Cyprus is among 12 eurozone countries whose draft budgets for 2026 have been assessed by the European commission as compliant with EU fiscal rules.

The commission’s evaluation, presented on Monday in Strasbourg, calls on Cyprus to continue implementing its planned fiscal policy while noting a risk of overspending.

Valdis Dombrovskis, European commissioner for economy, productivity, implementation and simplification, said the commission reviewed draft budgets from 17 eurozone countries submitted in October. Twelve countries, including Cyprus, Luxembourg, Finland, Germany, Estonia, Greece, Latvia, Italy, Slovakia, France, Ireland, and Portugal, met the commission’s recommendations.

The commission’s opinion on Cyprus’ draft budget highlights that government macroeconomic forecasts are more optimistic than the EU’s. It notes that “the macroeconomic scenario supporting the budgetary projections appears more favourable than the commission’s own forecast for 2026.”

Cyprus is expected to maintain an expansionary fiscal stance of 0.4 per cent of GDP in 2026, following a similar policy in 2025. Despite slowing economic growth, the general government fiscal surplus is projected to remain high at 3.0 per cent of GDP. Public debt is also expected to continue declining, with the debt-to-GDP ratio forecast to fall to 51.0% by the end of 2026.

The commission, however, flagged the risk of overspending on net expenditure. It estimates net spending will rise by 6.5 per cent in 2026, above the maximum 5.0 per cent recommended by the council. This represents a deviation of 0.5 per cent of GDP, with the cumulative deviation also calculated at 0.5 per cent of GDP.

Despite this, the commission concluded that Cyprus’ draft budget complies with the fiscal obligations of the stability and growth pact. It added a caution that “Cyprus faces a risk of significantly exceeding the maximum increase in net expenditure.”