Economic Council Calls for EU Funding and Proposes Updates to Cyprus' Long-Term Economic Strategy

The long-term strategy for the sustainable development of the Cypriot economy, known as Vision 2035, is set for an update, according to an announcement made on Tuesday by Takis Clerides, president of the Cyprus Economy and Competitiveness Council (Soak). This strategy includes a comprehensive set of actions, reforms, and institutional changes aimed at creating a sustainable economic model.

During a press conference, Clerides stated that the council had decided to submit a request to the European Commission for project funding. Council vice president Andreas Assiotis reminded attendees that the development of the long-term strategy began in 2020. It underwent public consultation and was ratified by the Cabinet in 2022, with a monitoring mechanism also established. Assiotis noted that several provisions of this ambitious strategy have already been implemented, with some included in the National Recovery and Resilience Plan, which mandates an update every five years.

The central message of the plan is to transform Cyprus into “one of the best places in the world to live, work, and do business,” Assiotis said. As part of the Council’s performance review ahead of its term ending this month, the press conference presented specific policy recommendations and measures to address challenges related to competitiveness, productivity, and sustainable development.

Among the most important recommendations, according to Clerides, is the need to address low birth rates. Council member Pavlos Photiades emphasized that birth rate is a critical factor determining a country’s future competitiveness. He pointed out that throughout Europe in the 21st century, the birth rate has fallen below the population replacement threshold of 2.1 births per couple. The European average is 1.53, while Cyprus’ rate stands at 1.39. This decline has extensive social, economic, and fiscal impacts.

The Council’s suggestions cover family-friendly policies, financial incentives for large families, subsidies for education, public housing and infrastructure, and tax incentives for employers to offer family-friendly policies, reflecting successful policies in other European countries. Photiades stressed the need for an in-depth study and a long-term strategy for tackling low birth rates. “This is our central recommendation,” he said, adding that it is already the primary suggestion to the Cyprus Research and Innovation Foundation (RIF), which funds such research. Clerides also highlighted the importance of immediate, practical measures to increase the low population replacement rate.

The green transition, a critical area for which the EU has made ambitious decisions towards climate neutrality by 2050, was also mentioned during the press conference. Presenting the council’s recommendations, Tasos Anastasiou described it as potentially the greatest challenge facing EU countries, as it encompasses all aspects of economic and social activity. Among the council’s recommendations, many are already underway, including the suggestion to create a Deputy Ministry for Climate and Environment. Anastasiou stressed the importance of having an authority with a broad perspective to prioritize actions and allocate budgets, such as revenues from green taxation.

The Finance Ministry estimates that total investments for the green transition will reach €3.1 billion by 2030. “The short-term cost undoubtedly exists, but future long-term benefits include job creation, technological development, and reversing climate change,” Anastasiou said.

Andreas Assiotis also presented recommendations for improving business competitiveness through mergers and acquisitions. These include creating a comprehensive support framework, changing the culture around promoting mergers and acquisitions, amending the legal framework for reorganizations, offering tax reliefs, and eliminating burdens. Promoting mergers and acquisitions in the agricultural sector was also suggested. Assiotis noted that these actions will address the issue of very small businesses by creating economies of scale. He pointed out that while SMEs are the backbone of the Cypriot economy, the country has around 50,000 very small businesses, many of which may be “financial zombies.” Of these, about 30,000 employ up to five people, leading to productivity issues as economies of scale cannot be achieved. He emphasized that while he is not against SMEs, there is a general need for synergies.

Evangelos Tryfonos presented the council’s pension system recommendations, stressing the urgency of action to prevent future problems. The recommendations focus on the second pillar, involving professional pension funds with automatic enrolment of all private-sector workers, reduced employer contributions to pension funds, and state contributions for low-paid employees. For the third pillar, which includes private pension schemes, the council suggested offering the same incentives or tax breaks provided to professional funds and insurances, along with strengthening supervisory authorities.

Regarding affordable housing, the council recommended creating a unified housing policy body, utilizing state land for public housing, increasing the capitalization of the Cyprus Land Development Corporation (Koag), and collaborating with the Cyprus Scientific and Technical Chamber (Etek) for low-cost, high-quality projects.

Finally, a risk assessment study by the council identified key risks to the Cypriot economy. Cybersecurity topped the risk index at 85%, followed by mass migration at 82%, with deteriorating climate conditions also scoring 82%.

By fLEXI tEAM