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European Structural and Investment Funds in Cyprus

Excerpt from the COM(2015) 639 final, ANNEX II: Country fiches:

1. ESIFs in Cyprus

Economic and social challenges in the ESIF context

As a condition for Cyprus’ EUR 10 billion financial package (consisting of EUR 9 billion under the European stability mechanism and EUR 1 billion from the IMF), the country is under an economic adjustment programme covering the 2013-2016 period.

In the context of a still-challenging economic environment, Cyprus is losing ground on some of its national targets for the Europe 2020 strategy. For example, its current employment and poverty rates deviate considerably from the national targets. While the two education indicators of the Europe 2020 strategy improved in 2014 and are both in line with the national targets, Cyprus has the lowest employability rate for recent graduates in the EU (64.9 % as against the EU average of 80.7 % for 2013). The percentage of GDP that Cyprus spends on R&D remains slightly below the national target. The climate indicators of the Europe 2020 strategy remain on course: the energy efficiency indicator for 2013 exceeded the interim annual target and the renewable energy sources indicator performed satisfactorily. However, Cyprus’ environmental performance remains very poor, in particular on solid waste management, where there are low levels of recycling.

Main priorities and results

ESIF programmes in 2014-2020 are designed around three key priorities: 1) competitiveness; 2) employment and social inclusion; and 3) the sustainable use and protection of natural resources.

The ESI Funds will be used to diversify the structure of the economy and make it more competitive by strengthening business innovation and encouraging cooperation between businesses and research facilities in the areas identified in the smart specialisation strategy. Entrepreneurship and the competitiveness of SMEs will be promoted, in particular in the tourism, food and aquaculture (production to be increased by 46%) sectors. ESI Funds are expected to support more than 600 SMEs and create 1 200 new jobs, while the proportion of GDP spent on R&D should increase from 0.47 % of GDP in 2012 to 0.5 % in 2020, while also leveraging private investments. ESIF will also support investment in fisheries to reduce the negative impact of fishing activities on the marine environment and support SMEs working in the aquaculture and processing sector. Cyprus expects to boost e-governance and digital entrepreneurship through investment in ICT and to increase ICT use by SMEs. It also expects high-speed broadband coverage to reach 50 % of households, while ICT use among the public and SMEs is expected to increase by 10 % and 6 % respectively.

ESIF will invest in employment and social cohesion, helping to increase employment opportunities, focusing on vulnerable groups such as the unemployed, long-term unemployed and especially young people. The Youth Employment Initiative (YEI) will also be used to support this latter group. More than 14 000 unemployed people are expected to benefit from ESIF interventions the majority of which (9 000) are young people. From those 5 800 will receive support under the YEI and the remaining from the ESF. Due to the ESIF support, labour market participation and employment rate are expected to increase to meet the target of 75-77 % in 2020 (2014 figure: 67.3 %). ESI funding is also expected to improve public administration. In addition, it will improve social inclusion by helping vulnerable people to participate in the labour market and supporting the creation of 180 social enterprises. This will help Cyprus to meet its target of reducing poverty to 19.3 % in 2020 (from 27.8 % in 2013). ESIFs are expected also to help improve lifelong learning and vocational education and training, particularly by aligning the provision of skills with the needs of the labour market.

The funds will help Cyprus shift to a low-carbon and resource-efficient economy by promoting energy efficiency (2020 target 14.3 %, compared with 12.3 % in 2011) and renewable energy consumption (13 % in 2020, compared with 7.7 % in 2011). In addition, some 3 500 households will be helped to improve their energy consumption, moving them into a more energy-efficient classification.

ESI Funds will be spent on addressing Cyprus’ pressing need to comply with EU requirements on the management of solid and liquid waste. Cyprus is expected to increase its recycling rate to 50 %, while 2 300 households (in terms of equivalent population) will receive improved waste water treatment. ESIF will also be used to complete the investments in Cyprus’ TEN-T port and its connections. As a result, goods transport is expected to increase from 300 000 to 1 million TEU. Improvements to urban transport mobility, in particular in Nicosia, should result in twice as many people using public transport.

EAFRD support will be focused on investments to promote the sustainable management and use of natural resources, the conservation of biodiversity, adaptation to climate change and the creation of new jobs in rural areas. EMFF support will be focused on the protection and rehabilitation of marine biological resources.

Use of financial instruments and territorial tools

Cyprus has indicated an amount of EUR 15 million to be allocated to financial instruments for SME support., Ex ante assessments have been launched in order to assess the scope for equity, loan and guarantee schemes in SME support, ICT, the energy sector and investment in the environment and transport.

Cyprus has allocated a considerable amount (20% of ERDF funding, approximately EUR 60.2 million) to sustainable urban development. The aim is to promote integrated action to tackle the economic, environmental, and social challenges affecting the country’s four main cities. This is far above the minimum 5 % required by EU legislation. Integrated territorial investments will not be implemented. On the other hand, community-led local development will be carried under EAFRD and EMFF programmes.

Key information

2. Pre-conditions for effective and efficient use of ESIFs

EMFF-specific ex ante conditionality (EAC) on fishing capacity reports has been partially fulfilled and an action plan is developed. Of 11 thematic EACs, five have not been fulfilled. The most important relate to broadband network, water pricing and river basin planning including waste recycling and re-use. Action plans are developed and deadlines for delivery are set. General EAC related to statistics and indicators has not been fulfilled, but an action plan has been drawn up to implement it by December 2015.

3. ESIF management

The number of programmes in Cyprus remains unchanged from the 2007-2013 programming period. The country has set up a single managing authority (the Directorate-General for European Programmes, Coordination, and Development) and a joint monitoring committee to coordinate ERDF/cohesion fund and ESF programmes, while a single information system is used for all programmes.

4. Simplification for beneficiaries

The Cypriot authorities intend to make more extensive use of simplified cost methodologies and upgrade the dedicated information system. They also plan to improve use of electronic forms and the interoperability among the national administrative services for the automatic issuance and reduce the number of documents and certificates needed. 

Source: COM(2015) 639 final, ANNEX II: Country fiches to the Communication from the Commission Investing in jobs and growth - maximising the contribution of European Structural and Investment Funds, Brussels, 14.12.2015.