Cyprus’ transport system remains heavily dependent on roads, even as the country continues to outperform the European average on road safety, according to a new European Commission report on transport and tourism trends across the European Union.

Titled Transport and Tourism in the European Union – Current Trends and Issues, the report assesses the bloc’s transport performance through the lenses of sustainability, resilience, connectivity, safety, security and the social dimension of mobility. It also includes country factsheets comparing member states against EU averages across a broad range of indicators.

Follow THE FUTURE on LinkedIn, Facebook, Instagram, X and Telegram

Roads Dominate Passenger And Freight Movement

Passenger cars accounted for 83.5% of inland passenger transport in Cyprus in 2023, slightly above the EU average of 82.0%. Buses and coaches made up the remaining 16.5%, more than double the EU average of 8.2%.

Road dependence is even more pronounced in freight transport. According to the report, road transport accounted for 100% of inland freight movement in Cyprus in 2023, making Cyprus and Malta the only EU member states entirely reliant on roads for domestic cargo transport.

As Cyprus has no railway network, the report’s rail market competition indicators do not apply to the country.

Emissions And Congestion Remain Structural Challenges

Transport also remains a major contributor to Cyprus’ greenhouse gas emissions. In 2023, emissions from the sector, including international maritime and aviation fuels, totalled 3.9 million tonnes of carbon dioxide equivalent, representing 37.9% of the country’s total emissions.

Across the EU, transport accounted for 31% of total greenhouse gas emissions, equivalent to 1,039.3 million tonnes of carbon dioxide equivalent.

Congestion remains another pressure point. The average peak-hour delay per driver in Cyprus reached 40.2 hours in 2023, well above the EU average of 28.6 hours. For businesses, those delays translate into lost productivity, slower logistics and higher operating costs.

Road Safety Stands Out Positively

Despite its heavy reliance on road transport, Cyprus recorded a strong road safety performance. The report ranked the country eighth among the EU’s 27 member states for the lowest number of road deaths per million inhabitants, with 36 fatalities per million people in 2023.

Cyprus also ranked 14th for the lowest number of road deaths per distance travelled, recording 46 fatalities per 10 billion passenger kilometres.

The figures highlight a notable contrast between the country’s reliance on road transport and its comparatively low fatality rates.

Electric Mobility Infrastructure Continues To Expand

Cyprus comfortably exceeded the minimum charging power target required under the Alternative Fuels Infrastructure Regulation. The country’s target stood at 608 kilowatts, while available charging capacity had reached 15,472 kilowatts.

The findings suggest there is scope for further growth in electric vehicle adoption. At the same time, the report indicates that expanding charging infrastructure alone will not address the island’s wider transport challenges. Congestion, dependence on road transport and emissions remain structural issues requiring sustained policy action.

Airports And Ports Continue To Anchor Connectivity

Larnaca Airport remained Cyprus’ busiest airport in 2024, handling 8.876 million passengers. Overall, the country’s airports served 12.514 million passengers, equal to 0.8% of total passenger traffic across the EU.

Larnaca also handled 30.6 thousand tonnes of air freight, accounting for virtually all of Cyprus’ total air cargo volume of 30.7 thousand tonnes.

Maritime traffic was similarly concentrated. Limassol Port was Cyprus’ busiest passenger port in 2024, handling 9,000 passengers and accounting for all recorded passenger port traffic on the island.

For freight, Zygi Port handled 4.212 million tonnes of cargo, representing 47% of Cyprus’ total maritime freight volume of 8.945 million tonnes.

Transport Remains A Core European Growth Engine

Beyond the Cyprus-specific findings, the report highlights transport’s strategic importance to the European economy. The EU transport sector includes around 1.4 million public and private companies and employs approximately 10.4 million people.

Transport and storage services, including postal and courier activities, accounted for more than 5% of total EU employment and around 5% of gross value added in 2023.

According to the report, the volume of goods transported across the EU increased by 43% between 1995 and 2023, while passenger transport rose by 32% over the same period. Passenger transport was hit particularly hard by the Covid-19 pandemic, falling 27% between 2019 and 2020, while freight volumes proved far more resilient.

Trade, Geopolitics And Tourism Reshape Policy Priorities

The report highlights maritime transport’s dominant role in external trade. In 2025, 74.8% of imports and exports by volume moved by sea, accounting for 45.7% of total trade value. Road transport represented 9.5% of trade volume and 22.3% of value, while air transport carried just 1.1% of volume but accounted for 22.9% of total trade value, reflecting the high-value nature of goods shipped by air.

The report also examines the impact of Russia’s invasion of Ukraine. EU Solidarity Lanes, launched in May 2022 after Russia blocked Ukrainian seaports, have enabled Ukraine to export around 214 million tonnes of goods, including nearly 91 million tonnes of grain, oilseeds and related products, while facilitating imports of around 100 million tonnes. The total value of trade handled through the initiative is estimated at about €270 billion.

According to the Commission, road transport agreements with Ukraine and Moldova have strengthened the initiative, while EU sanctions targeting air, maritime, road and rail transport have reduced Russia’s access to goods with military applications and weakened its economic base.

The report also devotes significant attention to tourism, describing it as one of the EU’s most important economic sectors and a key driver of growth, employment and regional development. The bloc recorded more than 3 billion overnight stays in tourist accommodation in 2025, the highest level on record.

The Commission is also preparing an EU Strategy for Sustainable Tourism aimed at promoting a more competitive, sustainable and inclusive sector while strengthening resilience to future crises and supporting local communities.

More broadly, the report argues that climate change, technological progress, demographic shifts and geopolitical disruption will continue to reshape transport. It concludes that the challenge for policymakers will be to keep the sector accessible, efficient and connected while making it more sustainable, innovative and resilient.

The Paphos regional tourism board, Etap Paphos, said on Tuesday that its “Paphos – Unleash Your Senses” campaign has secured two industry awards, underscoring the region’s long-term effort to strengthen its position as an international tourism destination.

Recognition For Strategy, Not Just Promotion

The campaign won gold at the Cyprus Tourism Awards 2025 in the Strategy & Innovation – Timeless Presence category and bronze at the Marketing Achievements Awards 2025 in Integrated Marketing.

Follow THE FUTURE on LinkedIn, Facebook, Instagram, X and Telegram

Etap Paphos said the honours reflect more than a successful promotional initiative. They also validate a broader collaborative model developed over the past seven years to support the region’s tourism growth.

A Public-private Model Built Over Seven Years

The strategy was designed around a shared long-term vision, bringing together public institutions and private-sector partners under a single destination marketing framework.

According to the board, it was the first organised effort in Cyprus to successfully align public authorities and private businesses behind one unified tourism strategy. That model, it said, has since become a reference point for how coordinated action can improve a destination’s competitiveness in international markets.

Partnership At The Core Of The Campaign

The success of the campaign was credited to the contributions of a broad network of partners and stakeholders, including the Paphos Regional Board of Tourism, the Cyprus Hotel Association’s Paphos district branch, Hermes Airports, Eurobank, participating hotels and other supporting organisations.

Special recognition was also given to AZTECH, the agency responsible for the campaign’s strategic planning and execution. The board said the agency’s expertise has been central to expanding and reinforcing Paphos’s international presence.

Why The Awards Matter

“These distinctions carry deep significance as they celebrate more than just a successful advertising campaign,” the tourism board said. It added that the awards highlight the value of sustained cooperation and shared objectives over short-term promotional activity.

The recognition comes as Paphos continues working to position itself as a year-round, modern, sustainable and smart tourism destination.

“Elevating the profile of Paphos as a year-round highly modern, sustainable and smart travel destination remains an ongoing effort that relies entirely on the continued commitment and contribution of all partners,” the board said.

Monday.com, the Israeli workplace software company, is laying off about 630 employees, or roughly 20% of its workforce, as it restructures the business to support a leaner operating model and accelerate investment in artificial intelligence.

Restructuring Around AI

In a regulatory filing, the company said the workforce reduction is intended to better align resources with its AI strategy, which has become a central focus of its product development.

Follow THE FUTURE on LinkedIn, Facebook, Instagram, X and Telegram

Earlier this year, Monday.com expanded its AI offering by introducing the Monday.com AI Work Platform, designed to integrate AI agents into day-to-day business workflows.

The platform includes a no-code app builder, a customizable AI agent, workflow automation tools and a chatbot capable of generating reports, updating dashboards and assisting with routine tasks.

Part Of A Wider Industry Trend

Monday.com’s restructuring reflects a broader shift across the technology sector, where companies are reducing costs while increasing investment in AI development and infrastructure.

According to Layoffs.fyi, tech layoffs rose sharply in May, with 78% of companies citing AI-related restructuring as a factor behind job cuts this year. More than 122,000 technology roles have been eliminated worldwide in 2026, according to the tracker.

Restructuring Costs

Monday.com expects to record restructuring charges of between $45 million and $55 million as a result of the layoffs. The move highlights how software companies are reallocating resources to support AI-focused products and services as competition in the sector intensifies.

The Ministry of Agriculture is introducing a National Quality Certification System designed to strengthen the quality, authenticity and competitiveness of Cypriot agricultural and livestock products.

The initiative, presented by Agriculture, Rural Development and Environment Minister Dr Maria Panayiotou at a Department of Agriculture event in Nicosia, will introduce a unified certification framework aimed at increasing transparency, consumer confidence and the market value of locally produced goods.

Follow THE FUTURE on LinkedIn, Facebook, Instagram, X and Telegram

National Quality Mark With QR Code

Certified products will carry a National Quality Mark featuring a QR code and a rating of up to three stars.

By scanning the QR code, consumers will be able to access information about a product’s origin, certification status, supply chain and quality characteristics. The three-star rating will also reflect criteria such as food safety, environmental performance and overall product quality.

The ministry said the framework is intended to create a transparent certification system that helps distinguish Cypriot products in both domestic and international markets.

Focus On Quality Over Volume

Dr Panayiotou said the initiative responds to growing consumer demand for greater transparency while recognising that Cyprus must compete on quality rather than production volume.

“The new National Quality Mark is the identity of Cypriot products; it is proof that behind every product stands a producer who invests responsibly in quality, food safety, environmental protection and continuous improvement,” she said.

Financial Incentives For Producers

The ministry plans to provide annual financial support to farms and processing units to help cover certification costs, as well as administrative expenses, record-keeping and documentation.

Participation in the certification system will also be considered in ministry investment schemes, giving certified producers additional points when applying for funding for modernisation and upgrading projects.

The ministry said the certification mark is expected to strengthen the market position of Cypriot products by helping producers differentiate their goods while giving consumers greater confidence in product quality.

Supporting Exports And Competitiveness

According to Dr Panayiotou, the National Quality Mark is also intended to strengthen Cyprus’ international reputation by promoting the quality, authenticity and reliability of its agricultural products and supporting export growth.

The initiative forms part of the government’s Strategy for the Development of the Primary Sector, which aims to improve the competitiveness and resilience of the agricultural sector.

Department of Agriculture Director Maki Antoniadis said the certification framework will be based on objective criteria, transparent procedures and independent certification. The technical framework was presented by Department of Agriculture official Dr Anthemi Melifronidou Pantelidou, who outlined the certification process and the role of accredited conformity assessment bodies.

Dr Panayiotou called on producer and professional organisations to support the initiative and encourage wider participation in the new certification system.

The Cyprus Chamber of Commerce and Industry (Keve) has signed a memorandum of cooperation with the Elpida Charitable Foundation for Children with Cancer and Leukaemia to strengthen support for children with cancer and their families through joint healthcare, education and humanitarian initiatives.

Partnership To Support Children And Families

The agreement establishes a framework for cooperation on public awareness campaigns, education, humanitarian assistance, medical and psychosocial support, palliative care and prevention. It also aims to promote equal access to healthcare while supporting children with cancer and leukaemia, their families, survivors of serious illnesses and other vulnerable groups.

Follow THE FUTURE on LinkedIn, Facebook, Instagram, X and Telegram

Keve Highlights Business Community’s Role

“Social contribution is an integral part of Keve’s mission,” said Keve president Stavros Stavrou.

“Through this partnership with the Elpida Foundation, we seek to strengthen initiatives that support children and their families while raising awareness within the business community about health and social solidarity,” he said.

Stavrou added that cooperation between the public, private and social sectors can create greater value for society by combining resources and expertise.

Focus On Prevention And Equal Access To Care

Elpida Foundation president Loizos Loizou described the memorandum as the start of an important long-term partnership.

“We are joining forces to promote prevention, early diagnosis, equal access to high-quality healthcare services and psychosocial support, to offer greater hope and better prospects to those who need them most,” he said.

Keve said the agreement marks the beginning of closer cooperation between the two organisations, with a shared focus on strengthening healthcare, social solidarity and support for children with cancer and their families.

Environmental tax revenue across the European Union rose 6.1% in 2024 to €371.9 billion, according to Eurostat. Cyprus collected €718.72 million over the same period, highlighting the continued role of environmental levies in national tax systems despite their declining share of the broader economy.

Cyprus Figures Reflect A Broad Revenue Base

In Cyprus, households generated €355.46 million in environmental tax revenue in 2024, while non-residents contributed €35.08 million. The total of €718.72 million also includes receipts from all economic activities and unallocated categories.

Follow THE FUTURE on LinkedIn, Facebook, Instagram, X and Telegram

Energy Taxes Remain The Core Of Environmental Revenue

Across the EU, environmental tax revenue increased from €350.4 billion in 2023 to €371.9 billion in 2024.

Energy taxes remained the largest source, generating €287.0 billion, up from €269.3 billion a year earlier. Transport taxes ranked second, rising to €67.0 billion from €64.0 billion, while taxes on pollution and natural resource use contributed €17.9 billion, compared with €17.2 billion in 2023.

The Long-Term Share Is Shrinking

Despite the increase in revenue, environmental taxes accounted for a smaller share of the EU economy than a decade ago, representing 2.1% of GDP in 2024, down from 2.5% in 2014.

Their share of total government revenue from taxes and social contributions also declined over the same period, falling from 6.1% to 5.1%, indicating that environmental tax receipts have not kept pace with the broader expansion of government revenues.

Revenue Rose In Most Member States

Environmental tax revenue increased in 22 EU member states in 2024. Romania recorded the strongest annual growth at 21.7%, followed by Lithuania at 13.9%, Poland at 12.7% and Hungary at 12.2%.

Five countries reported declines. Sweden recorded the steepest fall at 17.7%, followed by Slovakia (6.1%), Finland (3.8%), Greece (3.7%) and Bulgaria (2.3%).

Cyprus is strengthening its position as one of Europe’s most advanced cashless economies, with card payments accounting for the highest share of non-cash transactions in the euro area during the second half of 2025, according to a report by the Central Bank of Cyprus (CBC).

Digital Payments Gain Further Ground

The volume of non-cash payments in Cyprus rose 8% year on year to 174 million transactions in the second half of 2025, while their total value increased 9% to €148 billion. Across the euro area, transaction volumes also grew 7% to 83 billion, although total value remained broadly unchanged at €118 trillion.

Follow THE FUTURE on LinkedIn, Facebook, Instagram, X and Telegram

“Cypriots continue to shift towards digital payment methods, with non-cash payment transactions increasing in both volume and value during the second half of 2025,” the central bank said.

Based on data from Cyprus-based credit institutions, payment institutions and electronic money institutions, the report highlights the continued shift in consumer and business payment habits.

Cards Dominate Transaction Volumes

Card payments remained the dominant payment method, accounting for 75% of all non-cash transactions in Cyprus, compared with 16% for credit transfers. This gave Cyprus the highest share of card payments relative to total non-cash transactions in the euro area during the second half of 2025.

According to the CBC, the trend reflects the convenience and speed of card payments, widespread contactless adoption, continued growth in e-commerce and broader merchant acceptance of electronic payments. Across the euro area, cards accounted for 57% of non-cash transaction volumes, while credit transfers represented 21%.

Online Spending Is Reshaping Payment Behaviour

Online card payments carried significantly higher average values than purchases made at physical points of sale, while the average online transaction in Cyprus ranked among the highest in the euro area, reflecting the growing role of e-commerce.

Although cards dominated transaction volumes, credit transfers accounted for 84% of the total value of non-cash payments. Their average value reached €4,500, underlining their continued use for larger business transactions.

Cheques Persist In Select Sectors

Cheque use continued to decline but still accounted for 6% of the total value of non-cash payments in Cyprus, with an average transaction value of €4,000.

“Despite their continued decline, cheques remained the second most important payment instrument in value terms,” the CBC said.

Their use remains concentrated in business-to-business and property transactions, while across the euro area cheques accounted for less than 1% of total non-cash payment value, with an average value of about €1,200.

Instant Payments Accelerate After Regulatory Push

The introduction of the EU Instant Payments Regulation has accelerated the adoption of instant payments. Over the past three years, the share of SEPA Instant Credit Transfers (SCT Inst) rose from less than 1% to almost 32% of all SEPA credit transfers by volume, while their share by value increased to around 9%.

“Growth was more pronounced in Cyprus, enabling it to not only close the gap with, but also surpass the euro area average following the implementation of the Instant Payments Regulation,” the CBC said.

The average instant payment amounted to €1,500, compared with €5,500 for a traditional SEPA credit transfer, suggesting the service is still used primarily for lower-value transactions. Further growth is expected as new initiatives, including SEPA Request-to-Pay, are rolled out.

Infrastructure And Cash Use Continue To Evolve

Cyprus remains one of Europe’s leaders in contactless payment infrastructure, with more than 73% of domestic ATMs supporting contactless transactions, compared with a euro area average of 38%.

Cash withdrawals from ATMs continued to decline, although the average amount withdrawn reached a record high. Over-the-counter withdrawals also fell as consumers increasingly shifted to automated and lower-cost banking channels.

The Next Phase: Digital Euro, Wero And The Fight Against Fraud

Looking ahead, the payments landscape is expected to evolve further through new technologies, including the proposed digital euro, which the Eurosystem aims to introduce by 2029, subject to legislation expected in 2026.

The report also highlights the European Payments Initiative (EPI) and its Wero digital wallet as part of efforts to create a pan-European payment solution and reduce Europe’s reliance on payment providers based outside the region.

At the same time, the shift to digital payments presents new challenges. Older people and residents of remote areas may face difficulties accessing digital services, while the growing use of electronic payments has been accompanied by rising payment fraud.

Improving digital literacy and consumer awareness will therefore remain a priority, with the Cyprus Financial Literacy and Education Committee (CyFLEC) expected to expand its financial education initiatives.

“Ensuring that innovation is accompanied by security, financial inclusion and consumer trust will remain essential for the sustainable development of the payments ecosystem,” the CBC said.

Cyprus Sets A Regional Benchmark

Overall, the report shows Cyprus performing strongly against the euro area across key payment indicators, including card usage, contactless infrastructure and instant payment adoption, while retaining distinctive features such as the continued use of cheques in business and real estate transactions.

Tax Debt Swells To €4.64 Billion

Cyprus’ tax debt has risen to €4.64 billion from €3.93 billion a year earlier, highlighting the scale of the challenge facing the Tax Department as it steps up collection efforts following the tax reform that came into force on January 1.

Of the total, €3.32 billion is classified as immediately payable debt, meaning it is due and can be pursued by the state without delay. The remaining €1.31 billion is considered difficult to recover and is not treated as immediately collectable.

Follow THE FUTURE on LinkedIn, Facebook, Instagram, X and Telegram

Nearly €1 Billion In “Fresh” Arrears

Almost €979.4 million of the outstanding tax debt relates to liabilities less than one year old, accounting for 29.5% of immediately payable debt.

A further €992.6 million, or 29.9%, has been outstanding for between one and four years. The largest share, more than €1.32 billion, consists of debts that are over four years old.

Collections And Enforcement Underway

Before collection measures were applied, immediately payable debt stood at €3.32 billion, compared with €2.29 billion at the end of December 2024.

Of that amount, €901.5 million is already subject to enforcement action. This includes €325.9 million in cases before the courts and €575.4 million under administrative collection measures, including memos on immovable property and the seizure of funds from bank accounts.

The amount recovered through bank account seizures remains relatively small at €263,000. Following these measures, immediately payable debt still stands at €2.42 billion.

New Tools Strengthen The Tax Department

The tax reform has expanded the Tax Department’s enforcement powers in an effort to improve compliance and accelerate debt recovery.

Alongside memos and bank account seizures, authorities have begun sealing business premises for tax debts exceeding €20,000, as well as for failing to issue receipts or invoices. From 2027, the measure will also apply to taxpayers who fail to submit tax returns.

Criminal Cases And Payment Plans

The department is also pursuing criminal prosecutions in cases involving unpaid withheld taxes, including VAT, PAYE and the Special Defence Contribution, as well as the non-submission of tax returns.

These proceedings may result in penalties, settlement agreements or structured repayment plans. In some cases, taxpayers comply by filing overdue returns or agreeing to repay outstanding liabilities. Some debts have also been included in the framework for settling overdue tax liabilities, although certain repayment agreements have yet to be completed.

Debt Age Points To A Structural Problem

According to Tax Department data, the average age of immediately payable debt increased to 80.3 months, or 6.7 years, by the end of December 2025, up from 58.3 months a year earlier.

Officials caution that the figure is not fully representative because it includes substantial long-standing arrears that are now considered unlikely to be recovered. The figures illustrate the scale of Cyprus’ tax arrears challenge, with a significant share of outstanding debt dating back several years despite ongoing collection efforts and expanded enforcement powers.

Cyprus is not the cheapest holiday destination in the Mediterranean, but it remains more affordable than many of its best-known rivals on two of the costs travellers notice first: hotel accommodation and dining out.

A Competitive Position In A Costly Region

Latest Eurostat data puts Cyprus’s restaurant and accommodation price index at 85.2, against an EU average of 100. That places the island slightly below Spain and Greece, while Slovenia, Croatia, Malta, Italy and France all rank as more expensive destinations.

Follow THE FUTURE on LinkedIn, Facebook, Instagram, X and Telegram

Portugal remains the standout value destination in the western Mediterranean, while Albania and Montenegro offer even lower prices further east.

The wider European picture follows a similar pattern. Bulgaria, Romania, Serbia, Bosnia and Herzegovina, and North Macedonia all rank below Cyprus for both overall consumer prices and hospitality costs. Germany, Austria, Belgium, the Netherlands and the Nordic countries are considerably more expensive.

The Broader Cost Of A Holiday

Looking beyond hotels and restaurants, Cyprus also remains cheaper than the EU average across the broader household basket, which includes groceries, clothing, transport and services. Overall prices were 10.8% below the bloc-wide benchmark. The island was less expensive than Spain, Malta, Italy and France, although Greece, Portugal and Croatia recorded even lower overall price levels.

A separate Euronews analysis reinforced that regional picture. It found that North Macedonia, Bosnia and Herzegovina, Romania, Bulgaria, Montenegro, Serbia and Albania were among Europe’s lowest-priced countries, while Iceland and Switzerland ranked at the opposite end of the scale, alongside several northern and western European economies.

Food bought in shops tells a slightly different story. On that measure, Cyprus sits almost exactly on the European average. Greece, Croatia and Malta all recorded higher grocery prices, while Spain offered slightly better value. The comparison highlights an important point for travellers: the cost of a holiday depends largely on how it is structured. A self-catering family, a couple dining out every evening and an all-inclusive guest are likely to have very different spending experiences in the same destination.

Where Holiday Bills Diverge Most

Some everyday purchases reveal even greater differences. According to the Euronews holiday comparison, alcoholic drinks in Greece were priced 54% above the EU average, while Croatia was more than one-third above the benchmark. Italy was 18.1% below the EU average and Spain 9.9% lower, while France and Portugal remained much closer to the European average.

Soft drinks also varied considerably. Italy recorded the lowest prices in the comparison, at 18.2% below the EU average, while Croatia was 33.5% above it. Seafood prices were more tightly grouped, ranging from 4.6% below the EU average in Portugal to 12.7% above it in Greece.

Transport costs showed a different pattern. France was the only country in the comparison where public transport prices exceeded the EU average. Portugal, Spain and Croatia were around 20% cheaper, while Greece remained just below the European benchmark.

Borrowing became more expensive for euro area businesses in the second quarter of 2026, while smaller firms found it increasingly difficult to access credit, according to the European Central Bank’s latest Survey on the Access to Finance of Enterprises (SAFE).

Higher interest rates, tighter lending standards and modestly rising financing needs continued to weigh on businesses, even as inflation expectations remained broadly stable. The survey also suggests companies are adapting to a more challenging environment by relying on internal funding, reshaping supply chains and becoming more selective about investment.

Follow THE FUTURE on LinkedIn, Facebook, Instagram, X and Telegram

Borrowing Costs Continue To Climb

Businesses reported a further tightening in bank lending conditions, driven primarily by higher borrowing costs. A net 42% of firms said interest rates on bank loans had increased, up sharply from 26% in the previous quarter. Companies also continued to report higher fees, commissions and collateral requirements, although both measures eased slightly compared with the first quarter.

Demand for financing edged higher, with a net 2% of firms reporting increased demand for bank loans. Overall access to credit, however, remained broadly unchanged.

SMEs Feel The Pressure Most

Beneath the stable headline figures, the survey revealed a widening gap between large companies and smaller businesses.

Large firms reported improving access to bank loans, posting a net positive balance of 4%. SMEs, by contrast, saw financing conditions deteriorate further, with a net balance of minus 4%.

That divergence pushed the bank loan financing gap slightly wider, highlighting that tighter monetary conditions continue to affect smaller businesses more severely than larger firms.

Economic Uncertainty Still Weighs On Credit

Although businesses became slightly less pessimistic about future financing conditions, the broader economic outlook remains the biggest obstacle to accessing credit.

A net 29% of firms identified the general economic environment as a limiting factor, up from 26% in the previous survey. Businesses also became somewhat more cautious about their own prospects, with more firms expecting weaker sales and profitability to weigh on future access to external finance.

At the same time, banks appeared marginally more willing to lend, with the share of firms reporting improved bank willingness to provide credit edging higher.

Inflation Pressures Continue To Ease

The survey points to gradually easing price pressures across the euro area. Businesses lowered expectations for selling prices, non-labour input costs and wage growth over the next 12 months. Longer-term inflation expectations, however, remained broadly stable, suggesting firms continue to expect inflation to stay close to current levels over the coming years.

Companies Adapt To Geopolitical Risks

Rather than pulling back from international markets, many businesses are adjusting their operations to manage geopolitical uncertainty.

More than one-third of firms said they are seeking alternative suppliers, while nearly one-third are looking for new energy providers. Others reported investing in energy efficiency, increasing inventories and reviewing insurance or trade finance arrangements to strengthen resilience.

Large companies were generally better positioned than SMEs to implement these measures, reflecting their greater ability to diversify supply chains and absorb external shocks.

AI Investment Relies Mostly On Internal Funding

When it comes to artificial intelligence, businesses overwhelmingly expect to finance investment with their own resources.

Nearly three-quarters of firms said they plan to rely on internal funds, while only a minority expect to use bank loans, grants, leasing or equity financing. Debt securities remain the least popular source of funding for AI-related investment.

A More Cautious Business Environment

The ECB’s latest SAFE survey, conducted between May 21 and June 26 among 5,087 euro area firms, paints a picture of businesses operating in an environment where credit remains expensive despite signs that inflation pressures are easing.

Smaller firms continue to face the greatest financing challenges, while companies across the euro area are increasingly relying on their own balance sheets to fund investment and adapting their operations to a more uncertain economic and geopolitical landscape.