Cyprus recorded the European Union’s highest budget surplus in 2025, at 3.6% of GDP, and the bloc’s largest quarterly reduction in public debt in the second quarter of 2026, according to data released by CYSTAT and Eurostat on 21 October.
The figures highlight Cyprus’s strong fiscal position at a time when many EU countries face budget deficits, rising borrowing costs and pressure to increase public spending.
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Budget Surplus Reaches €1.36 Billion
Cyprus’s public expenditure stood at 37.9% of GDP, compared with the EU average of 50%. The country was among just five EU member states to record a budget surplus in 2025, alongside Denmark, Greece, Ireland and Portugal.
The surplus reached €1.36 billion, or 3.6% of GDP. Social insurance organisations contributed €1.34 billion, while central government recorded a surplus of €2.1 million and local government added €22.9 million.
Total public revenue rose to €15.9 billion, supported by a 10% increase in income and wealth tax receipts and an 8.4% rise in social contributions. Public sector wages increased by 7.6% and social transfers by 5.3%, while capital expenditure grew by 46.4%.
Public Debt Falls Below 50% Of GDP
Cyprus’s public debt declined to 48.5% of GDP in the second quarter of 2026, down three percentage points from the previous quarter, marking the largest quarterly reduction in the EU. Greece followed with a 2.7-point decline, while Hungary recorded a two-point fall.
Year on year, Cyprus’s debt ratio dropped by 9.5 percentage points, from 58.1% to 48.5%. Only Greece recorded a larger reduction, at 11.2 percentage points.
Cyprus Gains Fiscal Flexibility As EU Debate Continues
The figures come amid debate over whether EU fiscal rules should allow greater flexibility for governments facing higher energy costs and growing pressure to support households.
Countries including Italy, France and Greece have called for exceptional social support spending to be excluded from the limits of the Stability and Growth Pact. However, the European Commission and fiscally conservative member states, including Germany and the Netherlands, have resisted broader exemptions over concerns about financial market stability.
With its budget surplus and debt below the EU’s 60% threshold, Cyprus has greater room to finance targeted domestic support, including VAT relief on essential goods and electricity subsidies, while remaining within the bloc’s fiscal framework.
The government nevertheless continues to support targeted flexibility at EU level for member states facing greater fiscal pressure.







