Cyprus cost-of-living relief fails to tackle high energy costs

Like putting a band-aid on a bullet wound, would an apt analogy for the relief measures announced at the end of September to tackle the rising cost of living. But economic observers highlight another issue: the average consumer would be feeling less pain had the government done a modicum to bring down baseline energy prices. The past has now come back to bite. With people feeling the squeeze, and consumer advocacy groups complaining, the government in late September unveiled its latest relief package, costed at €70 million. Chiefly, the tax on heating oil will be cut by 5.3 cents per litre as of November 1. The package includes an extension on electricity subsidies, zero VAT on a wider range of essential goods, reduced VAT on residential photovoltaic systems and additional financial assistance for vulnerable households and residents of mountainous areas. Days later, President Nikos Christodoulides boasted that the government has spent “more than a billion” to ease the cost of living. He did not specify the time period, but presumably he meant the duration of his administration since 2023. Is the €1 billion number even accurate? More on that later. High energy costs blamed for Cyprus inflation Economist at the European University Cyprus Alex Apostolides feels that any discussion of the topic should start with the question of why – why is Cyprus more affected by inflation than other European countries? “In August 2026 we had the third highest inflation rate in the EU – 5.2 per cent,” he said. Without prompting, he immediately provided the reason: “A complete, absolute failure of our green transition. “This is due to our reliance on mazut for power generation,” he said. “And this government – though not the only one to blame – has played a significant part in the failure of the green transition. And I include in this the stalled LNG project in Vasiliko – the cheaper natural gas would have a made difference.” OK so Cyprus had one of the worst inflation rates in the EU bloc. But playing the devil’s advocate, we asked whether this snapshot might be unfair, and whether the difference between Cyprus’ inflation and that of other countries is not that significant anyway. It turns out the answer is no – Cyprus’ inflation numbers are bad, both in absolute and relative terms. Apostolides cited the example of Malta, a comparable country to Cyprus. Their inflation in August registered at 2 per cent. “They [in Malta] also import all their energy, just like we do. Except, some of their imports include natural gas, used for domestic electricity generation via local power plants. Meaning their energy costs are lower than ours.” Heating oil tax cut offers limited savings Regarding the lower tax on heating oil, on paper it may sound impressive: slashed from 7.4 cents a litre to 2.1 cents. The average household in Cyprus uses between 350 and 400 litres of heating oil over the winter season. A household that bought 350 litres in November 2025 at €0.96 a litre paid about €335. The price has since spiked to nearly €1.7, so filling up the tank now costs just over €600. With the excise duty discount, the savings are meagre, almost negligible. Doing the arithmetic, €1.7 multiplied by 350 litres equals €595; and applying the discounted tax of 2.1 cents per litre, €595 multiplied by 1.021 gives €607 – what you actually pay. Compare this to the previous excise duty of 7.4 cents: €595 multiplied by 1.074 equals €639. The savings work out to just €32 – for the whole winter. Christodoulides said one billion euro has been spent on relief measures Contacted by the Cyprus Mail, economist Savvakis Savvides remarked: “They’re treating the symptoms. The problem is a lot deeper.” Back to Apostolides, who pointed out that high energy costs aside, and the associated lapses in policy, there are other factors which, if better handled, would have left people with more disposable income. The tax reform, enacted this year, is one such example. Under the reform, the personal tax-free threshold went up from €19,500 to €22,000. Individuals who previously paid tax on earnings above €19,500 now get to keep more of their money. An individual making €25,000 sees their taxable base reduced by €2,500, resulting in direct tax savings of €500 per year. “Well, a €500 benefit a year is not a lot; inflation easily eats into it.” At the time, the government refused to listen to political parties calling for higher tax breaks. A third major objection Apostolides had was with the president’s constant use of the term “targeted measures”. “If you give a VAT discount on a certain consumer product, is that targeted? No, because everyone – including millionaires- benefits from the discounted VAT.” The discount on heating fuel is likewise not targeted. And as for the direct financial assistance given to certain groups, the economist noted that it’s a one-off. Government’s €1bn relief claim questioned Now to the €1 billion number (spent on economic relief) mentioned by the president. Is it legit? “Who knows?” quipped Apostolides. “Economists expect politicians to make evidence-based statements. I can’t even venture to guess if the number is accurate.” Here, a side note that has to do with communication: whenever a president makes a throwaway remark – like the one about the €1 billion – he is not challenged on the spot by the press gaggle around him at the time. It’s then left to the public to conjecture what he meant. Also, according to Apostolides, with that statement the president undermined his own government – namely, his commitment to track the goals of the administration. Here, Apostolides was referring to the website which serves as the official portal of the Presidency of the Republic for tracking government work and transparency. On the website, there is no mention of the €1 billion cited by the president – nor an overall tally of the relief measures during his administration. The Cyprus Mail took a look at the subsection titled ‘Support measures related to the cost of living’. It lists the various relief packages, starting from October 2023 up until the most recent €70 million package. Adding them up, and taking them at face value, they tally to €545 million – no small amount, but still a far cry from the claimed €1 billion. We reached out to the finance ministry, asking about the €1 billion figure and whether it checks out. We did not receive a response. Transport costs and CoLA add to pressure Whereas Apostolides conceded that, as things stand, the various support measures are necessary, he stressed that they shouldn’t be necessary. “But they’ve become necessary because of the failure of the green transition.” He gave the example of people traveling by public transport, so not spending fuel on their private car. A bus ticket in Nicosia (one-way trip) costs €2.70. With a round-trip, it comes to €5.40. Plus, tickets are non-transferable. So, by taking the bus, are you actually saving money? Not really. And the 30-day urban bus pass for Nicosia costs €67. This means you have to take 25 trips to get your money’s worth, so to speak. Then there’s the whole other matter of photovoltaics being switched off to prevent grid system overload. But people invested money in PV. Beyond all that, the rising cost of living is almost certain to drive up CoLA – and thus the public payroll. People working in the broader public sector are entitled to CoLA. According to the Statistical Service, total employment in the public sector came to 78,000 persons during the second quarter of this year. As of July 2026, CoLA rose, now indexed at 90 per cent of the increase in the Consumer Price Index. And under the phase-in schedule, as of July 2027 CoLA will be indexed at 100 per cent of the CPI. “It’s bound to increase the public payroll,” said Apostolides. “What’s more, the extra disposable income could itself drive up inflation, at a time you’re trying to rein it in.”