The European Commission on Tuesday endorsed a positive preliminary assessment of Cyprus' payment request for €85 million in grants under the Recovery and Resilience Facility (RRF), while Cyprus lost €90 million in grants due to better-than-expected economic performance during the Covid-19 pandemic.
President of the European Commission Ursula von der Leyen said: “I have good news for Cyprus.”
“Sufficient progress has been made in the rollout of its recovery and resilience plan to receive a first payment under NextGenerationEU. Once Member States give their greenlight, Cyprus will receive 85 million euros as a result of its good and swift progress in implementing the plan's first set of reforms and investments,” she said according to European Commission press release, adding that the reforms include important measures for the green and digital transition, as well as measures to enhance financial stability and to fight corruption.
“So, congratulations Cyprus! The Commission stands by your side, to make your NextGenerationEU plan a success,” von der Leyen added.
On his part, Valdis Dombrovskis, Executive Vice-President for An Economy that Works for People congratulated Cyprus for meeting the first 14 milestones set out in its recovery and resilience plan.
“Many of these will contribute to Cyprus' green and digital transitions, with reforms to its electricity market, investments to promote the use of renewable energy, promotion of the circular economy and a national plan to boost digital skills. Cyprus is also strengthening the fight against corruption and improving the environment for reducing non-performing loans,” he said, adding that once the Commission's assessment is reviewed and approved by Member States, Cyprus should receive €85 million in grants to help create a more resilient economy with higher growth prospects.”
Paolo Gentiloni, Commissioner for Economy, said: “today marks a key step forward in the implementation of the Cypriot recovery and resilience plan.”
Noting that the Recovery and Resilience Facility is the strongest common tool we have at our disposal, Gentiloni encouraged the Cypriot authorities “to pursue its implementation with determination. Making a success of this opportunity is of fundamental importance as we together navigate the current troubled waters and work to make our economies more sustainable, inclusive and competitive.”
Cyprus submitted to the Commission its first payment request on July 28 based on the achievement of the 14 milestones set out in the Council Implementing Decision for the first instalment, the Commission said in a press release. The money will be disbursed in the coming December follower the conclusion of the approval procedure stipulated in the RRF.
According to the Commission, these milestones cover reforms and investments in the electricity market, in the areas of energy efficiency and circular economy, and anti-corruption and transparency. Measures in the financial sector and public administration, in the domain of digital skills, as well as Cyprus' audit and control system for the implementation of the RRF are also covered.
“The milestones fulfilled demonstrate significant progress made in the implementation of Cyprus' recovery and resilience plan and its broad reform agenda,” the Commission said, noting that these milestones include “important measures” such as the reform ensuring the independence of the Cyprus Transmission System Operator from the incumbent Electricity Authority of Cyprus, a National e-Skills Action Plan and laws on transparency in public decision-making and on the protection of whistle-blowers. A reform that aims at reducing the level of non-performing loans is also included.
Following its preliminary green light, the Commission will send its positive preliminary assessment to the Economic and Financial Committee (EFC), asking for its opinion. The EFC's opinion, to be delivered within a maximum of four weeks, should be taken into account in the Commission's assessment.
After the EFC's opinion, the Commission will adopt the final decision on the disbursement of the financial contribution, in accordance with the examination procedure, through a comitology committee. Following the adoption of the decision by the Commission, the disbursement to Cyprus can take place, the Commission added.
Cyprus is the tenth EU member-state to receive a positive preliminary assessment, while it has already received pre-financing amounting to €157 million.
Cyprus will lose €90 million of total grants due to better-than-expected economic performance
However, Cyprus lost €90 million from the grant’s envelope due to better-than-expected economic performance during the Covid-19 pandemic, with the overall financial envelope for Cyprus under the RRF amounting to €916 million in grants and €200 million in loans, totalling €1,016 million.
Sources told CNA the reduction in the allocation of grants was due to “a mechanical exercise” concerning the allocation key for EU member-states following actual macroeconomic data such as GDP growth and unemployment as revised in June 2022.
It was an initial formula based on GDP and unemployment back in 2020 and 2021 when the regulation was decided which could not take into account the impact of the covid crisis, the same sources added noting that 30% share of the total envelope was to be updated in June 2022 based on actual data for the period of 2020 and 2021 a statistical exercise of updating GDP figures and unemployment figures of Eurostat.
The countries that performed better than the EU average in the Covid-19 crisis lost money compared to other member-states which were more hit even more by the crisis.
Indeed, in this context Cyprus lost 90 million from grants as result of the mechanical update, the same sources added.
Now Cyprus can compensate this loss either through increased national funds, or possible drawing on increased money from the EU’s Cohesion Funds, as a European Commission decision paved the way for such a possibility.
Cyprus could also consider taking up more loans from the RRF, while the decision RepowerEU for decarbonisation and reducing dependency on Russian fossil fuels allocates to Cyprus an additional €52.2 million. However, these funds will be granted solely for decarbonisation and reducing dependency on Russian fossil fuels.
Meanwhile the European Commission has repeatedly pointed out reduced amount should not lead to reduced reforms which are extremely important and cost-free and would yield extremely important results.