Cyprus will keep pressing the European Union for greater fiscal flexibility so that member states can cut taxes below EU minimum levels to ease the impact of the energy crisis, Finance Minister Makis Keravnos said, as the government awaits Brussels’ response to its request to scrap excise duty on heating oil.
Excise duty on heating oil has already been cut to 2.1 cents a litre, the minimum allowed under EU rules, from 7.5 cents. Cyprus has asked to reduce it to zero, and is also awaiting a response on further cuts to taxes on motor fuel and electricity.
At home, the government intends to extend the 8.3-cent-a-litre reduction in excise duty on motor fuel until March 2027, as the measure expires at the end of the month. The cabinet is expected to approve a bill at its next meeting. The tiered electricity subsidy will also continue in 2027.
Keravnos said on Wednesday that Cypriot authorities had an open line of communication with EU authorities and that, from the consultations so far, he saw a positive approach from the Commission. However, the signals coming from the Commission are discouraging, with information suggesting Cyprus’s room for manoeuvre is limited.
At the upcoming EU meetings, Keravnos is expected to point to the economy’s good economic indicators, citing a fiscal surplus of 1.6 billion euros and growth of 3 per cent. He said Cyprus would keep making its case until it got what it was due. “We cannot accept these one-size-fits-all restrictions,” he said.
Keravnos welcomed the European Central Bank’s recent decision to leave interest rates unchanged despite rising inflation, and endorsed ECB President Christine Lagarde’s position that rates would not rise further.
Commenting on the surplus, he said the economy continued to show resilience thanks to the government’s preventive and responsible economic policy. Higher consumption could bring in more VAT revenue, he said.
That consumption reflected disposable income, he added, which the government was strengthening through social policy funded by the surpluses, especially for vulnerable households.
