Containing fuel prices rather than achieving major decreases is the government’s current policy, Finance Minister Makis Keravnos said on Tuesday.

Speaking to media on the sidelines of an event marking European Statistics Day, Keravnos commented on the latest relief package to tackle the rising cost of living and on whether the government plans additional measures.

He said authorities are monitoring the support measures announced, adding that a first assessment by the Consumer Protection Service shows a 5 per cent drop in the prices of some essential items.

But asked whether still climbing energy prices have already neutralised the effect of the relief measures, Keravnos said that under the circumstances one should not expect significant decreases.

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He said Cyprus finds itself in the middle of four wars – he did not specify – which have created “a huge global energy crisis”.

The effort should be to “contain prices and not expect sharp reductions”, he added.

The government has already cut tax rates to the minimum allowed under EU rules, and has asked for an exception in order to be able to lower taxes further.

But securing such an exception is not an easy process, Keravnos said, alluding to recent discussions at a summit of EU leaders.

Cyprus to raise issue with EU finance minister

The minister said Cyprus would raise the issue again at the next meeting of EU finance ministers scheduled in about two weeks’ time.

“There needs to be a certain flexibility in implementing EU fiscal governance rules, because we cannot design a monolithic policy that doesn’t factor in current circumstances, especially those we are experiencing today.”

Turning back to the latest relief package in Cyprus, Keravnos said some of the measures are already being implemented, while others still require the nod from parliament.

The reduced excise duty on heating oil is one such measure requiring a vote in the House plenary.

Once all the measures kick in, the government would do a follow-up assessment of their impact.

“I think we’re on the right track, in terms of what we are able to do and within the context of EU fiscal governance rules.”

The European Commission has rejected calls from member states like Italy and Greece to loosen the EU’s fiscal rules further to cushion the energy price crisis.

High prices lead to tax collection boost

Italian prime minister Giorgia Meloni argues that governments are collecting more tax revenue because prices are higher, but EU fiscal rules make it difficult to recycle that windfall into temporary energy support.

Higher inflation automatically increases indirect tax receipts such as VAT, but using that additional revenue to finance measures that reduce energy costs can count as discretionary fiscal action and run into limits imposed by agreed national spending paths, Meloni noted.

The EU’s reformed economic and fiscal governance framework entered into force in April 2024, overhauling the Stability and Growth Pact to balance debt sustainability with public investment.

One of its key constraints relates to keeping a government deficit limit under 3 per cent of GDP and public debt under 60 per cent of GDP.

Earlier this month, the Cyprus Consumers Association estimated that fuel price increases cost households and businesses an additional €23 million between March and August.