Key Challenges

Need to treat reforms holistically
New challenges, in addition to existing challenges, have emerged from the pandemic for Cyprus and the world. A key priority is to design plans to face the impact from subsequent waves. In the short term, recovery plans should aim to reallocate resources to offer remedies to the uneven impact of the pandemic. Reforms that have stalled for many years should be approached holistically, if the goal is to achieve a sustainable economy. Emphasis should be on reforms that warrant a trustful policy environment, starting with the rule that policies should be based on sound regulation. Addressing structural and other deficiencies in the administration and expansion of effective strategic planning on all levels is fundamental. Establishing mechanisms for self-monitoring and continuously reassessing policies, overall and per service, is required. Ultimately, existing governance values need to change, re-establishing respect for and enhancement of fundamental democratic practices (i.e., the rule of law).
Financial sector still
not competitive
Within the financial sector, the government must prioritize measures that strengthen Cyprus’s weak competitiveness. A comprehensive plan is needed to definitively settle issues related to non-performing loans. To avoid fiscal risks and safeguard the benefits to health provided by the General Health System (GESY), it is urgent to devise efficient oversight mechanisms and upgrade public healthcare services.
Opportunities for
green policy
The opportunity offered by the Recovery and Resilience Plan for green policies challenges the government to holistically review its choices on social and environmental issues. A prerequisite for sustainability is to plan for a fully green economy. This requires a shift of emphasis from business and financial interests to the benefit of environmental protection before the resulting destruction becomes irreparable. This shift places greater weight on broader social benefits rather than on individual interests. To be meaningful, the small-scale funding from the Recovery and Resilience Plan for green public transportation and the promotion of renewable energy sources must be expanded rapidly. This would benefit the economy, the environment and society. The pandemic stressed once again that economic activity requires differentiation and a shift to productive sectors.
Tax revisions should promote equality
The decision to revise the tax system is an opportunity to promote equality. Measures are needed to fight aggressive tax planning, problems with tax collection and avoidance, and speed up the clearance of tax declarations. For the system to ensure the equitable treatment of taxpayers and a fairer reallocation of resources, corporate taxation should not upset equity. Sectors such as family policies, pensions, healthcare and social welfare need sufficient funding. Enhancement of social equity is a first step to gradually return to a functioning welfare state.
More monitoring needed to reduce rule-breaking
Sustainability is and will remain at risk if the discretion and authority granted to the Council of Ministers is not limited. The unscrupulous violation of laws – such as is evident in the citizenship-for-investment scheme, the disorderly granting of construction permits for skyscrapers and the failure to protect the environment – point to the need to limit the powers of the Council of Ministers. Additionally, monitoring mechanisms are needed for effective oversight. The imminent reform of the justice system will only be the beginning in resolving problems with the administration of justice. More measures and time are needed so that justice benefits society, the financial and other sectors, and ultimately democracy. Beyond the need for transparency across all decision-making levels, state officials and political actors should endorse and respect ethical standards, and honestly accept when their wrongdoing is documented.
Coordination, proper budgeting are priorities
For reforms to bear results, a regular review of the government’s actions and operations at all levels is required. Public bodies with a clear mandate for coordination and action would greatly benefit the efficiency of the state. With the imminent reform of local government, developing strategic planning capacities, applying rules and standards, and proper budget execution must be key priorities.
Rule of law should be primary focus
To conclude, meritocracy remains an unfulfilled promise and the public sector still requires capable managers to be appointed to key positions to efficiently promote reforms. For any reform to be successful, the administration needs to place service quality and the rule of law above all other aspirations.

Party Polarization

Polarization has
limited impact
A long-standing cleavage between left and right, shaped in the 1940s, has weakened considerably. In the 2021 elections, the two poles secured a combined 50.1% of the vote, 32.2% of the electorate. As the Cypriot president cannot face a vote of confidence, the impact of party polarization is limited. Neither a parliamentary vote, even by a party with government ministers, against a government proposal nor the outcome of parliamentary elections have any destabilizing effect on the government or the political system.
Cyprus Problem is
key divide
Party positions are polarized with respect to the Cyprus Problem, and often motivate voting patterns even on unrelated matters. The main challenges involve finding common ground, forming a voting majority, avoiding arbitrary decisions based on precarious or circumstantial majorities and political expediency. Political parties generally avoid legislation which could reduce their support from powerful interest groups.
Elections result in
policy reversals
Ideological polarization becomes more visible right before and immediately after a change of government, with those rising to power reversing the previous government’s policies. This affects, in particular, the economy and the education system. (Score: 7)
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