Filenews 6 July 2025 - by Eleftheria Paizanou
The seven-year investment plan "THALIA 2021–2027" has a significant contribution to the Cypriot economy. The plan adopts the five main objectives of the EU's Cohesion Policy for a greener, social, competitive, interconnected Europe, and a Europe closer to citizens.
The Deputy Director General of the General Directorate of Development of the Ministry of Finance, Poly Papavassiliou, in an interview with FORBES, opens her papers, pointing out that more than 150 projects have been completed or are in progress through the program.
So far, funds of more than €600 million have been made available. out of a total budget of €1.8 billion. According to Ms Papavassiliou, of the total budget of the programme, priority is given to energy and environment projects (€800 million), support for small and medium-sized enterprises, digitalisation and research and innovation (€300 million), employment, education, the fight against poverty and social exclusion (€400+ million), local development through municipalities and local authorities (€150+ million) and projects related to transport networks (€30 million). It indicates that 4,000 households benefit from energy upgrades and another 138,000 benefit from water management projects.
Through the digital transition, public sector infrastructure is being upgraded, which is expected to benefit 133,000 users. The Deputy Director General of the Directorate-General for Development of the Ministry of Finance told Forbes that 2,000 businesses are being supported through projects, while 900 new positions are being created for researchers supporting innovation and extroversion.
- What is the mission of the Directorate-General for Development?
The name of the Directorate-General for Development reflects its mission, which is to promote the sustainable development of the Cypriot economy. This is achieved through the responsibilities of DG Development, such as the documented assessment of public investments, the monitoring of the implementation of the obligations of the Republic of Cyprus deriving from the European Semester, as well as the optimal utilization of the available European resources through the design of targeted development Programmes and appropriate procedures to ensure their effective management.
Of these Programmes, the Cohesion Policy Programme "THALIA2021-2027" and the Recovery and Resilience Plan stand out, mainly due to the size of their budget.
What is the purpose and objectives of the "THALIA2021-2027" Programme? How much money has flowed into the country from the European Union (EU) for the implementation of the Programme and what is Cyprus' contribution to the projects being promoted?
THA2021–2027 is a seven-year investment plan that adopts the five main objectives of the EU's Cohesion Policy: for a greener, social, competitive, interconnected Europe, and a Europe closer to citizens.
It consists of 16 priorities and includes over 160 projects, which respond to national development needs through investments in value-added projects, while being aligned with European priorities.
The Programme emphasizes the targeted use of European funds, investing in projects with added value. At the same time, it limits the funding of projects that are not in line with EU objectives, thus enhancing its effectiveness and its compliance with EU cohesion policy objectives.
The total budget of "THALIA2021-2027" amounts to €1.8 billion, of which €969 million. constitute an EU contribution and €842 million. come from the state budget. It is worth noting that this is the largest funding to date to Cyprus, compared to previous periods, since its accession to the EU in 2004.
Through the Programme, more than 150 projects have been completed or are in progress and so far funds of more than €600 million have been allocated.
TARGETED INVESTMENTS
Can you tell us in detail in which areas the Program invests and what is the budget? What are the investments and what are the expected results?
Through the "THALIA2021–2027" Program, targeted investments are implemented in critical sectors of the economy and society, promoting sustainable development, social cohesion, digital and green transformation, as well as the country's competitiveness.
The implementation of the Programme is expected to have a substantial impact on the Cypriot economy and society.
Specifically, by 2029, GDP is projected to grow by 6% and create about 8,500 new jobs, while by 2040 it is estimated that GDP will increase by a total of 7%, with the creation of 10,500 new jobs.
Of the total budget of the Programme, priority is given to energy and environment projects (€800 million), support for small and medium-sized enterprises, digitalisation and research and innovation (€300 million), employment, education, the fight against poverty and social exclusion (€400+ million), local development through municipalities and local authorities (€150+ million) and transport network projects (€30 million).
Specifically, in the field of green development, energy upgrade projects are being implemented for about 4,000 households, water management projects by 138,000 people with connection to improved water supply and sewerage networks, as well as flood protection and fire protection projects, which will benefit 100,000 and 90,000 citizens respectively. At the same time, 45,000 citizens will gain access to upgraded public spaces.
In the field of digital transition, public sector infrastructure is being upgraded, which is expected to benefit 133,000 users. In addition, 2,000 companies are supported through projects, while 900 new positions for researchers are being created supporting innovation and extroversion.
With regard to social cohesion and employment, 3,000 unemployed people are expected to participate in subsidised work programmes and 6,400 young people aged 15–29 in training and labour market integration actions.
In addition, benefits for children are being strengthened, with the provision of school breakfast to 126,000 and the provision of material assistance to 3,000 infants.
At the same time, 35,000 disability assessments will be carried out by assessment centres, people with paraplegia and quadriplegia will benefit from home care services, while people with severe disabilities will be supported for independent living in the community. Finally, public transport is being upgraded, serving 22,000 new users per year.
THE PROJECTS THAT ARE RUNNING AND THOSE THAT WILL COME
Are there still projects that are "running"? What are these and when are they expected to be implemented?
"THALIA2021-2027" is on track for implementation and all projects are expected to be completed by the end of the programming period. Some of the projects that are in progress are the following:
- Creation of zero-energy schools to improve the energy efficiency and comfort conditions of public school buildings in Cyprus.
- Upgrading of public transport infrastructure with the installation of new smart stops/shelters and the construction/upgrade of bus stations
- "Green and Smart Energy at the University of Cyprus" for increasing the use of RES and actions to reduce energy consumption
- Nicosia Bypass Motorway – Phase B3
- Aradippou Flood Protection Works
- Water project for the transport of drinking water on the hill of Kokkinokremmos in the free Famagusta
- Modernising the electricity grid to support the energy transition
- Technical School of Green Professions
- Tuition and Feeding Subsidy Scheme for Children up to 4 years old
- Provision of home care services for people with disabilities
- Restructuring of Social Welfare Services
- Strengthening the operation of the Welfare Benefits Management Service
- Upgrade/Expansion of the Land Information System of the Department of Land Registry and Surveying
It is also worth mentioning some notable projects that have been completed within the framework of the "THALIA2021-2027" Programme, such as the redevelopment of the old GSP for the creation of green space and recreation in Nicosia, the construction of a University School of CUT in Paphos, the restoration of the old Municipal Market of the Municipality of Nicosia into a Research and Innovation Centre, the configuration of the Salina Municipal Park in Larnaca and the Gauguin Park in Limassol.
FINANCIAL INJECTION of €330 MILLION IN SMALL AND MEDIUM-SIZED ENTERPRISES
With the implementation of this Program, small and medium-sized enterprises have also been supported. In what way and on what criteria was the support for these businesses? Are new measures expected for these businesses?
Within the framework of the "THALIA2021-2027" Programme, calls with a total budget of €330 million have been announced to date. to support businesses.
These include Grant Schemes to enhance the competitiveness of small and medium-sized enterprises, mainly in the manufacturing sector, support for young businesses with an emphasis on young people and women, digitalization, promotion of entrepreneurial innovation and connection with the research community.
At the same time, in the context of the implementation of Active Employment Policies, Projects are implemented in the form of incentives to companies for the recruitment of unemployed people in new jobs, covering part of the wage costs. The aim of these Projects is to facilitate the access of the unemployed belonging to vulnerable population groups (e.g. young people aged 15-29, people with disabilities) to the labour market.
The Sponsorship Plans announced are based on the strategies and policies of the competent Ministries and the government as reflected in the "THALIA2021-2027" Program. The selection criteria include, among others: the legal form of the enterprise to be defined as a small and medium-sized enterprise, the maturity and effectiveness of the proposal and its contribution to the indicators and objectives of the Programme, such as the creation of new jobs.
The following calls are currently open for applications:
- Research and Innovation Promotion Projects (6 different calls with a total budget of €11.5 million)
- Business Digital Transformation Promotion Plan (€15.2 million)
- Incentive Scheme for the Recruitment of People with Chronic Diseases (€2 million until budget exhaustion)
- Incentive Scheme for the Recruitment of People with Disabilities (€2 million until budget exhaustion).
- Incentive Scheme for the Employment Rehabilitation of Released Prisoners (€4 million until budget exhaustion).
More information about the Grant Schemes and the application process can be found on the website of the THALIA Programme.
With regard to future funding opportunities with recipient enterprises, it is expected that calls for additional Subsidized Employment Schemes will be announced through the Programme, specifically targeting the employment of unemployed people over the age of 50 and the activation of inactive women.
Is the Programme supervised by the EU? Is Brussels satisfied with the actions taken through the Programme or is it demanding more?
The management of the THALIA2021–2027 Programme is decentralised, with Member States having significant autonomy, while the European Commission exercises supervision through meetings, monitoring committees, sending of financial and physical indicators and multi-level audits.
At national level, DG Development of the Ministry of Finance is the National Planning Authority and the Managing Authority for the Cohesion Policy Programme "THALIA2021-2027". Since the beginning of the programming period, DG Development has consulted institutions and social partners and civil society to define priorities and investment areas.
The adoption of the Programme and the Partnership Agreement by the EU in 2022 was essentially a vote of confidence in our strategy and the consistent presence of Cyprus over time
In addition to the Managing Authority, the "THALIA" Program is shielded by a broad institutional framework.
The Certifying Authority, which is the General Accounting Office of the State, ensures the proper accounting function, the certification of expenditures and the accurate flow of European funds.
The Audit Authority, as an independent audit body, conducts systematic and random audits for the compliance of the management and control system. The Monitoring Committee, which meets on an annual basis, in the presence of representatives of the European Commission, is responsible for monitoring the implementation of the Programme, recommending improvements and being informed of progress by DG Development.
The annual visit of European officials to Cyprus in May 2025 confirmed the positive assessment of the progress of the Programme, with EU officials expressing satisfaction with the progress on projects they visited in Limassol and Larnaca. It should be noted here that Cyprus is consistently ranked among the top EU in the absorption of funds, which reflects the consistency, transparency and efficiency in the management of European funds by DG Development and all stakeholders.
The European Commission emphasizes projects with a measurable impact on the green and digital transitions and social cohesion – priorities that have also been fully adopted by the Thalia Programme, enhancing the added value of each investment, for the benefit of society and the economy.
With the completion of this Program, what follows? Is the Republic in contact with the EU for the implementation of another program?
Processes have already begun at European level for the next multiannual European budget, i.e. the Multiannual Financial Framework, and the preparation of the new programmes for the period 2028-2034. In this context, the allocation of Cyprus for Cohesion Policy as well as the regulatory framework of the European funds will be decided, on the basis of which the new Programme will be designed after public consultation.
In July 2025, the European Commission's proposal on the priorities of the future multiannual budget is expected to be announced, when the start of negotiations will officially be announced.
BY SEPTEMBER €568 MILLION FROM THE RECOVERY FUND
The General Directorate of Development of the Ministry of Finance is also responsible for the implementation of the National Recovery and Resilience Plan (RRP) through which Cyprus will receive an amount of €1.2 billion by 2026. So far, how much money has Cyprus disbursed?
The total amount of financing of €1.22 billion from the Recovery and Resilience Facility to Cyprus concerns €1.02 billion. sponsorship and €200 million. borrowing. The disbursement of the amount is made in 10 sponsorship instalments and 4 loan instalments.
Disbursements are made on a performance based basis, i.e. in order to disburse a tranche, the milestones/targets of the RRP measures corresponding to the tranche must be completed.
To date, payment requests have been submitted for 5 sponsorship instalments with the completion of a total of 91 milestones and the 4 instalments have already been disbursed. In July 2025, an amount of €37 million is also expected to be disbursed, which concerns a milestone of the 2nd payment request, (legislation to address aggressive tax planning), the payment of which had been suspended by the European Commission, until the milestone has been satisfactorily reached.
In addition, by September 2025, the European Commission's assessment of the request for payment of the 5th tranche of the grant is expected to be completed and an additional amount of €76 million will be disbursed. Therefore, by September 2025, the total receipts from the RRF are expected to amount to €568 million, and at a percentage of 46.6% of the total budget of the RRP.
WHAT WILL HAPPEN WITH THE GREEN TAX
A few months ago, the Recovery Plan was diversified. What changes have been made and why was the commitment to green taxes not also requested? As far as we know, steps are being made at the political level to move the imposition of the carbon tax to the bottom. Is such a thing possible?
In December 2023, a major amendment to the RRP was adopted by the Council of the EU, which concerned the inclusion of the RepowerEU chapter to address the energy challenges caused by the Russian invasion of Ukraine.
At the same time, a significant number of measures were amended where the achievement of their milestones/targets was rendered impossible due to objective circumstances, such as the increase in raw material prices and supply chain disruptions due to the energy crisis. The changes mainly included the transfer of time milestones, amendments to the wording of measures for greater clarity and, in limited cases, a reduction in targets.
As part of the 2023 amendment, there was also a change in the measure of green taxation included in the RRP. Specifically, the European Commission has approved the shift/transfer of the relevant milestone from Q2 2023 to Q1 2024. The fulfilment of this milestone will be considered by the Commission in the context of the submission of the request for the 6th tranche of sponsorship, which will take place within 2025.
In addition, recognizing the challenges related to the design and implementation of the green tax reform, we have already successfully negotiated with the European Commission the following:
(a) Abolition of carbon taxation on motor fuels with the launch of the Emissions Trading System
(b) Exemption of the carbon tax on production fuels, so that taxation covers only motor fuels, instead of production fuels
(c) A significant reduction from the proposed carbon tax burden on motor fuels: the initial study provided for 15 cents per litre plus VAT from 2023 with an annual increase of 1 cent, while now with the negotiation we have reached 3 cents per litre for the 2nd half of 2025, 6 cents per litre in the 1st half of 2026 and 9 cents per litre in the 2nd half of 2026.
This increase is much smaller than the difference in the price of fuel that occurs today between the most expensive and cheaper price at petrol stations in the same Province.
The European Commission, by accepting the above amendments, has already shown considerable flexibility in achieving the milestone and expects us to implement our commitments to it. In general, however, consultations with the European Commission within the framework of the RRP are continuous. I should also mention that compensatory measures have been prepared by the competent Ministries to mitigate the effects of the limited increase in the price of fuel from green taxation.
Of course, how green taxation will ultimately proceed is evaluated and will be decided at the political level.
However, it is also important to mention that according to the RRF Regulation and the official communication of the European Commission of 4 June 2025, there will be no extension for the implementation of the Member States' Recovery and Resilience Plans and all milestones/targets of the Plans should be completed by August 2026.
THE IMPLEMENTATION OF 156 OTHER MILESTONES IS PENDING
Are there any provisions of the Plan that delay the disbursement of money? What are they?
The Plan includes a total of 135 measures (61 reforms and 74 investments) for which 271 milestones/targets have been set and 115 have been completed to date (including milestones of subsequent tranches that have already been completed). Therefore, 156 milestones/targets are still pending, which should be completed by August 31, 2026 at the latest. As you can see, we are talking about a large number of milestones that will have to be completed by then.
There are challenges, both in reforms and in investment. In reforms, either due to the need for a change of culture and their acceptance by a part of society, such as trade unions (e.g. a new system for evaluating teachers) or due to the complexity of legislation (mainly on financial issues), while in investments - and specifically for public procurement projects - there are very often delays in the signing of contracts, due to appeals to the Tender Review Authority.
In any case, DG Development, which has been designated as the Coordinating Authority for the Plan, closely monitors the implementation of the Plan's milestones and in cooperation with the Implementing Bodies, tries to resolve the problems that arise, through both major amendments that have already been submitted and approved for the Plan as well as through other targeted amendments.
Is there a risk that Cyprus will not receive the full amount of €1.2 billion? Why?
If all 271 milestones/targets set out in the Plan are successfully completed by August 2026, then Cyprus will receive a total of €1.2 billion. of the Plan.
The government, of course, may decide not to use the entire amount of the loan.
With regard to the amount of the grant (1 billion), if even 1 milestone/target is not achieved, then there will be a cut-off, which is calculated on the basis of a specific methodology applied by the European Commission.
There are major challenges, but as I mentioned above, the DG closely monitors progress in the implementation of the Plan and tries as much as possible to resolve problems when they arise.
By the end of 2025, another important amendment to the Plan will be submitted through which we will try to resolve problems and delays that arise and our planning is that by the end of 2025 payment requests will be submitted for the 6th, 7th and 8th sponsorship instalments and one loan instalment and at the latest by September 2026 (as allowed by the Regulation). Payment request for the 9th and 10th sponsorship instalments and the remaining 3 loan instalments.
DG Development manages funds related to other Programmes. What are they?
DG is also responsible for a number of other programmes such as the European Territorial Cooperation Programmes (Interreg), which are part of the EU's Cohesion Policy. Through our participation in four Inter Projects (Greece-Cyprus, Euro-MED, NEXT MED, Europe), cross-border, transnational and interregional cooperation projects are co-financed, i.e. joint actions between Cyprus and other Member States, third countries and candidate countries.
Examples of projects are the LS, which strengthens the surveillance of marine areas and the management of migration flows, and the project for the creation of the legal framework for energy communities, with the pilot being created in the area of Kato Pyrgos, Tillyria.
DG Development has also assumed the role of the National Coordination Unit (NCU) for the implementation of the Switzerland-Cyprus Cooperation Programme for the period 2019-2029, through which a total of five projects in the areas of Migration and the Reduction of Economic and Social Inequalities in the EU are being implemented with a total budget of €16 million.
The projects include the construction of the headquarters of the Asylum Service and the Center for Rare Diseases by the Karaiskakio Foundation, new infrastructure for the treatment of domestic violence by SPAVOS, contribution to the Investigative Committee for the Missing Persons.
In addition, DG Development has been designated as the National Contact Point (NFP) for the EEA/Norway Financial Mechanism. During the 2014-2021 programming period, 11 projects were implemented, with a total budget of approximately €9 million, which were completed with excellent results in April 2024.
Some of the projects that were co-funded are the new infrastructure for the diagnosis and treatment of patients by the Institute of Neurology, as well as the digitization of the Museum of Cyprus.
