Cyprus could lose tens of millions of euros in EU recovery funding after its own Audit Office found the country’s National Recovery Plan was over-ambitious, poorly risk-assessed, and repeatedly amended to manage implementation failures.
The report, examining Cyprus’s use of EU Recovery and Resilience Mechanism funds, concludes that the plan submitted to Brussels in 2021 was flawed from the outset — packed with too many milestones, built on unrealistic timelines, and burdened with projects that were not ready to deliver.
Too many targets, too little capacity
The Audit Office found the plan contained a disproportionately large number of milestones and targets relative to Cyprus’s size and its funding allocation. The milestones were drawn up in excessive detail, with many targets too specific — creating problems in implementation, monitoring, and coordination. The coordinating authority also faced persistent staffing shortages.
“Several projects were included in the Plan before they were ready,” the office said. “Risks of delayed implementation were not properly assessed, resulting in unrealistic timelines — and the limited administrative capacity of certain implementing bodies made repeated amendments to the Plan necessary.”
56% absorbed with one year to go
Cyprus was originally set to receive €1.2 billion — €1.02bn in grants and €200.32m through a loan facility — from the EU mechanism, set up to help member states recover from the economic impact of the Covid-19 pandemic. To access the funds, Cyprus had to implement 133 measures covering investments and reforms by August 2026.
With roughly a year to go, Cyprus had absorbed just 56% of its EU funds — €567.7m, including €151.67m in pre-financing. That figure, drawn from EU monitoring platform data obtained by the Audit Office in January, ranks Cyprus 20th out of 27 member states for absorption of non-repayable grant support. The General Directorate of Development says it remains confident a high absorption rate will be achieved by the August 2026 deadline.
€200m loan never drawn, cable project axed
Cyprus did not draw on the €200.32m loan facility at all. The loan was tied to seven measures — but under last summer’s plan amendment, the Cypriot authorities dropped six of them, including the GSI electricity interconnection project between Cyprus and Greece, formerly known as EuroAsia. Cyprus stood to receive €100m for that project alone.
The project’s own documentation had listed 13 indicative risks and rated the likelihood of non-implementation as “very low (grade two),” concluding that none of the technical risks were sufficient grounds for abandonment. Construction work has not yet begun, making completion within the plan’s timeframe impossible. The €26m already disbursed will be offset against future grant instalments.
The Audit Office added that the loan carried more favourable terms than either market borrowing or European Investment Bank financing — and should have been used.
Brussels threatens permanent €50m cut
A further financial threat concerns green taxation. The European Commission may suspend €50m in grant funding over Cyprus’s failure to implement a green tax reform. The Commission has warned that if the measure is not delivered within the plan, the funding cut will be permanent — and will damage Cyprus’s standing as a partner in meeting its EU obligations.
Five amendments, and the risk remains
The cascade of failures — immature projects, poor risk assessment, unrealistic deadlines — forced five amendments to the plan. Each round pushed additional milestones into the final quarters of the implementation period, already carrying a heavy concentration of milestones.
Despite those five revisions, the Audit Office warns the risk of Cyprus failing to fully absorb its allocated funds has not been eliminated. It concludes that public investment projects were not properly evaluated before being included in the plan.