Five years, €1 billion and hundreds of projects: Cyprus closes its EU recovery chapter

The end of the summer marks the completion of Cyprus’ Recovery and Resilience Plan (RRP), effectively closing a five-year cycle of investments and reforms.

The Recovery and Resilience Directorate of the Development Directorate at the Ministry of Finance is racing to complete all remaining actions included in the plan by the end of August, with the aim of ensuring the full absorption of available funds.

The final payment request, which must be submitted to the European Commission by September 30, will essentially bring the implementation of the RRP to an end, as most projects and reforms have already been completed.

However, part of the final funding remains pending due to the failure to pass green taxation legislation. Specifically, around €46 million is currently suspended.

According to information available, efforts are underway to reduce the potential financial loss linked to green taxation by replacing the specific milestone with alternative green tax incentives.

Funding and benefits

The final payment request to the European Commission will cover the program's two remaining installments, following a decision to merge the two requests into one process.

The installments were initially divided into 10 payments, but after the latest revision, some were consolidated and submitted together in 2025.

So far, the Republic of Cyprus has received around €589 million, while another €118 million is expected, following a positive evaluation by the European Commission. Once this amount is released, total funding received will reach approximately €707 million.

The entire grant budget of €1.02 billion has already been committed, either through public contracts or agreements with beneficiaries of grant schemes, including businesses, individuals, and other organizations.

Of the total funding:

• 42% is allocated to the green transition;
• 30% to digital transformation;
• 9% (€91 million) to employment, education, skills development and social welfare.

The plan was also expected to contribute to economic growth, with projections showing employment increasing by more than 2.5% between 2021 and 2026, corresponding to around 11,000 new jobs.

What has been completed

As the RRP enters its final stage, many major investment projects have already been completed, while remaining projects are expected to be finished by the end of August.

Among the projects delivered through the plan are:

• the upgrade of Paphos General Hospital and the creation of a new dialysis unit;
• expansion of the Interventional Radiology Department at Nicosia General Hospital;
• the new Mental Health Centre;
• the national blood centre;
• the Akaki Regional Health Centre;
• childcare centres;
• photovoltaic installations in 405 schools;
• water reservoirs;
• student housing in Nicosia’s old city;
• flood protection projects in municipalities;
• smart water and electricity metering infrastructure;
• sustainable transport systems;
• two special education schools;
• the Market Management System (MMS), supporting the opening of the electricity market to competition;
• expansion of the Famagusta District Court;
• digitalization projects across government ministries and services.

Other completed actions include expanding high-capacity networks in underserved areas, installing smart meters, purchasing firefighting equipment and expanding the nationwide Green Points network.

The RRP also financed 40 grant schemes worth around €450 million for businesses, individuals and other beneficiaries.

These included programs supporting:

• energy efficiency investments by small and medium-sized enterprises;
• renewable energy use and energy savings in homes;
• electric mobility;
• the digital upgrade of manufacturing and agricultural businesses;
• the revival of rural, mountainous and remote areas through tourism initiatives.

On the reform side, the plan supported measures including teacher evaluation, expansion of preschool education, anti-corruption reforms, public administration reform, local government reform, easier access for strategic investments, improving court efficiency and tackling aggressive tax planning.

The €46 million problem

The biggest outstanding issue concerns around €46 million linked to green taxation, which was part of Cyprus’ commitments under the green transition reforms.

The proposed legislation included environmental taxes, including a carbon tax on fuels outside the Emissions Trading System and other green taxation measures.

However, the government delayed the implementation of some measures, citing the rising cost of living and concerns about placing additional pressure on households.

President Nikos Christodoulides said in 2025 that Cyprus was in discussions with the European Commission and was prepared to lose part of the Recovery Fund money if necessary to avoid further financial burdens on citizens.

The government has argued that the goal was for green taxation to be fiscally neutral.

The reform was not removed from the Recovery Plan but was delayed and became the subject of negotiations with the European Commission.

Authorities have since submitted a request to amend the plan, proposing the replacement of the milestone with other green incentives included in the broader tax reform.

Until that process is completed, the €46 million remains suspended.

Why delays happened

Delays to the RRP began in 2022 due to the energy crisis, which caused sharp increases in costs and major supply chain disruptions.

Some grant schemes also received lower-than-expected market interest, leading to revised criteria or the transfer of funds to other programs with higher demand.

Other delays were linked to public tender procedures and appeals before the Tenders Review Authority.

Some reforms, such as changes to the education system and teacher evaluation process, proved more complex and required lengthy consultations.

Several major projects were also removed from the plan because they could not realistically be completed by June 2026. These included the Great Sea Interconnector (GSI), the construction of collective marine aquaculture infrastructure in Pentakomo, and the Limassol Technical School.

The European Recovery and Resilience Facility allowed member states flexibility to modify their plans when faced with unavoidable challenges.

What comes after the Recovery Plan

With the completion of the RRP, Cyprus is now turning its attention to the EU’s next major funding tool: the new Multiannual Financial Framework (MFF).

The framework will determine EU priorities and available funding for the next programming period, supporting areas such as cohesion, green and digital transition, competitiveness, infrastructure, and agriculture.

For Cyprus, preparing early to secure future funding will be a major challenge to ensure investment and reforms launched through the RRP continue.

The allocation of the new funds has not yet been finalized, with decisions expected at a later stage.

Meanwhile, the THALIA 2021-2027 Cohesion Policy Program is expected to be completed in 2027. The program has a total budget of €1.81 billion, including €969 million from EU Cohesion Policy Funds and €842 million in national contribution.