At its meeting today, the Cabinet approved the measures submitted by the Ministry of Finance to address inflationary pressures and rising prices, in line with the Government’s previously announced intention and commitment.
The ability we have to propose these additional measures stems precisely from the implementation of an economic policy that generates budget surpluses and reduces public debt. “These surpluses are being passed on in this tangible way to society and to our fellow citizens,” said Finance Minister Makis Keravnos after the session concluded.
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Of the measures that have been approved, two are renewals of existing measures set to expire in the immediate future and are being extended through all of 2027. One measure that expires today is being renewed and expanded to include new everyday essentials, while there are also new measures, as well as an additional measure concerning mountainous regions. Essentially, there are seven measures.
Specifically, the tiered subsidy for the cost of electricity under the residential tariff for Category 08 vulnerable consumers, and the monthly commercial rate (category 10), which is set to expire at the end of 2026, is being extended through all of 2027.
This measure benefits 23,300 households and covers 100% of the increase in electricity costs. There is a list of 20 categories of eligible recipients.
In addition, approximately 82,500 commercial consumers—that is, businesses, stores, and small enterprises— will receive benefits on a sliding scale based on their consumption, with the subsidy reaching up to 85%.
The duration of the list of specific essential products is also being extended; it was set to expire at the end of 2026 but is now being renewed to remain in effect throughout 2027 with zero value-added tax. It includes fresh fruits, vegetables, milk, children’s diapers, adult diapers, and feminine hygiene products.
In addition, the measure providing a zero VAT rate on meat, fish, and poultry—which expires today—is being renewed. It is being renewed and expanded to include additional everyday items, such as bread, all types of bread, milk and all dairy products, coffee, sugar, and baby food.
The measure will remain in effect until May 31, 2027, with a zero VAT rate on these specific products, and its implementation begins on October 12, 2026.
For heating oil, the excise tax is being reduced to the minimum level permitted by EU law. Specifically, it will be reduced from 7.4 cents per liter to 2.1 cents per liter, representing a reduction of 5.3 cents per liter. This measure will be in effect from November 1, 2026, through April 30, 2027.
Regarding the excise tax, the Minister stated that he has already requested a derogation from the European Commission so that we may be able to reduce this tax even further. The process has begun, and he hopes that we will be able to obtain approval to further reduce the excise tax.
Furthermore, regarding the purchase and installation of photovoltaic systems by residential consumers, the value-added tax is being reduced from 19% to 9% and this measure will take effect immediately upon the issuance of the relevant decree.
In addition, a one-time payment of €200 will be made to specific groups of vulnerable citizens and recipients of public assistance.
This measure covers 53,511 beneficiaries, including recipients of the Universal Basic Income (UBI), people with disabilities who receive a transportation allowance, families of low-income pensioners, and families with three or more dependent children who receive a child allowance.
This amount may be used for any purpose, at the discretion of the families and individuals receiving the benefit, and, of course, its use for heating purposes is not excluded.
In his remarks, the Minister noted that other measures are also in effect.
Specifically, he mentioned the imposition of a reduced value-added tax rate, from 19% to 5% on the price of electricity for all residential electricity consumers, at a cost of €49 million.
The measures approved today by the Cabinet are estimated to cost €70 million and are in addition to the measures already in force and being implemented. Together, they amount to approximately €160 million.
According to Makis Keravnos, the government has initiated has also initiated another process regarding the value-added tax (VAT), which until now required us to apply VAT twice on the Electricity Authority’s invoice.
“We have initiated proceedings with the European Commission in order to demonstrate and convince them that this practice cannot be continued,” he emphasized.
At the most recent ECOFIN meeting, he noted, he also met with the relevant Commissioner and raised this issue in order to request, in the context of this entire crisis and the conflicts, for some relief measures and certain exemptions from the European Commission, so that we can provide greater relief to our fellow citizens.
Furthermore, a seventh and final measure concerns the support allowance for residents of mountainous areas, which covers 10,500 households and 24,000 beneficiaries.
The allowances have been increased compared to those currently in effect. Additionally, an increase per person is proposed for residents of these specific areas.
A €50 increase is provided per household or residential unit, depending on elevation, and a €35 increase is provided on top of existing amounts for residents of mountainous and remote areas.
The ability to implement this policy and these measures to alleviate the cost-of-living crisis is linked to the country’s sound fiscal position, the Ministry of Finance noted.
“The new economic and fiscal governance framework has been in effect in the European Union since July 2024. This policy has significant positive aspects, because it prevents member states from engaging in uncontrolled spending and leading us into further crises, such as those we faced in previous years, the memories of which are still fresh. At the same time, however, this raises an issue with countries that are implementing sound economic policies and have reduced their debt to below 60 percent, such as Cyprus,” he added.
“Today we’re at 49%, and by the end of the year we may reach 45%. At the same time, we are running budget surpluses. For the fourth year in a row, the government of Nikos Christodoulides is submitting a budget based on general government surpluses. These surpluses help us weather crises, and we are living in a period of constant and recurring crises. At the same time, however, the European Union’s economic governance imposes certain caps on spending increases in member states. In the case of Cyprus, this acts as a kind of punishment, in the sense that, while we have strong economic performance and the European Union, due to our strong economic performance, is asking us to be a larger and net contributor to the European Union budget, there is at the same time a constraint on the spending we can increase to provide more relief to our fellow citizens during a time of crisis. “I have discussed this issue at length with the Commissioner responsible and the Director-General of the relevant Directorate-General,” the Minister stated. He even expressed the impression “that fertile ground has been laid, with the support of other fellow ministers,” and he will continue this effort, “so that streamlining can take place.”
“At this time, the measures being implemented and those already in effect have a total cost of approximately €160 million. As for the child allowance, it is provided through the Deputy Ministry of Social Welfare. The Ministry of Finance considers it one of the measures being taken by the government. The Ministry of Finance has approved the proposal from a financial standpoint—that is, the proposal submitted to raise the thresholds. “The budget includes €136 million for the child allowance,” he concluded.
