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MEPs plan to prolong top-up in EU funding for projects in #Greece and #Cyprus

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Parthenon-on-Acropolis-in-Athens-GreecePlans to prolong a 10% increase in the EU contribution towards project costs in Greece until 30 June of the year following the end of its economic adjustment programme were approved by Regional Development Committee MEPs on Tuesday (11 October). MEPs also approved a special provision whereby the EU would pay up to 85% of project costs in Cyprus until the current programming period ends in 2020.

“The purpose of the legislative proposal voted today is to help those member states most affected by the financial and economic crisis to continue  implementing the programmes on the ground,” said the rapporteur and Regional Development Committee Chair Iskra Mihaylova (ALDE, BG). The legislative resolution was approved by 31 votes with three abstentions.

Prolonging top-ups for countries with an economic adjustment programme

'Top-ups' in EU contributions, on top of the EU’s usual “co-financing” share (EU member states themselves pay the rest) were first introduced in 2010. In the 2007-2013 funding period, eligibility for top ups ended on the day when a member state stopped receiving financial assistance under the economic adjustment programme. For 2014-2020, the eligibility period was aligned with the accounting year, which currently runs from 1 July to 30 June.
MEPs agreed that programme member states should continue to be eligible for top ups until 30 June of the year following the calendar year in which they cease receiving financial assistance under an economic adjustment programme. Greece is the only EU country currently under a financial assistance programme, which is due to end in August 2018.

Cyprus - 85% co-financing rate until the closure of the 2014-2020 programmes

MEPs voted in favour of extending the period of eligibility for Cyprus for the increased EU co-financing rate of 85% until the closure of the 2014-2020 programmes.

Cyprus has the status of a “more developed region” in the current EU cohesion policy and would normally receive 50% co-financing for projects under the European Regional Development Fund and European Social Fund programmes. But given that Cyprus has been experiencing economic hardship and declining investment over a long period, it was granted a higher co-financing rate of 85% between 1 January 2014 and 30 June 2017.
Next steps

The legislative resolution will be put to the plenary vote in October II. The Council agreed on 21 September to adopt the Commission proposal without amendments.

Background

Article 24 of the Common Provisions Regulation CPR allows the Commission to make increased payments under ESIF programmes - so called top-ups - to countries which are experiencing economic difficulties. At the request of a member state, interim payments may be increased by 10 percentage points above the co-financing rate applicable to each priority for the European Regional Development Fund (ERDF), European Social Fund (ESF) and the Cohesion Fund or to each measure for the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF). The top-up does not change the overall European Structural and Investment Fund allocations in 2014-2020.

Cyprus

France calls Turkish-Cypriot move on ghost town a 'provocation'

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French Foreign Affairs Minister Jean-Yves Le Drian speaks during a news conference with U.S. Secretary of State Antony Blinken at the French Ministry of Foreign Affairs in Paris, France, June 25, 2021. Andrew Harnik/Pool via REUTERS

France on Wednesday (21 July) criticized as a "provocation" a move by Turkish Cypriot authorities to partially reopen an abandoned town in Cyprus for potential resettlement, in the latest critique from the West that Ankara has dismissed, write Sudip Kar-Gupta in Paris and Jonathan Spicer in Istanbul, Reuters.

Turkish Cypriots said on Tuesday (20 July) that part of Varosha would come under civilian control and people would be able to reclaim properties - angering Greek Cypriots who accused their Turkish rivals of orchestrating a land-grab by stealth. Read more.

Varosha, an eerie collection of derelict high-rise hotels and residences in a military zone nobody has been allowed to enter, has been deserted since a 1974 war split the island.

French Foreign Minister Jean-Yves Le Drian (pictured) discussed the matter with his Cypriot counterpart on Tuesday and will raise the topic at the United Nations, a spokesperson for Le Drian's ministry said.

Cyprus is represented in the European Union by an internationally recognised Greek Cypriot government. France presides over the U.N. Security Council this month.

"France strongly regrets this unilateral move, upon which there had been no consultations, which constitutes a provocation and harms re-establishing the confidence needed to get back to urgent talks over reaching a fair and long-lasting solution to the Cypriot question," Le Drian's spokesperson said.

The EU, the United States, Britain and Greece also objected to the plan unveiled when Turkish President Tayyip Erdogan visited Nicosia on Tuesday. He called it a "new era" for Varosha, on the island's eastern coast.

Turkey's foreign ministry said the EU's critique was "null and void" since it is disconnected from realities on the ground and favours Greece, an EU member. "It is not possible for the EU to play any positive role in reaching a settlement to the Cyprus issue," it said.

Peace efforts have repeatedly floundered on the ethnically split island. A new Turkish Cypriot leadership, backed by Turkey, says a peace accord between two sovereign states is the only viable option.

Greek Cypriots reject a two-state deal for the island that would accord sovereign status to the breakaway Turkish Cypriot state that only Ankara recognises.

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Cyprus talks can resume only on two-state basis, Erdogan says

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Turkish President Tayyip Erdogan (pictured) has said peace talks on the future of ethnically divided Cyprus can take place only between "the two states" on the Mediterranean island, in comments sure to further annoy Greek Cypriots and the EU, write Jonathan Spicer in Istanbul and Michele Kambas.

Turkish Cypriot officials also announced plans for the potential resettlement of a small part of the now abandoned Greek Cypriot suburb of Varosha on the island's east coast.

That move too is likely to infuriate Greek Cypriots as essentially staking ownership over an area the United Nations says should be placed under the control of peacekeepers.

"A new negotiation process (to heal Cyprus' division) can only be carried out between the two states. We are right and we will defend our right to the end," Erdogan said in a speech in the divided Cypriot capital of Nicosia.

He was marking the anniversary of a Turkish invasion on July 20, 1974, days after a Greek Cypriot coup engineered by the military then ruling Greece. The island has remained split ever since into a Greek Cypriot south and a Turkish Cypriot north.

Greek Cypriots, who represent Cyprus internationally and are backed by the European Union, reject a two-state deal for the island which would accord sovereign status to the breakaway Turkish Cypriot state that only Ankara recognises.

Decked out in red-and-white Turkish and Turkish Cypriot flags, the celebratory mood in north Nicosia on Tuesday stood in stark contrast with a sombre mood in the south, where Greek Cypriots were woken by air raid sirens marking the day Turkish forces landed 47 years ago.

Although the United Nations has grappled inconclusively with Cyprus for decades, the dispute has come into sharper focus due to competing claims over offshore energy reserves and the recent re-opening by Turkish Cypriots of part of Varosha to visitors.

Varosha has been a Turkish military zone since 1974, widely viewed as a bargaining chip for Ankara in any future peace deal.

On Tuesday, Turkish Cypriot leader Ersin Tatar said his administration would scrap the military status of about 3.5% of Varosha and allow beneficiaries to apply to a commission mandated to offer compensation or restitution of properties.

A spokesman for Cyprus's internationally-recognised government said authorities would be briefing the EU and the United Nations Security Council on the matter.

The sealed-off area includes 100 hotels, 5,000 homes and businesses previously owned mostly by Greek Cypriots.

Turkish Cypriot authorities opened up part of it to the public in November 2020.

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NextGenerationEU: European Commission endorses Cyprus's €1.2 billion recovery and resilience plan

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The European Commission has adopted a positive assessment of Cyprus's recovery and resilience plan. This is an important step towards the EU disbursing a total of €1.2 billion in grants and loans under the Recovery and Resilience Facility. This financing will support the implementation of the crucial investment and reform measures outlined in Cyprus's recovery and resilience plan. It will play a key role in enabling Cyprus to emerge stronger from the COVID-19 pandemic.

The RRF is at the heart of NextGenerationEU which will provide up to €800bn (in current prices) to support investments and reforms across the EU. The Cypriot plan forms part of an unprecedented coordinated EU response to the COVID-19 crisis, to address common European challenges by embracing the green and digital transitions, to strengthen economic and social resilience and the cohesion of the Single Market.

An Economy that Works for People Executive Vice-President Valdis Dombrovskis (pictured) said: “Cyprus has submitted a wide-ranging recovery plan. It contains significant reforms and investments to address its main socio-economic challenges and put the country onto a greener and more digital path. Cyprus intends to invest in energy efficiency and renewable energy, improve its water and waste management, and contribute to the ‘EuroAsia Interconnector' project to link its electricity network with the Greek one in Crete. It will make considerable investments to boost very high-capacity broadband coverage, promote digital education and skills and digitalise its public services and courts. On the economic side, we welcome its focus on addressing risks from non-performing loans held by banks, improving the working environment for credit acquirers and services, and increasing access to finance and liquidity for smaller businesses. The social dimension features strongly with support for early childhood education and care, along with measures to get more young people into jobs and to promote equal opportunities. Once put into full effect, this plan will allow Cyprus to emerge stronger from the crisis.”

The Commission assessed Cyprus's plan based on the criteria set out in the RRF Regulation. The Commission's analysis considered, in particular, whether the investments and reforms set out in Cyprus's plan support the green and digital transitions; contribute to effectively addressing challenges identified in the European Semester; and strengthen its growth potential, job creation and economic and social resilience.

Securing Cyprus's green and digital transition  

The Commission's assessment finds that Cyprus's plan devotes 41% of the plan's total allocation to measures that support climate objectives. The plan includes reforms relating to the introduction of green taxation, the liberalisation of the electricity market, facilitating energy renovations in buildings and accelerating electric mobility. The plan further includes a broad range of energy efficiency and renewable energy investments targeting households, enterprises, municipalities and the wider public sector and non-governmental organisations (‘NGOs'). The plan includes investments relating to the mass roll-out of smart meters as well as the EuroAsia Interconnector project, which should aid electricity generation from cleaner sources, in particular renewables.

The Commission's assessment finds that Cyprus's plan devotes 23% of its total allocation to measures that support the digital transition. Measures related to the digital transition are spread out throughout the plan. The plan includes considerable investments in connectivity, through a series of measures aiming to ensure coverage with very high-capacity broadband. It promotes digital education and skills by enhancing digital infrastructure and curricula in schools, training teachers, and investing in digital skills training programmes. It also contains projects expected to promote the digitalization of public services and the digital transformation of the courts system.

Reinforcing Cyprus's economic and social resilience

The Commission considers that Cyprus's plan includes an extensive set of mutually reinforcing reforms and investments that contribute to addressing all or a significant subset of the economic and social challenges outlined in the country-specific recommendations addressed to Cyprus.

The plan includes measures to strengthen the public employment services, with a particular focus on youth employment. It provides for measures to increase the quality of education and training. The plan also supports early childhood education and care by extending free compulsory pre-primary education from the age of four, investing in childcare centres accompanied by a national action plan on early childhood education that aims to foster equal opportunities for all children and fulltime labour market participation of carers, notably women. The implementation of the plan is expected to strengthen the capacity, quality and resilience of the health and civil protection systems through measures aiming at upgrading infrastructure and equipment and setting up dedicated information systems, next to promoting investments in communication systems and e-Health.

Commission President Ursula von der Leyen said: “I am delighted to present the European Commission's positive assessment of Cyprus's recovery and resilience plan. The plan will have a real, meaningful impact on securing Cyprus's green and digital transitions. A significant part of the funds will be devoted to fight climate change, including the protection against forest fires. Further measures to promote energy efficiency, sustainable mobility, improve education and training and expand connectivity will leave Cyprus well placed to benefit from the opportunities and face the challenges that the twin transition present. I am proud that NextGenerationEU will provide €1.2 billion to support these crucial projects.”

The establishment of a National Promotional Agency and the introduction of funding programmes and schemes are expected to improve access to finance and liquidity, especially for small and medium-sized enterprises. Grant schemes for research and innovation as well as the establishment of a central knowledge transfer office are expected to increase investments in research and innovation. The plan aims to reduce risks in the banking sector related to the legacy non-performing loans through a dedicated action plan as well as through measures to improve the working environment for credit acquirers and credit servicers.

The plan represents a comprehensive and adequately balanced response to Cyprus's economic and social situation, thereby contributing appropriately to all six pillars referred to in the RRF Regulation.

Supporting flagship investment and reform projects

The Cypriot plan proposes projects in all seven European flagship areas. These are specific investment projects which address issues that are common to all Member States in areas that create jobs and growth and are needed for the twin transition. For instance, Cyprus has proposed to invest €40 million to promoting energy efficiency investments in SMEs, municipalities and the wider public sector and €35 million on the expansion of very high capacity networks in underserved areas.

The assessment also finds that none of the measures included in the plan significantly harm the environment, in line with the requirements laid out in the RRF Regulation.

The control systems put in place by Cyprus are considered adequate to protect the financial interests of the Union. The plan provides sufficient details on how national authorities will prevent, detect and correct instances of conflict of interest, corruption and fraud relating to the use of funds

Economy Commissioner Paolo Gentiloni said: “With the approval by the Commission of Cyprus's recovery and resilience plan, the country takes a step closer to accessing €1.2bn in funding to support the renewal of its economy. Cyprus is seizing the opportunity offered by NextGenerationEU to make important progress with the climate transition and in boosting its digital competitiveness. Particularly beneficial to Cyprus will be the projects connecting the island to the Greek electricity and high-capacity broadband networks. I also welcome the commitments to addressing those features of Cyprus's tax system that facilitate aggressive tax planning.”

Next steps

The Commission has today adopted a proposal for a Council Implementing Decision to provide €1.2bn in grants and loans to Cyprus under the RRF. The Council will now have, as a rule, four weeks to adopt the Commission's proposal.

The Council's approval of the plan would allow for the disbursement of €157m to Cyprus in pre-financing. This represents 13% of the total allocated amount for Cyprus.

The Commission will authorise further disbursements based on the satisfactory fulfilment of the milestones and targets outlined in the Council Implementing Decision, reflecting progress in the implementation of the investments and reforms. 

More information

Questions and Answers: European Commission endorses Cyprus's recovery and resilience plan

Recovery and Resilience Facility: Questions and Answers

Factsheet on Cyprus' recovery and resilience plan

Proposal for a Council Implementing Decision on the approval of the assessment of the recovery and resilience plan for Cyprus

Annex to the Proposal for a Council Implementing Decision on the approval of the assessment of the recovery and resilience plan for Cyprus

Staff-working document accompanying the proposal for a Council Implementing Decision

Recovery and Resilience Facility

Recovery and Resilience Facility Regulation

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