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Cyprus Removed from EU’s Macroeconomic Imbalance List – What This Means

by News Editor

EU Lifts Cyprus from Macroeconomic Imbalance List

Breaking News: The European Commission’s 2025 Spring Package confirms that Cyprus is off the list of countries with macroeconomic imbalances. This achievement stems from a consistent decrease in external and private debt vulnerabilities, bolstered by solid economic growth.

Nevertheless, Cyprus still faces challenges in areas like innovation and the green transition. According to a senior EU official, “Economic growth in Cyprus remains robust despite a volatile global landscape.”

Major improvements include public finances showing substantial surpluses and a swiftly declining public debt. Diversification efforts in Cyprus’ economy are finally yielding positive outcomes, complemented by enhanced performance across United Nations sustainable development indicators.

Yet, ten predominant challenges have been identified by the commission, warning of risks tied to increasing public expenditures and slight deviations from the fiscal trajectory set for 2025. A glaring issue is research and innovation investment, which falls short compared to the EU average, presenting a need for enhanced collaboration among universities, the financial sector, and businesses.

The commission suggests the development of Cyprus’s financial system beyond banking and emphasizes the need to raise financial literacy levels.

Moreover, Cyprus must intensify its push towards cleaner energy. The nation’s current over-reliance on fossil fuels and imported energy leaves it vulnerable. High electricity costs for domestic usage, alongside low environmental performance, underline the urgency for these reforms.

Notably, Cyprus stands as a low investor in climate change adaptation when set against the EU norm. Using resources from the Recovery and Resilience Facility, Cyprus could address these critical areas swiftly.

Looking to the future, Cyprus is urged to enhance its labor market conditions. Youth engagement in vocational training and education in STEM fields need nurturing to tackle skill mismatches.

Though recent economic achievements mark progress for Cyprus, the commission stresses the importance of continued vigilance and reform to ensure lasting stability and prosperity.

Bank of Cyprus Upgrade Signals Fresh Optimism For Greek And Cypriot Banks

by THEFUTURE.TEAM

Regional Banks Enter A More Favorable Cycle

Bank of Cyprus and Eurobank are well positioned to benefit from a renewed re-rating of Greek and Cypriot bank stocks, according to Cyprus-based investment firm Roemer Capital, which upgraded Bank of Cyprus to a buy rating and reaffirmed its positive view on Eurobank.

The firm cited easing geopolitical tensions, resilient economic growth in Greece and Cyprus, lower funding costs and Greece’s expected transition to developed-market status as the main factors supporting the sector.

Roemer Capital also lowered its cost of equity assumptions, updated its forecasts following first-quarter 2026 results and extended its valuation horizon to the end of 2027, raising target prices across its banking coverage.

Bank Of Cyprus Gets The Largest Upgrade

Bank of Cyprus received the biggest revision, with Roemer Capital upgrading the stock from hold to buy and setting a target price of €11.10, implying potential total upside of 27%.

The firm highlighted the bank’s strong capital generation, profitability and projected 100% dividend payout, describing it as the strongest capital-return story among the banks under coverage. Roemer Capital maintained its buy rating on Eurobank, assigning a target price of €4.90 and forecasting potential upside of 28%. The report said the bank is well placed to benefit from loan growth, improving operating performance and merger-and-acquisition synergies.

National Bank of Greece and Piraeus Bank also retained buy ratings, with expected returns ranging from 25% to 36%. Optima Bank was upgraded to buy, while Alpha Bank remained at hold on valuation grounds.

Why Growth Still Sets The Region Apart

According to Roemer Capital, Greek and Cypriot banks continue to benefit from stronger economic fundamentals than many western European peers. The report pointed to faster economic growth, healthier balance sheets, low levels of non-performing exposures, capital ratios approaching 20% and strong customer deposit bases.

Analysts expect performing loans across the sector to grow at a compound annual rate of 6% to 8% through 2028, supported by private investment, digitalisation, green manufacturing, supply-chain expansion and a gradual recovery in household lending.

The report also said the conclusion of lending under the EU Recovery and Resilience Facility is unlikely to materially affect credit growth, as banks have already shifted back towards traditional commercial lending. Roemer Capital expects Euribor to remain between 2.2% and 2.5%, a level it believes should support both lending activity and net interest margins.

Geopolitics, Valuation And Market Structure Support The Case

The report said improving geopolitical conditions have strengthened the investment outlook, noting that Brent crude prices have largely returned to pre-war levels while Greek government bond yields have stabilised at around 3.5%. Although geopolitical risks remain, Roemer Capital believes the likelihood of a major inflationary shock or significant pressure on bank profitability has eased.

Another important catalyst identified by the firm is Greece’s expected promotion to developed-market status by FTSE Russell, STOXX and MSCI over the coming months.

According to the report, the reclassification should improve liquidity and attract a broader base of international investors. Roemer Capital also said Euronext’s acquisition of the Athens Exchange is expected to strengthen market infrastructure and increase international visibility, particularly for Bank of Cyprus and Optima Bank.

The firm noted that Bank of Cyprus has already benefited from its Athens listing, with average daily trading value increasing from less than €400,000 before its September 2024 move to nearly €6 million afterwards.

Economic Momentum Remains A Core Tailwind

Roemer Capital said both Greece and Cyprus have moved beyond post-crisis recovery and are now supported by private-sector-led growth. For Cyprus, the report highlighted recent tax reform and efforts to simplify the legal and regulatory framework, while also noting that limited foreign banking competition continues to support domestic lenders.

Overall, Roemer Capital expects Greek and Cypriot banks to remain well-positioned for profitable loan growth over the coming years.

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