Cyprus

   

Policy Performance

#37

Economic Policies

#36
With considerable reform needs remaining despite its recent progress, Cyprus falls into the bottom ranks internationally (rank 36) with regard to economic policies. Its score in this area has improved by 1.1 point relative to 2014.

Cyprus exited its bailout program in 2016. Its progress since that time has been generally good, although a renewed banking crisis and resulting bailout during the period indicated continuing financial-sector fragility. The country is seeking a new model enabling it to recover its role as an attractive investment center.

Growth has persisted at moderately high levels, driven by tourism, large construction projects and private consumption, but economic diversification is badly needed. Unemployment rates have continued to fall, but remain above pre-crisis levels. Youth unemployment remains a problem. Crisis-era public-sector wage cuts are being gradually reversed.

Tax evasion and avoidance remain problems. The tax system plays very little redistributive role. Recent budgets have focused on deficit and debt reductions. The banking bailout pushed public debt levels back above 100% of GDP, but small budgetary surpluses are expected to reduce this over time.

Social Policies

#27
With crisis-induced stress on its social system receding, Cyprus falls into the lower-middle ranks internationally (rank 27) with respect to social policies. Its score in this area has improved by 0.1 point relative to 2014.

The rate of those at risk of poverty and exclusion has continued to decline, nearly reaching pre-crisis levels. Targeted assistance policies have helped people who have lost benefits, but the share of people not in education, employment or training is deemed critically high. A national health service is under construction, but progress has been impeded by private-sector doctors’ resistance.

Although the labor-force participation rate for women is high, underdeveloped family policies make it difficult for women to combine work with parenthood. Family networks help fill serious gaps in child care. Improved pension benefits have reduced elderly citizens’ risk of poverty, but public employees fare better than private-sector workers.

Migrant EU nationals form a significant share of the labor force, but no comprehensive integration policy is in place. While policies and official rhetoric impede migrant integration, the government actively offers citizenship to wealthy investors.

Environmental Policies

#38
With fragmented and badly coordinated strategies, Cyprus falls into the bottom ranks internationally (rank 38) with regard to environmental policies. Its score on this measure has declined by 0.1 point since 2014.

Despite local and international pressures, the country has continued to prioritize financial interests over environmental protections, failing to meet EU obligations. The realization of CO2-reduction plans will require very significant action. The economic crisis has been used as a pretext for the relaxation of environmental rules, with new development projects threatening ecosystems.

Water management is a serious issue, with illegal water drilling and water-intensive development projects undermining progress. The EU has repeatedly threatened sanctions if waste-management problems remain unresolved.

The country has ratified international conventions, and participates in numerous environmental organizations. However, officials have asked for exemptions from EU environmental-protection rules.

Democracy

#32

Quality of Democracy

#32
With corruption control becoming an increasing concern, Cyprus receives a comparatively low overall score (rank 32) for democracy quality. Its score in this area has declined by 0.1 point relative to 2014.

Voting is no longer mandatory, and electoral-participation rates have declined, particularly in local elections. A number of recently passed laws regulate political-party financing, but donation and spending caps are high, and party-subsidy criteria remain opaque.

Policies combatting human trafficking and assisting victims have improved. Treatment of asylum-seekers and economic and irregular migrants has drawn criticism. The media is increasingly dependent on financial interests, undermining critical reporting. Parliament has passed a new law regulating access to government information.

Legal certainty is undermined by governmental and administrative delays in action, and by the frequency with which laws are judged unconstitutional. Court workloads make for very long case durations. The anti-corruption body is underfunded. Recent years have seen numerous officials convicted for corruption, but many were granted early release in 2018.

Governance

#39

Executive Capacity

#41
With numerous gaps in central planning and strategic powers, Cyprus receives the SGI 2018’s lowest overall score (rank 41) with regard to executive capacity. However, its score in this area has improved by 0.9 points since 2014.

Post-crisis reforms improving strategic planning capacities have been narrowed in scope, with planning remaining fragmented between ministries, without a viable centralized coordination body. Line ministries draft bills, and the finance minister has decision-making power on budgetary proposals.

The effects of a new RIA system have been muted by shifting administrative responsibility. Numerous high-impact policies are introduced without assessment. Ex post assessment is not a part of government practice. Government communication relating to serious political issues has been contradictory or even confusing.

The government has effectively restored economic growth and investment credibility. Reforms are needed to improve municipal financial management. Regulatory enforcement tends to be biased toward powerful groups and individuals.

Executive Accountability

#38
With notable monitoring-mechanism gaps, Cyprus falls into the bottom ranks internationally (rank 38) in the area of executive accountability. Its score in this area has improved by 0.7 points since 2014.

Electoral-participation rates have fallen sharply, along with interest in politics more generally. The disengagement reflects plummeting trust in politicians and institutions. Data officially made available is not systematic, and does not adequately describe government activities.

Parliamentarians have comparatively few resources, and their formal executive-oversight powers are quite limited. The Auditor General’s Office and the ombuds-like Commissioner for Administration and Human Rights have lost credibility due to a lack of impartiality and political motivated appointments.

Media coverage is often biased, with conflicts of interests often undisclosed. A past shift toward grassroots-level influence in parties has been reversed. Most economic interests focus narrowly on their sectoral demands. Civil-society groups have become increasingly sophisticated, though their crisis-era influence has waned.
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