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Fiscal Council Chief Warns Of Hidden Risks Amid Sustained Economic Growth

by THEFUTURE.TEAM

November 10, 2025

Cyprus is currently experiencing a period of robust economic expansion and fiscal balance. Fiscal Council President Michalis Persianis highlighted in the 2024 activity report that the nation is poised to maintain growth around 3 percent, driven by widespread sectoral contributions. State revenues are climbing steadily, even outperforming forecasts adjusted for inflation and general expansion.

Emerging Risks In A Period Of Prosperity

Despite these favorable conditions, Persianis warned that apparent stability could be masking significant long-term risks. He noted that while employment indicators remain strong, a further drop in unemployment could serve as an early warning signal rather than a celebratory milestone. The sustained zero inflation during this high-growth phase exemplifies both the nation’s resilience and the subtle challenges that accompany prosperous times.

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Preparing Fiscal Space And Strategic Flexibility

Central to the Fiscal Council’s mandate is managing the nation’s debt trajectory, which remains on a downward path with a target of falling below 60 percent of GDP by 2025. According to Persianis, one of the Council’s key objectives is to preserve sufficient fiscal space. This flexibility is essential for governments to implement decisive measures when economic conditions require fiscal intervention. He emphasized that the current inflexibility in state expenditures—particularly indiscriminate social spending—limits available policy options and can entrench pro-cyclical dynamics.

Infrastructure, Climate, And Strategic Institutional Upgrades

Persianis underscored the urgent need to address structural weaknesses in vital infrastructures such as water supply, public transport, and energy. Challenges posed by climate change, which has transitioned from a theoretical scenario to a tangible reality, demand significant investment and forward-thinking strategies. His analysis also pointed to external uncertainties—from geopolitical turmoil to rapid technological advancements—that could reshape fiscal dynamics in coming years.

Long-Term Vision And Institutional Readiness

The Fiscal Council’s report calls for proactive, medium- to long-term strategies to safeguard Cyprus from future crises. While current surpluses offer a window of opportunity, Persianis reminded decision makers that easy times can mask the risks of complacency. He stressed the importance of enhanced analytical capacity and strategic planning within the Council to provide decisive guidance as external pressures intensify.

Upcoming Initiatives And Regional Cooperation

Looking forward, the Fiscal Council is organizing a thematic conference under the auspices of the European Network of Independent Fiscal Institutions (EU NIFI) in early 2026. This event, set against the backdrop of Cyprus’s forthcoming Presidency of the European Commission, underscores the critical role of institutional collaboration for broader fiscal reform and policy coordination across the European Union.

In summary, while Cyprus currently enjoys impressive economic health, the Fiscal Council’s leadership warns that significant challenges lie ahead. The nation’s ability to maintain fiscal discipline and implement strategic reforms will be pivotal in navigating the evolving global and domestic landscapes.

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Cyprus Records EU’s Largest Quarterly Drop In Public Debt Ratio

by THEFUTURE.TEAM

October 21, 2026

Cyprus recorded the European Union’s largest quarterly decline in government debt as a share of GDP in the second quarter of 2026, as its debt burden continued to fall while borrowing levels across the bloc increased, according to Eurostat.

Debt Ratio Falls To 48.5%

Cyprus’ government debt fell to 48.5% of GDP at the end of June, down from 51.5% in the first quarter and 58.1% a year earlier.

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In absolute terms, debt declined to €19.2 billion from €20.03 billion at the end of March and €21.7 billion in June 2025. Cyprus also recorded the EU’s second-largest annual reduction in its debt-to-GDP ratio, after Greece.

Cyprus Outpaces Other EU Member States

Greece recorded the largest annual decline, at 11.2 percentage points, followed by Cyprus at 9.5 points, Slovenia at 4.5 points and Portugal at 3.4 points.

Quarterly, Cyprus led the bloc, ahead of Greece, where the ratio fell by 2.7 percentage points, and Hungary, which recorded a 2-point decline.

By contrast, the EU’s debt-to-GDP ratio increased to 82.9% in the second quarter from 82.5% in the first. The euro area ratio rose to 88.8% from 88.4%. Compared with the same period in 2025, the figures increased from 81.4% and 87.3%, respectively.

Debt Levels Remain High Across Europe

Greece had the EU’s highest debt ratio at the end of June, at 140.8% of GDP, followed by Italy at 139.9%, France at 119.1%, Belgium at 110.2% and Spain at 101.4%.

The lowest ratios were recorded in Estonia at 26.1%, Denmark at 27.1%, Luxembourg at 28.2% and Bulgaria at 28.7%.

Compared with the first quarter, debt ratios rose in 15 member states and fell in 10, while the Netherlands and Spain remained unchanged. Poland recorded the largest quarterly increase, at 3 percentage points.

Cyprus Maintains A Government Surplus

Cyprus’ debt reduction comes alongside a strong fiscal position. In 2025, the country recorded a government surplus of 3.6% of GDP, the highest in the EU, according to audited figures published by Cystat and Eurostat. Government debt at the end of that year stood at €20.05 billion, or 52.3% of GDP.

However, Cyprus’ seasonally adjusted government surplus narrowed to 3.3% of GDP in the second quarter of 2026, from 3.8% in the first quarter.

The figures come from Eurostat’s latest government deficit and debt release, based on member states’ second 2026 notifications under the EU’s Excessive Deficit Procedure and compiled under the European System of Accounts 2010 methodology.