Electricity subsidy extended until end of June (Updated)

The electricity subsidy is to be extended until the end of June as part of the government’s latest package of measures aimed at alleviating the cost-of-living crisis.

The measures were announced on Thursday following an extraordinary meeting called in light of the forthcoming expiry of the fuel tax subsidy, which Finance Minister Makis Keravnos had said on Tuesday would not be extended past its planned expiry date of next Monday.

The government estimates that the extension of the electricity subsidy will cover more than 400,000 households and 100,000 businesses. It had been initially extended in February to cover electricity consumption until April 30.

The government estimates that the extension of the electricity subsidy will cost €8 million, though the benefit to the consumer is markedly less than it originally was when the measure was first introduced in October.

At the time of its introduction, the subsidy was worth around €70 per bimonthly bill for average consumers, but reductions in the price of oil since then have blunted the value of the subsidy to around a €14 reduction for the average consumer.

Other measures include the extension of the zero VAT on everyday household items, including bread, milk, eggs, baby’s nappies, baby food, vegetables, fish, and meat, until the end of June.

The zero VAT was previously set to expire at the end of May, but Makis Keravnos had praised the measure earlier this month, saying it had “significant benefits for consumers.”

“The average benefit to consumers from the application of zero VAT on the products covered by the measure amounts to approximately €7.50 on purchases totalling €95, or eight per cent,” he said.

The extension of the zeroed VAT is set to cost the government €6m.

In addition, households in receipt of government benefits are set to receive three extra payments in April, May, and June, with the government describing those payments as compensation for the abolition of the fuel tax subsidy, which is set to expire on Monday.

The government will also pay an extra €100 per month to the country’s 4,200 mobility allowance recipients, and an extra €100 per month to the country’s 28,000 low-income pensioners.

Speaking about the measures after Thursday’s cabinet meeting, Finance Minister Makis Keravnos said the total package is worth €35.3 million.

“The government has stated many times that the economic and social policy it follows is completely human-centred and it has been proving this in practice for a year now,” he added.

He said the government “is aware of the increase in the cost of living for households” and is “always taking fiscal conditions into account.”

“Our priority is to announce and implement targeted measures because it has been proven many times that these measures reach those who they should reach in time, and we must give the most vulnerable priority,” he said.

Additionally, he rubbished the idea that the middle class has been “left out” of the latest package of measures, pointing out that those who benefit from the zeroed VAT on basic products include the middle class.

He also batted away the claims made by both Disy and Akel that the fuel subsidy could remain in force, saying “we are in a pre-election period and some parties are making use of everything to try to present an image of scorched earth.

He added that Cyprus has “one of the best economies in the European Union” with a rate of growth of 2.5 per cent and falling inflation.

“For this reason and through balanced surplus budgets, we are ably to carry out these social policies and announce this economic package today,” he said.

Speaking earlier on Thursday before the measures were announced, President Nikos Christodoulides said “this government has proven from the very first day, with actions, not words, that it has only one priority; the improvement of ordinary people’s everyday lives.”

He added that the measures announced would be aimed at “combatting the challenges faced by our most vulnerable compatriots in terms of the cost of living.”

He also pointed out other initiatives taken by the government to help working families’ financial situations, including the introduction of the cost-of-living allowance, the raising of the minimum wage in December, and the “photovoltaics for all” plan.

He then turned his attention to points raised by opposition parties, saying “I want to remind the Cypriot people that cheap proclamations made by some after we announced previous measures were made by those who led this country to its second-biggest disaster after the Turkish invasion of 1974.”

Referring to the financial crisis of the early 2010s, he said, “let me remind you what happened in 2012 in this country. We, as a responsible government, are accountable to only the Cypriot people. We are not going to be drawn into policies which will endanger this country again.”