And its lack of preparedness when the Limassol fire hit is just one sad example

In addition to trying to solve the overarching Cyprus problem, governments have faced many interrelated challenges, including ensuring the adequate functioning of physical infrastructure systems, implementing reforms required for EU funding, protecting the civic population from disasters, and ironing out corruption and cronyism.

But, the current government administration, like its predecessors, is failing to meet these challenges by just spewing out words with no follow-up in substantive action that should involve, among other things, the effective implementation of infrastructure projects and the strict and even-handed enforcement of laws and regulations.

The yawning gap between the words and promises of the government and its failure to deliver effective follow-up action was demonstrated by the government’s lack of preparation and inadequate response to the very damaging recent fires in the Limassol district. Early this summer, government spokesman Konstantinos Letymbiotis boasted that the country’s firefighting capability was at a state of “absolute operational readiness with strengthened forces, modern means and clear strategy” and that it would contribute to “the new policy of civil protection of the Cyprus Republic”.

But as the fires ignited and spread, no warning system was in place in line with EU obligations to alarm the public on the need and how to escape the fires. And there was an inadequate and uncoordinated response in fighting the fires, with the president stating later that the government services “didn’t respond as they should have”.

What is most disturbing is that the current government has had the financial resources, including considerable committed funding from the EU to contribute toward fulfilling its promises and addressing its key challenges, particularly in implementing development projects. In this connection, the government has been generating sizable surpluses and piling up cash at banks (deposits totalling €5.6 billion at end-June 2025) in part because of the low spending on executing development projects. In fact, in recent years, less than 65 per cent of funds budgeted for government investment projects have been disbursed.

Indeed, government administrations, increasingly through a combination of cronyism, corruption and deficient institutional capacity, have been unable to complete effectively key infrastructure projects despite the existence of much available funding.

Plans to boost future energy supply have been disrupted in part by the continued failure to make significant progress in completing the notorious Vasiliko project that involved the construction of a terminal for the storage and regasification of liquefied natural gas. Work on this project was terminated in July 2024 when the Chinese-led consortium pulled out of the project, owing to irregularities associated with the tenders’ evaluation process. And with the termination of the project because of alleged irregularities, the EU claimed a refund of 68.5 million euros for its contribution to the project.

Later in 2024, Energy Minister George Papanastasiou stated that work on the project would resume and that the “Vasiliko terminal would be completed by end-2025” so that “natural gas can be channelled into conventional power generation in early 2026”. But to date, no progress has been made on completing the project.

Indeed, corruption and catering to the interests of business favourites by the political authorities and government bureaucrats have resulted in poor project design and evaluation and in the questionable selection of contractors that in turn have led to the delayed and often incomplete implementation of projects. Waste management projects are a classic example where the selections of successful project managers have been tainted with corruption via the grossly inefficient Tenders Review Authority and where the implementation of projects has not resulted in the environmentally friendly disposals of waste, but have often resulted in the accidental or deliberate burning of waste, that have in turn elicited fines from the EU.

Furthermore, the failure of the government to deliver on its promise to serve the interests and welfare of its residents is being increasingly hampered by the incompetence of its managers and employees. Cyprus governments, with their promotion and recruitment practices, have fallen far short in having the human resources that can manage and effectively execute government policies, particularly in the areas of designing, selecting and implementing economically viable development projects as well as in targeting and efficiently providing adequate social benefits to deserving households.

Unfortunately, many people are employed in the public sector based on who you know and/or political affiliation rather than what you know and retain their positions or even get promoted not notwithstanding their questionable job performances.

The inability of governments to deliver on the promised aim to enhance the competitiveness and productivity of the Cyprus economy is hindered to a large extent by its failure to strictly and even-handedly enforce laws and regulations that, in turn, promote corruption.

Most notably in the face of announcements by President Christodoulides and the government spokesman that “there would be zero tolerance toward corruption, tax evasion, and money laundering” many business entities continue to freely engage in tax evasion and irregularities that grossly distort genuine competition, allowing inefficient firms to prosper, while discouraging entrepreneurship and technological innovation, which are the essential ingredients for raising productivity and competitiveness.

Furthermore, with taxation on properties quite low and the implicit freedom given to property developers and hoteliers to violate building, environmental and licensing regulations, the competitiveness of the construction, real estate and tourism sectors is effectively raised, distorting in turn the allocation of resources away from potentially more efficient activities and damaging the natural environment in the process.

Recommendations

The government’s hollow promise to respond well to an outbreak of fires this summer should be a wake-up call for the Cyprus authorities. The president, ministers and government officials can’t continue to just appeal to the public with empty promises, wishful plans and populist short-term measures. It can’t be business as usual. They must address underlying problems and protect society against possible future contingencies, including natural disasters, with concrete actions. Otherwise, not only will festering problems not be overcome, but mistrust of the government will rise.

Institutional capacity of the government and its agencies, including the Tenders Review Authority, must be strengthened through appointing, recruiting and promoting competent employees, which would contribute positively to the urgent need to efficiently implement infrastructure projects, especially for sustainably increasing energy and water supplies.

The Cyprus government’s annual budget, which is the main instrument reflecting its priorities in the allocation of the country’s resources, gives scope for the government to earmark funds for actions to fulfil its promises. In the forthcoming budget, funds for development projects, including outlays for the maintenance and upgrading of infrastructure facilities as well as for social benefits, should be increased substantially, while current expenditures on employees, advisors and consultants should be constrained

But, government budgets approved by the House of Representatives in recent years have become somewhat fantasy documents. Ministers deliberately and constantly overrun budget allocations in spending on personnel, very large shortfalls in disbursing funds for implementing development projects take place, and real spending on social benefits is kept at low levels. 

To help rectify poor and unmonitored budgetary performance, expenditure outlays and progress in meeting government objectives should be seriously evaluated each quarter, with ministers and permanent secretaries held accountable for expenditure shortfalls and significant cost over-runs as well as for irregularities in diverting funds.

Finally, it is paramount that laws and regulations be strictly and even handedly enforced so that the business and natural environments can, respectively, be enhanced and preserved, enabling both the economy and society to prosper equitably.

Les Manison is a former senior economist at the International Monetary Fund, an ex-advisor in the Cyprus finance ministry and a former senior advisor at the Central Bank of Cyprus.