Questions and Answers on Cyprus' disbursement request under NextGenerationEU
How did the Commission assess Cyprus' first payment request?
On 28 July 2022, Cyprus submitted to the Commission a request for the disbursement of €85 million under the Recovery and Resilience Facility (RRF). The request was based on the achievement of the 14 milestones for the first instalment, as outlined in the Council Implementing Decision approving the plan. They cover reforms and investments in the electricity market, in the areas of energy efficiency and circular economy, and anti-corruption and transparency. Measures in the financial sector and public administration, in the domain of digital skills, as well as of Cyprus' audit and control system for the implementation of the RRF are also covered.
With their request, the Cypriot authorities provided detailed and comprehensive evidence demonstrating the fulfilment of the 14 milestones. The Commission has thoroughly assessed this information before endorsing the positive preliminary assessment of the payment request.
What are the next steps?
The Commission has now sent the positive preliminary assessment of Cyprus' fulfilment of the milestones required for this payment to the Economic and Financial Committee (EFC), asking for its opinion. The EFC's opinion, to be delivered within maximum four weeks, should be taken into account in the Commission's assessment. The Commission will adopt the decision on the disbursement of the financial contribution, in accordance with the examination procedure, through a comitology committee. Following the adoption of this decision by the Commission, the disbursement to Cyprus will take place. The amounts disbursed to the Member States will be published in the Recovery and Resilience Scoreboard. The Commission has also shared its positive preliminary assessment with the European Parliament.
How do the milestones achieved by Cyprus so far effectively support the green transition?
Six milestones in the first payment request relate to the green transition.
These include the reform on ensuring the independence of the Cyprus Transmission System Operator (TSOC) from the incumbent Electricity Authority of Cyprus (EAC). This reform will enhance competition in the electricity market by creating conditions for new investors to participate in the generation, storage, aggregation, demand response and supply of electricity. The green transition is further supported by the amendment of the Transmission and Distribution Rules (TDRs) and the Trading and Settlement Rules (TSRs) to allow storage facilities to participate in the wholesale electricity market. Furthermore, the National Action Plan for the Enhancement of Circular Economy in Cyprus was approved by the Council of Ministers. The Plan sets out actions to create a circular culture amongst citizens and entrepreneurs, support businesses via a grant scheme and create the necessary infrastructure.
In addition, several investments included in the payment request support Cyprus' green transition, such as promoting energy efficiency in buildings for SMEs, communities and the public sector, the investment in the use of renewables and energy savings by public authorities and NGOs and facilitating the transition of local communities towards climate mitigation and adaptation. The calls for proposals for these investments have been published.
How do the milestones achieved by Cyprus so far effectively contribute to the digital transition?
Two milestones related to the digital transition are included in the first payment request.
First, a National e-Skills Action Plan has been adopted by the Council of Ministers aiming at strengthening digital skills throughout the Cypriot society. The Action Plan includes, amongst other measures, the development of an e-learning platform as well as investments in digital infrastructure to support digital learning.
Second, an investment to enhance the authentication of traditional Cypriot products based on the use of advanced digital technologies. Most notably, these will help develop a mechanism for the authentication of at least three categories of Cypriot products (dairy products, honey and spirits) that are significantly affected by adulteration and fraud.
How do the milestones achieved by Cyprus so far contribute to improving Cyprus' economic, social and institutional resilience?
Cyprus successfully implemented five milestones that contribute to effectively improving its economic, social and institutional resilience.
Three completed milestones are aimed at making the justice system more efficient and fighting corruption. Through the entry into force of the laws on transparency in public decision-making and on the protection of whistle-blowers, the legal and institutional framework for fighting corruption is expected to improve. The construction of an extension to the Famagusta District Court building addresses inefficiencies caused by inadequate court premises.
Furthermore, the functioning of the public administration is expected to benefit from a review of the framework for the recruitment and promotion of civil servants, as well as the review of their performance appraisal system. The concerned milestone required the entry into force of a law providing new criteria and methods based on an objective assessment of merits for the evaluation and selection of candidates to civil service jobs, including managerial posts. It also required the entry into force of new regulations for implementing a new performance appraisal system for servants, aimed at making the performance appraisal procedure and the promotion mechanism more transparent, fair, skill-based and effective.
Finally, financial stability is expected to benefit from a reform that aims at reducing the level of non-performing loans (NPLs) in Cyprus. Namely, a package of amending laws entered into force, putting non-performing loan servicers under the Central Bank's regulation and supervision, and giving non-performing loan servicers and credit acquiring companies access to the Land Registry. This is a clear improvement of the environment for non-performing loans management.
Does the achievement of these first milestones contribute to an effective implementation of the Plan?
The milestones fulfilled constitute a significant step in the implementation of Cyprus's recovery and resilience plan, and of its broader reform agenda. They include important measures addressing long-standing challenges in the functioning of the public administration and of the anti-corruption framework, such as the reform to improve the recruitment and promotion framework of civil servants and a reform for the improvement of the legal and institutional framework for fighting corruption.
The milestones also pave the way for the green and digital transitions, through investments in the field of energy efficiency and the use of renewables, as well as through the adoption of a National e-Skills Action Plan. Cyprus has also satisfactorily fulfilled its audit and control milestone concerning the set-up of the repository system for monitoring the implementation of the RRF.
For More Information
Question and Answers on Cyprus's disbursement request under NextGenerationEU
Press release on €157 million in pre-financing to Cyprus
Question and Answers on Cyprus's recovery and resilience plan
Factsheet on Cyprus's recovery and resilience plan
Proposal for a Council Implementing Decision
Annex to the Proposal for a Council Implementing Decision
Recovery and Resilience Facility
Recovery and Resilience Scoreboard
Recovery and Resilience Facility Regulation
Question and Answers on the Recovery and Resilience Facility