**Cyprus Clears State Aid for €6 Million AI Initiative**
The government of Cyprus has received a significant boost in its efforts to enhance artificial intelligence (AI) capabilities, as the State Aid Control Commissioner, Stella Michaelidou, has approved a grant scheme for the Cyprus AI Factory Antenna Pharos-CY. This ruling, issued on July 17, 2026, confirms that the initiative complies with European Union state aid regulations, paving the way for its implementation.
The initiative aims to provide free advisory services to local businesses, particularly targeting small and medium-sized enterprises (SMEs). The Deputy Ministry of Research, Innovation and Digital Policy will oversee the execution and management of the scheme, which has a total budget of €6 million. Of this amount, €3 million will be sourced from the Deputy Ministry, while the remaining €3 million will be funded through the Horizon Europe programme. The project is set to conclude on March 31, 2029.
According to the announcement, the initiative will not only benefit SMEs but also extend support to larger companies, semi-government organizations, and government departments. These larger entities will receive assistance either as de minimis aid or support that does not qualify as state aid under EU law.
The primary objective of the Pharos-CY initiative is to accelerate the development and adoption of reliable AI applications in Cyprus, with a focus on key sectors such as health, sustainability, culture, and language. The Cyprus AI Factory Antenna will collaborate closely with the Greek AI Factory Pharos and the EuroHPC Joint Undertaking (JU). This partnership is expected to provide various stakeholders, including start-ups, SMEs, public sector bodies, and researchers, with access to advanced AI tools, curated datasets, and high-performance computing resources, including the Daedalus supercomputer.
In addition to providing access to cutting-edge technology, the initiative will offer tailored AI services, secure data environments, and specialized tools designed to meet Cyprus' national requirements. The Pharos-CY project aims to strengthen innovation and increase the integration of AI into productive economic activities across the country.
Michaelidou's ruling emphasized that the measure aligns with Regulation (EU) No. 651/2014, specifically Article 28, which pertains to innovation aid for SMEs. The approval from the State Aid Control Commissioner is a crucial step in enabling Cyprus to advance its artificial intelligence agenda within the framework established by the European Union.
The Council of Ministers had previously endorsed the measure through decision No. 98.229, dated June 25, 2025, further solidifying the government's commitment to fostering AI development in the region. The initiative is seen as a vital component of Cyprus' strategy to enhance its technological landscape and promote economic growth through innovation.
As the implementation phase begins, stakeholders across various sectors are expected to benefit from the resources and support provided by the Pharos-CY initiative. The project not only aims to elevate the capabilities of local businesses but also positions Cyprus as a competitive player in the evolving landscape of artificial intelligence in Europe.