Filenews 28 August 2025 - by Angelos Angelodimou
The government is expected to take measures at various levels, regarding the issue of reducing the cost of the state salary. At the same time, through the Minister of Finance, he clarifies where the problem is focused on the state payroll, with the footnote that the discussion that is taking place around this issue is "excessive".
More specifically, the Minister of Finance, Makis Keravnos, who spoke yesterday after the conclusion of the meeting of the Council of Ministers, during which the EU evaluation report for the European Semester 2025 for Cyprus was discussed, referred to key issues of the Cypriot economy, such as tax reform, public debt, state payroll, ATA, the development course of the Cypriot economy and the issue of business financing.
In particular, in relation to the state payroll, which is highly prioritized by the government, as a factor that shapes the amount of expenditures, the Minister of Finance noted that in addition to the IMF study, additional specialized studies have been submitted for this part. He also pointed out that the next budget will include measures to reduce the cost of the state salary, for which, however, he wanted to clarify some points.
Civil Service and salaries
In particular, when asked about what will happen with the increase in the state salary, which affects the ceiling on expenditures, the Minister of Finance described the discussion on this issue as "excessive". As he explained, in the 2025 budget, the salary of civil servants was a few thousand lower than the previous budget and the positions were much less than all previous budgets that have been submitted to date. "We are following this course and the new budget 2026 will be at those levels," noted Mr. Keravnos.
He also said that additional specialized studies have been submitted to the Ministry, in addition to that of the IMF, in order to deal with this issue in the best possible way. "But we have to separate some things," he noted, noting that the central government's civil servants are 12,300. "This number has been the same for years and even reduced, while we are obliged, due to our participation in the EU, to create new institutions, new committees and have needs," he noted. Beyond that, he added, there are other sectors that absorb a huge number of employees, such as the Education sector and the Health sector, stressing that drastic efforts have been made for the central government to reduce costs.
Asked by "F" to clarify what are recorded as conclusions in the specialized studies that have been carried out on the state payroll, the Minister of Finance noted that what has already been said by us is mentioned. In other words, that the increase in public employees is not due to the central government, but to sectors of general government such as the HIO and the OCYPY, the education sector and semi-state organizations.
Reduction of expenditure
The finance minister noted that the ceiling for expenditure in 2025 was exceeded and instead of 6% it went to 6.8%. Therefore, the government will proceed with corrective moves in the context of the preparation of the new budget to reduce the percentage of 6.8%. Mr. Keravnos spoke about the abolition of positions that may not be needed, rationalization in the pyramid of various services, and even the preparation of new service plans, interchangeability, transfers, so that the needs can be met without the need for additional positions.
Public debt
The Minister of Finance made special reference to the public debt, which is expected to be reduced more and faster than the previous forecasts, a development that will have significant benefits for the entire Cypriot economy, especially in terms of development spending. In particular, Makis Keravnos said that public debt is expected to fall to 57% as early as the end of 2025, well earlier than estimates that spoke of a reduction below 60% at the end of 2026. "This is very important, because it will free up additional economic opportunities for our country to increase development spending for defense as well," he added.
Asked about the position of the Ministry of Finance, regarding the issue of ATA, the Minister said that the issue is handled by the Minister of Labour, who is in dialogue with the social partners. "What will be given and what will be done will be the result of the dialogue with the social partners," he said, noting that the government does not act individually and piecemeal, but discusses the issues as a whole when it comes to and takes all issues into account.
Other challenges
Finally, Mr. Keravnos referred to a number of other challenges that the government is called upon to face in terms of the economy. Among them, there are the Research and Innovation sectors, which are at a low percentage of GDP, with 0.29% compared to 0.72% in the EU, and continuous efforts are being made to improve this.
There is also the issue of the underdeveloped capital market, the result of which is that companies depend mainly on banks for financing. On this issue, Mr. Keravnos said that the Government has already set up the Capital Financing Fund, the well-known Equity Fund, amounting to €37.5 million.
