EU Commission approves Cyprus’ €1.2 bln Covid recovery plan

The European Commission adopted on Thursday a positive assessment of Cyprus’ recovery and resilience plan, worth €1.2 billion in grants and loans under the Recovery and Resilience Facility (RRF), to support the implementation of the crucial investment and reform measures outlined in Cyprus’ recovery and resilience plan, enabling Cyprus to emerge stronger from the Covid-19 pandemic.

The Cypriot plan forms part of an unprecedented coordinated EU response to the Covid-19 crisis, to address common European challenges by embracing the green and digital transitions, to strengthen economic and social resilience and the cohesion of the Single Market.

EU Commission president Ursula von der Leyen is currently in Cyprus for the official presentation of the Commission’s approval of the plan.

The Commission assessed Cyprus’ plan based on the criteria set out in the RRF Regulation, in particular, whether the investments and reforms set out in Cyprus’ plan support the green and digital transitions; contribute to effectively addressing challenges identified in the European Semester; and strengthen its growth potential, job creation and economic and social resilience.

The Commission adopted a proposal for a Council Implementing Decision to provide €1.2 billion in grants and loans to Cyprus under the RRF. The Council will now have, as a rule, four weeks to adopt the Commission’s proposal.

The Council’s approval of the plan would allow for the disbursement of €157 million to Cyprus in pre- financing. This represents 13% of the total allocated amount for Cyprus.

The Commission will authorise further disbursements based on the satisfactory fulfilment of the milestones and targets outlined in the Council Implementing Decision, reflecting progress in the implementation of the investments and reforms.

The Commission’s assessment finds that Cyprus`s plan devotes 41 per cent of the plan’s total allocation to measures that support climate objectives. The plan includes reforms relating to the introduction of green taxation, the liberalisation of the electricity market, facilitating energy renovations in buildings and accelerating electric mobility.

The plan further includes a broad range of energy efficiency and renewable energy investments targeting households, enterprises, municipalities and the wider public sector and non-governmental organisations.

The plan includes investments relating to the mass roll-out of smart meters as well as the EuroAsia Interconnector project, which should aid electricity generation from cleaner sources, in particular renewable energy sources.

The Commission’s assessment finds that Cyprus`s plan devotes 23 per cent of its total allocation to measures that support the digital transition. Measures related to the digital transition are spread out throughout the plan.

The plan includes considerable investments in connectivity, through a series of measures aiming to ensure coverage with very high-capacity broadband. It promotes digital education and skills by enhancing digital infrastructure and curricula in schools, training teachers, and investing in digital skills training programmes. It also contains projects expected to promote the digitalisation of public services and the digital transformation of the courts system.

The Commission considers that Cyprus’ plan includes an extensive set of mutually reinforcing reforms and investments that contribute to addressing all or a significant subset of the economic and social challenges outlined in the country-specific recommendations addressed to Cyprus.

The plan includes measures to strengthen the public employment services, with a particular focus on youth employment. It provides for measures to increase the quality of education and training.

The plan also supports early childhood education and care by extending free compulsory pre-primary education from the age of four, investing in childcare centres accompanied by a national action plan on early childhood education that aims to foster equal opportunities for all children and full-time labour market participation of carers, notably women.

The implementation of the plan is expected to strengthen the capacity, quality and resilience of the health and civil protection systems through measures aiming at upgrading infrastructure and equipment and setting up dedicated information systems, next to promoting investments in communication systems and e-Health.

The establishment of a National Promotional Agency and the introduction of funding programmes and schemes are expected to improve access to finance and liquidity, especially for small and medium-sized enterprises. Grant schemes for research and innovation as well as the establishment of a central knowledge transfer office are expected to increase investments in research and innovation.

The plan aims to reduce risks in the banking sector related to the legacy non-performing loans through a dedicated action plan as well as through measures to improve the working environment for credit acquirers and credit servicers.

The plan represents a comprehensive and adequately balanced response to Cyprus’ economic and social situation, thereby contributing appropriately to all six pillars referred to in the RRF Regulation.

The RRF is at the heart of NextGenerationEU which will provide up to €800 billion (in current prices) to support investments and reforms across the EU.