The House of Representatives on Wednesday passed a €10.7 billion state budget for 2026, greenlighting a fiscal strategy that bets on digital transformation and social welfare to insulate the Republic against regional economic volatility.
The budget was approved by a margin of 37 votes to 19, secured by a coalition including DISY, DIKO, ELAM, EDEK, and DIPA.
While Finance Minister Makis Keravnos hailed the plan as a “balanced and developmental” roadmap, the session was marked by rebukes from the left-wing AKEL and the Movement of Ecologists-Citizens’ Cooperation, who argued the government’s focus on surpluses fails to address the eroding purchasing power of Cypriot households.
Fiscal expansion and the social safety net
The 2026 fiscal plan represents a five per cent increase in primary spending, injecting an additional €508 million into the economy compared to last year. A significant portion of this growth is directed toward a 6.7% hike in social benefits, a move intended to bolster education, healthcare, and welfare services amid high interest rates and persistent inflation.
Developmental spending is also slated for a 4.7% rise. According to the Ministry of Finance, these funds are tied to the Recovery and Resilience Plan, specifically targeting the “green transition” and the “digital transformation” of the state apparatus—reforms mandated by the European Union for the continued release of recovery funds.
Strategic priorities and debt reduction
Addressing the House before the vote, Minister Keravnos said that the budget’s primary objective is “long-term sustainability in a constantly changing political environment.” The government has committed to:
- Debt reduction: Continuing the downward trajectory of public debt as a percentage of GDP.
- Public sector restraint: Limiting new hires in the civil service to maintain a lean administrative structure.
- Contingency planning: Maintaining a primary surplus to provide a fiscal buffer against external shocks.
A divided chamber
The political split during the vote mirrored broader disagreements over the country’s economic trajectory. Supporters praised the “fiscal discipline” of the budget, while opponents accused the administration of being “out of touch” with the structural weaknesses of the labour market. The four independent MPs were also split, with Andreas Themistocleous, Andreas Apostolou, and Michalis Giakoumi backing the government, while Kostis Efstathiou and Alexandra Attalides joined the opposition.
With the budget now ratified, the Republic is set to begin implementation on 1 January 2026.
Read more: