reduced out-of-pocket costs for citizens. On social protection, targeted support for energy-poor households, adequate minimum pensions and increased availability of affordable housing are requested. In line with a broader EU-wide priority reflected in this year's recommendations, particular emphasis is placed on the lack of social housing in Cyprus.
CNA/EK/EPH/2026
ENDS, CYPRUS NEWS AGENCY
