The dramatic underfunding of the judicial system in Cyprus is now the main factor of economic entrapment, as the huge delays in the courts block the liquidation of private debt.
The interim report of the 2026 Fiscal Council, released yesterday, captures the magnitude of the problem and the side effects created on the economy.
Despite the fact that banks "cleaned up" their balance sheets, reducing the non-performing loans (NPLs) ratio to a historically low of 1.6% in April 2026 (from 5.5% in 2021), the economy remains deeply over-indebted. An astronomical reserve of €18.5 billion (more than half of 2025's GDP) is now out of the banking system, in the hands of credit acquiring companies, with its settlement solely dependent on a dysfunctional judicial channel.
The interim report of the Fiscal Council states that the lack of resources and human resources has led to a complete reversal of improvement efforts, making Cypriot courts the slowest in Europe.
The great setback is recorded in the fact that while the time for resolving first-instance cases had gradually decreased from 903 days (2014) to 605 days (2023), in 2024 it jumped again to 709 days. This deterioration, by 104 days in one year, puts the Republic in first place for delays in the EU.
In civil and commercial law litigation (where the procedures for the execution of securities and foreclosures belong), the time of the first instance reaches 682 days (the second worst in the EU after Greece). For comparison, the corresponding time in Denmark is 19 days and in Estonia 31.
The problem is exacerbated in the second instance (appeals), where Cyprus records the longest duration in the entire EU. Any disputed sale procedure is therefore extended beyond three years, annihilating the present value of the recoveries. This negative turn coincides with the 2023 reform, which failed to deliver the expected results. It is characteristic that the Commercial Court, which was established to quickly adjudicate high-value commercial disputes, with specialized judges, has not yet become operational.
The Fiscal Council clearly warns that the goals of reducing judicial years, when they are not accompanied by real support in human resources, infrastructure and modern technology, are doomed to fail. Without the immediate acceleration of justice and the full activation of the Commercial Court, the remaining over-indebtedness of €18.5 billion. It will continue to act as a permanent brake on the country's growth dynamics. This risk is now assessed as medium probability and moderate impact, with a clear medium-term horizon.
The interim report states that this performance is not independent of the amount of resources allocated. Public expenditure on the operation of courts in Cyprus in 2024 amounted to € 50.2 million, i.e. 0.14% of gross domestic product, the second lowest ratio in the Union, compared to a median of 0.295%.
In per capita terms, the expenditure amounts to €51.9, the lowest among the twenty-seven Member States. The Council notes that targets to reduce adjudication times, which are not accompanied by a corresponding increase in human resources and modern technology, carry an increased risk of not being achieved.
The Fiscal Council does not fail to emphasize that, although the domestic foreclosure framework primarily provides for an out-of-court procedure, the recourse of borrowers to the courts transfers a significant part of the cases to the courts. With a resolution time of 682 days at first instance and the longest duration of an appeal procedure in the entire Union, any disputed collateral enforcement proceedings are extended beyond three years.
