Commission recommends Cyprus speed up recovery plan, reduce fossil fuel use

The European Commission recommends that Cyprus speed up the implementation of its recovery and resilience plan, and reduce reliance on fossil fuels placing an emphasis on developing electricity interconnections, in the context of country-specific recommendations issued as part of the 2023 European Semester Spring Package.

The package focuses on what needs to be done so member states build a robust and future proof economy that secures competitiveness and long term prosperity in the face of a challenging geopolitical environment. This, the Commission notes in a press release, requires an integrated approach across all policy areas: promoting environmental sustainability, productivity, fairness, and macroeconomic stability.

Among other elements included in the package, the Commission has assessed the existence of macroeconomic imbalances for the 17 Member States, including, Cyprus, selected for in-depth reviews in the 2023 Alert Mechanism Report.

“Cyprus is experiencing imbalances after experiencing excessive imbalances until 2022 as vulnerabilities related to private, government, and external debt have overall declined but remain a concern,” according to the European Commission.

Regarding the post-programme surveillance report issued for Cyprus (along with those for Ireland, Greece, Spain and Portugal), the Commission finds that Cyprus and the other countries that have benefited from financial assistance programmes retain the capacity to repay their debt.

More specifically, the recommendations proposed by the European Commission to Cyprus for the years 2023 and 2024 are for the country to:

1. Wind down the energy support measures in force by the end of 2023. Should renewed energy price increases necessitate support measures, ensure that these are targeted at protecting vulnerable households and firms, fiscally affordable, and preserve incentives for energy savings. While maintaining a sound fiscal position in 2024, preserve nationally financed public investment and ensure the effective absorption of RRF grants and other EU funds, in particular to foster the green and digital transitions.

Facilitate the reduction of private debt, including by implementing an effective foreclosure framework.

For the period beyond 2024, continue to pursue investment and reforms conducive to higher sustainable growth and preserve a prudent medium-term fiscal position.

1. Accelerate the implementation of its recovery and resilience plan, also by ensuring an adequate administrative capacity, and swiftly finalise the REPowerEU chapter with a view to rapidly starting its implementation. Proceed with the speedy implementation of cohesion policy programmes, in close complementarity and synergy with the recovery and resilience plan.
2. Take measures to improve the governance of the state-owned entities in line with international standards.
3. Reduce reliance on fossil fuels and diversify the energy supply. To better exploit all untapped potential for renewable energy generation, accelerate renewables deployment by using suitable economic instruments and making further investments to upgrade and modernise the electricity grid, including energy storage facilities.

Speed up the development of electricity interconnections. Extend and accelerate energy efficiency measures, also to address energy poverty, as well as the shift towards sustainable transport. Step up policy efforts aimed at the provision and acquisition of the skills needed for the green transition.