Despite the positive economic indicators in the Cypriot economy, there is a potential threat that could bring a sudden halt to this growth.
The state may have to pay up to €500-€600 million to cover the costs arising from the termination of the terminal project in Vasiliko, which was halted a few months ago and is now in the process of claiming compensation at the Arbitration Court.
According to information obtained by philenews, yesterday, the Minister of Finance, Makis Keravnos, met with representatives from the coalition parties DIKO, EDEK, and DEPA.
He briefed them on the 2025 budget, providing insights into the estimates, forecasts, expenses, and fiscal risks that the economy may face.
Despite the positive economic growth and the rise in economic indicators, the economic team of the government is concerned about the worrying developments regarding the terminal in Vasiliko.
According to philenews sources, the additional expenses that the Republic will have to bear due to the project in Vasilikos, as analysed by the Minister of Finance yesterday, are as follows:
- By the end of the month, the Republic will have to repay the European Investment Bank or the European Bank for Reconstruction and Development a total of €220-€230 million. This money was borrowed by ETYFA (a subsidiary of DEFA) for the implementation of the project, with the Republic as the guarantor. After the project’s failure, the European bank demanded the repayment of the loan by the end of the month, according to Minister Keravnos.
- The European Commission demanded that the Cypriot authorities return €73 million, which was granted to the country as a grant (out of a total of €101 million) for the construction of the project.
- To complete the works on the land in Vasiliko (pier and other infrastructure) and to settle other pending issues with the consortium, an additional €230 million is estimated to be required.
- The additional expenses that the state may have to bear are estimated to be between €500-€600 million, which poses a serious fiscal risk to the Cypriot economy. The state has reserves to cover these additional expenses through the surplus, which doubled in the first seven months of the year to €702.5 million or 2.2% of GDP compared to the previous year. Therefore, the state will use this cushion to cover the losses from the scandalous development at the terminal instead of social policies or funding other decisions to boost the economy. The Ministry of Finance is in a wait-and-see mode, monitoring the developments, while also working on various scenarios to address the situation.
- Regarding the Crete-Cyprus electrical interconnection, the responsible minister informed the party representatives that an annual budget of €25 million for five years will be included to finance the expenses of the implementing body.
A 4.9% increase in expenses is expected for the 2025 budget, which is expected to be presented to the Cabinet next Friday.
Minister Keravnos informed the parties that, due to the good condition of the Cypriot economy, the European Union has allowed the Republic to increase its expenses by an average of 4.9% for the next four years.
However, according to information, this advantage may be affected in the coming years, depending on the developments regarding the terminal in Vasiliko.
Regarding the fiscal surplus, it is estimated to be 3.3% in 2025, and the primary surplus will reach 4.9%.
Additionally, the growth rate is expected to be around 4%, inflation at 2%, and unemployment at 5%.
As for public debt, it is estimated to close this year at 72.5%, public debt in 2025 is estimated to be 64%, and in 2026, it is expected to decrease to 58%.
Read more:
