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Six Strategic Goals Define Cyprus’s 2026 State Budget And Mid-Term Fiscal Framework

by THEFUTURE.TEAM

October 8, 2025

Overview Of The Fiscal Objectives

The 2026 state budget, together with the Mid-Term Fiscal Framework for 2026-2028, is built on six strategic goals. These include maintaining a surplus fiscal balance, preserving public sector employment, reducing public debt over the medium term, advancing the green transition and digital transformation, fostering sustainable growth in key economic sectors, and upholding a resilient financial system. Finance Minister Makis Keravnos announced that the budget, capped at €10.7 billion excluding debt servicing costs, reflects a methodical approach to sustaining economic stability and growth.

Fiscal Discipline And Strategic Investments

The government has signaled a focused commitment to fiscal discipline, as developmental expenditures are set to rise by 4.7% in 2026 compared to 2025. Notably, social benefits—including education, health, and social welfare spending—will see an approximate increase of 6.7%. This disciplined fiscal policy is underscored by efforts to generate primary surpluses and to maintain long-term fiscal balance, averaging around 3.4% of GDP through 2028.

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Managing Geopolitical And Climate Risks

External risks, particularly those emanating from volatile geopolitical developments, present potential headwinds for domestic economic activity. Moreover, the budget acknowledges the adverse impacts of climate change, including natural disasters and the consequent need for infrastructure and compensation investments in the primary sector. The prospect of complex challenges—such as the termination of natural gas supplies from specific sources—necessitates cautious and proactive risk management.

Infrastructure Projects And Public Sector Efficiency

Key to the 2026 budget is the emphasis on high-value-added infrastructure projects, including co-financed initiatives and the successful execution of the Recovery and Resilience Plan. In parallel, public sector reforms have led to a reduction in permanent staffing positions for the second consecutive year. The plan calls for the creation of 458 positions while eliminating 472 roles, underlining a commitment to streamline public administration without compromising essential services.

Tax Revenue And Operational Spending

The budget projects strong tax revenues, with direct taxes expected to reach €4 billion in 2026, rising steadily in subsequent years. Revenue contributions from indirect taxes—including VAT and excise duties on alcohol, tobacco, and energy—are forecast to support a robust fiscal framework. On the spending side, operational costs, covering maintenance, training, consultancy services, and even unforeseen expenses, are anticipated to increase by 11.8%, reflecting investments in critical areas such as water acquisition and defense and security.

Ensuring Competitiveness In Public Payroll

Addressing the hot-button issue of public sector payroll, the Finance Minister confirmed efforts to restrain wage-related expenditures. In 2026, the public payroll is projected to account for 27.5% of the budget—down from 28% in 2025—demonstrating a commitment to fiscal prudence while balancing competitive compensation in education, healthcare, and other vital sectors.

Outlook And Strategic Implications

Overall, the budget reflects a long-term strategy that seeks not only to safeguard Cyprus’s fiscal position—by keeping the public debt to GDP ratio on a declining path towards 43.6% by 2028—but also to balance the dual imperatives of growth and risk management. With projected economic growth of around 3.1% in 2026 and an unemployment rate nearing 4.6%, the framework is designed to navigate uncertainties while laying a solid foundation for future prosperity.

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EU Moderates Emissions While Sustaining Economic Momentum

by THEFUTURE.TEAM

November 15, 2025

The European Union witnessed a modest decline in greenhouse gas emissions in the second quarter of 2025, as reported by Eurostat. Emissions across the EU registered at 772 million tonnes of CO₂-equivalents, marking a 0.4 percent reduction from 775 million tonnes in the same period of 2024. Concurrently, the EU’s gross domestic product rose by 1.3 percent, reinforcing the ongoing decoupling between economic growth and environmental impact.

Sector-By-Sector Performance

Within the broader statistics on emissions by economic activity, the energy sector—specifically electricity, gas, steam, and air conditioning supply—experienced the most significant drop, declining by 2.9 percent. In comparison, the manufacturing sector and transportation and storage both achieved a 0.4 percent reduction. However, household emissions bucked the trend, increasing by 1.0 percent over the same period.

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National Highlights And Notable Exceptions

Among EU member states, 12 reported a reduction in emissions, while 14 saw increases, and Estonia’s figures remained static. Notably, Slovenia, the Netherlands, and Finland recorded the most pronounced declines at 8.6 percent, 5.9 percent, and 4.2 percent respectively. Of the 12 countries reducing emissions, three—Finland, Germany, and Luxembourg—also experienced a contraction in GDP growth.

Dual Achievement: Environmental And Economic Goals

In an encouraging development, nine member states, including Cyprus, managed to lower their emissions while maintaining economic expansion. This dual achievement—reducing environmental impact while fostering economic activity—is a trend that has increasingly influenced EU climate policies. Other nations that successfully balanced these outcomes include Austria, Denmark, France, Italy, the Netherlands, Romania, Slovenia, and Sweden.

Conclusion

As the EU continues to navigate its climate commitments, these quarterly insights underscore a gradual yet significant shift toward balancing emissions reductions with robust economic growth. The evolving landscape highlights the critical need for sustainable strategies that not only mitigate environmental risks but also invigorate economic resilience.