Interior Minister Constantinos Ioannou on Monday rejected claims that the government was driving municipalities towards “financial suffocation”, announcing that state funding would rise to €156 million by 2027.

Responding to Monday’s three-hour work stoppage by the Union of Cyprus Municipalities, Ioannou said the previous government and the union had agreed that state funding for the country’s 39 municipalities would total €117 million, a figure later enshrined in a law passed in 2022.

Ioannou said the 2022 local government reform increased state funding to around 37 per cent of municipalities’ revenues, representing a 15 per cent increase on previous levels.

This figure is boosted by an additional €12 million granted for the loss of revenue from the transfer of licensing to the local district governments, while another €15 million was allocated for road maintenance projects of “primary importance”.

Meanwhile, Ioannou said that in consultation with the finance ministry, the government proposed the implementation of a formula for adjusting state funding with retroactive effect from 2024, bringing the amount from €117 million to a total of €125 million.

Together with the proposed three-year adjustment formula, state funding would rise to €156 million by 2027.

Ioannou also said Nicosia municipality would receive an additional €28 million between 2023 and 2027 under the Green Line revitalisation project, while municipalities nationwide would receive €240 million in infrastructure funding over five years.

He firmly rejected the municipalities’ argument that the government was attempting to pass the cost of the reform onto citizens.

“The municipalities must finally realise that the money they claim from the state is the citizens’ money,” he said.

Ioannou said that the government had provided solutions to “a series of problems and distortions” arising from the reform. He said that the government had “significantly strengthened” municipalities by providing additional and temporary resources and had proposed a mechanism for automatically adjusting state subsidies.

The Union of Cyprus Municipalities on Monday proceeded with a three-hour work stoppage in protest at the government’s latest funding proposal, arguing it would shift the burden of local government reform onto citizens.

The union described the interior ministry’s proposal as insufficient, warning that the lack of funding could lead to service cuts or higher taxes and fees. It also challenged the government’s claim that state funding would double.

The municipalities argued that the comparison was based on the reduced grant of €70.8 million, which had been frozen since the financial crisis, rather than the €104.8 million allocated in 2010.

The municipalities also argued that although government revenue increased by 132 per cent between 2010 and 2024, state grants are expected to rise by only 42 per cent by 2026.

The municipalities’ earlier request for grants to be adjusted in line with inflation was also rejected.