Cyprus is currently facing a historic challenge. The energy crisis, the green transition, the need for technological modernization and the pressure to strengthen the competitiveness of businesses are creating a new reality, in which the state can no longer operate with low-risk management logics and fragmented interventions. The era requires strategy, speed and political boldness.
And yet, in Cyprus there is still a very conservative approach to the use of state aid. The vast majority of support schemes are based on de minimis aid because it is considered administratively easier, more "safer" and less demanding in terms of compliance.
However, this is a practice that, while it may serve short-term administrative convenience, ultimately severely limits the country's development potential.
Cyprus doesn't just need more sponsorships. It needs smarter state aid. A new public policy model is needed, which makes substantial use of the tools offered by the European Union through the General Block Exemption Regulation (GBER), with national approval by the Registrar and the Climate, Environment and Energy Guidelines with approval by the European Commission. These are tools that allow Member States to support large and strategic investments, without time-consuming notification procedures to the European Commission, as long as specific rules are respected.
The crucial question is simple: why does a country with such serious energy and structural weaknesses continue to use mainly the most limited tool of state aid?
The answer lies in part in administrative culture. For years, state aid in Cyprus has been treated more as an area of legal risk than as a development policy tool. Many competent authorities choose de minimis not because it is the most appropriate tool, but because it is considered the easiest and least dangerous administratively. But this leads to a deep distortion: instead of designing policies based on the real needs of the economy, they are designed on the basis of the administrative comfort of the system.
The result is that Cyprus is often limited to small, piecemeal subsidies that do not have the power to substantially change the country's productive base.
This is particularly evident in the energy sector.
Energy Storage and Smart Grids
Cyprus has one of the highest electricity costs in the European Union. Households and businesses are burdened with huge energy costs, while the economy remains heavily dependent on imported fossil fuels. At the same time, the country is facing serious problems integrating renewable energy sources into the grid, resulting in continuous production cuts from photovoltaic projects.
And yet, instead of making full use of state aid tools that allow large investments in energy storage, smart grids, hybrid projects and the energy transition of industry, it continues to rely heavily on small, limited aid.
De minimis can be useful for small business needs or limited local actions. However, it cannot be the basis of the energy strategy of a country located in the most energy-vulnerable region of Europe.
The reality is that Cyprus today needs investments of tens and hundreds of millions of euros in: energy storage systems, energy upgrading of businesses, electrification of industrial processes, green transport, energy communities, production of innovative technologies and smart energy infrastructure.
This type of investment cannot be substantially supported by the limited ceilings of de minimis aid.
On the contrary, the GBER and the relevant guidelines of the European Union allow for much higher aid intensities for strategic objectives, especially in areas such as: energy efficiency, renewable energy sources, storage, research and development, innovation, circular economy, green industry.
And this is precisely where the great political challenge for Cyprus lies: will we continue to treat state aid as a tool for management or will we turn it into a lever for national transformation?
This need is equally crucial in the field of research and innovation.
Cyprus has significant scientific and research potential. The country's universities and research institutions have achieved significant distinctions in European programs. However, the link between research and production and the real economy remains limited.
One reason is that many businesses still face high risk when investing in research, technological development and innovative products. This is precisely where state aid can act as a catalyst.
GBER provides extremely important possibilities for: industrial research, experimental development, pilot facilities, start-ups, technology clusters, university-business collaborations, innovation in SMEs, digital transformation.
Cyprus could create much more ambitious aid schemes for: clean energy technologies, storage, artificial intelligence, maritime technology, agrotechnology, water management, cybersecurity, biotechnology.
Instead, we often limit ourselves to small sponsorships that help businesses in the short term but do not create innovation ecosystems with a real international footprint.
Tool to go
The problem is not only technocratic.
For years, Cyprus has operated with a low value-added economic logic, based mainly on services, consumption and the real estate market. The new era, however, requires a different production model: greener, more technological, more extroverted and more resilient.
State aid can be a crucial tool in this transition.
The European Union has already moved in this direction. The pandemic, the energy crisis and international competition with the United States and China have led to a new European philosophy: a more active industrial policy, more strategic autonomy and greater flexibility in state aid.
Other European countries are already aggressively leveraging these tools to attract investment, boost industries, and create tech ecosystems.
Cyprus cannot be left behind.
If we continue to operate exclusively with a logic of risk limitation and administrative ease, we will miss out on a historic opportunity. The green transition and technological change will not wait for our administrative weaknesses.
This does not mean, of course, that the rules should be relaxed uncontrollably. State aid requires serious planning, transparency and know-how. We need to strengthen the competent authorities, train officials and better coordination between ministries and agencies.
A change of mindset is also needed.
State aid is not just a legal obligation to comply with EU law. It is an economic policy tool. It is a tool of competitiveness. It is an energy security tool. It is a tool of strategic survival for small states such as Cyprus.
The country now needs a more mature and more ambitious approach. Political will is needed to design large, targeted and transformative aid schemes that respond to the real needs of the economy and not just to the administrative facilities of the system.
Cyprus currently has a unique opportunity: to transform state aid from a small-management mechanism into a national strategy tool.
* Superintendent of State Aid Control
