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Cyprus Employee Compensation Set To Climb 6.9% In 2025 Amid Fiscal Concerns

Cyprus is poised to expand its employee compensation expenditure by 6.9% in 2025, reaching an estimated €4.1 billion from €3.9 billion in 2024, according to figures released by the Finance Ministry. This rise in payroll costs, which will elevate public sector wages to 11.8% of GDP, is rooted in a blend of automatic and contractual adjustments already embedded in the state budget.

Drivers Behind The Increase

The draft budgetary programme for 2026, submitted to the European Commission on October 15, outlines key factors behind the escalation. The CoLA provision contributes an estimated 1.87 percentage points, while contracts linked to the state health services organization (Okypy) add approximately 1.1 percentage points. Additional factors include a 1% annual increment and increased spending on tips contributing around 0.8 percentage points. A 1.5% general wage increase introduced in October 2024 is projected to further add an estimated 0.4 percentage points.

Outlook And Fiscal Implications

While employee compensation is expected to rise at a slower pace in 2026—estimated at a 4% increase to €4.3 billion—the current figures for 2025 are a cause for concern. The forecast of zero inflation for 2025 leaves the CoLA unchanged, and the absence of a base effect from the previous year’s increase tempers future growth. Notably, the wage bill as a share of GDP is expected to remain broadly stable, reaching 11.8% in 2025 and slightly easing to 11.7% in 2026.

Policy And Market Challenges

Despite the increase, recent figures indicate a significant deviation from the EU’s new fiscal regulations. With primary expenditure anticipated to surge by 7.9% in 2025—overshooting the annual ceiling of 6% by 1.9 percentage points—the outlook diverges sharply from both the Fiscal Council’s recommendations and governmental commitments under the national plan. The situation is further compounded by ongoing discussions regarding the future of CoLA. Unions are pressing for an increased payment rate starting early 2026 with a phased upward adjustment over 18 months. With salaries forming a substantial portion of primary expenditure alongside pensions, subsidies, and public investments, any new agreements would further strain an already considerable payroll.

Expert Perspectives

During a recent commentary, Michalis Persianis, President Of The Fiscal Council, cautioned that “people tend to make mistakes when conditions look comfortable,” highlighting growing concerns about the current fiscal trajectory. His earlier remarks during the opening of the 2026 budget debate likened the CoLA to an “inflationary burden on the economy,” further emphasizing the risks inherent in rising payroll costs without corresponding improvements in public service quality.

Conclusion

As Cyprus navigates the dual challenges of increased employee compensation and rigorous EU fiscal standards, policymakers face the critical task of balancing economic stability with the demands of public sector remuneration. The coming months will prove decisive in shaping the nation’s fiscal framework and ensuring sustainable economic growth.

EU Mercosur Agreement Sparks Political Battle Over Cyprus Agriculture

A political battleground emerged in the Parliamentary Agriculture Committee’s latest session, as fierce debates broke out over the controversial trade deal between the European Union and Latin American nations under the Mercosur framework. Lawmakers voiced deep concerns regarding food safety and the prospects for local agriculture, particularly following the high-profile absence of the Minister of Trade.

Minister Absence And Parliamentary Integrity

Committee Chair Giannakis Gabriel expressed strong disapproval over the Minister’s no-show, noting that the extraordinary session was scheduled at midday at the Minister’s own request. “His absence undermines the authority of the parliament,” Mr. Gabriel declared. Given that the Minister is not abroad, it was expected that he would be present to clarify why Cyprus supported an agreement widely criticized as disadvantaging the agricultural sector.

Trade Deal Under Scrutiny

In his address, A.C.E.L General Secretary Stefanos Stefanos described the pact as a “dangerous agreement” imposed under the pressure of multinational conglomerates. He especially critiqued the contrasting sanitary standards whereby, while the EU bans our farmers from using certain pesticides and antibiotics, the Mercosur deal appears to allow imports produced with these very substances. His remarks underscored the possibility of double standards in safety measures and the potential long-term impacts on Cypriot agriculture.

Economic And Safety Concerns

Legislators questioned the basis of government studies that justified backing the agreement, even as Cyprus’ agricultural sustainability is increasingly threatened by water scarcity and soaring production costs. Representatives from various political factions pointed to insufficient controls over import volumes and tariff structures. For example, Christos Orphanidis (DIKO) demanded precise data on imports from Latin America, citing honey as a case in point, and pressed for clear explanations regarding the tariff regime.

Legal And Health Implications

Questions about legal authority were raised by Elias Myriantounos (EDEK), who inquired whether parliament can reject or amend the agreement should economic studies forecast negative outcomes. Environmental advocates, like Haralambos Theopemptou of the Movement of Ecologists, emphasized the need to safeguard traditional products such as halloumi, highlighting concerns over how rigorous food safety controls will be maintained. Meanwhile, Linos Papagiannis (ELAM) cautioned against unfair competition, drawing parallels with challenges posed by lower-standard goods from occupied territories.

Protecting Local Interests

The overarching message from lawmakers was clear: the future of Cyprus’ farming community and the well-being of its citizens should not be sacrificed at the altar of commercial trade. Agricultural organizations have voiced alarm over the importation of goods potentially contaminated with banned substances, the risk of market distortion by low-quality products, and the lack of localized impact studies. They argue that the agreement is biased in favor of select corporate interests, ultimately undermining consumer safety and the livelihood of European farmers.

As this debate continues to unfold, the outcome of these deliberations will be pivotal in determining not only trade policy but also the long-term economic and food security landscape of Cyprus.

Parliamentary Committee Session
Economic Impact Discussion

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