COUNCIL RECOMM END ATION 
of 20 July 2020 
on the 2020 National Refor m Prog ramme of Cypr us and deliv ering a Council opinion on the 2020 
Stability Prog ramme of Cypr us 
(2020/C 282/13) 
THE COUNCIL OF THE EUR OPEAN UNION, 
Havi ng regar d to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) 
thereof, 
Havi ng regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary 
positions and the surveillance and coordination of economic policies (1), and in particular Article 5(2) thereof, 
Havi ng regard to Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on 
the prevention and correction of macroeconomic imbalances (2), and in particular Article 6(1) thereof, 
Havi ng regar d to the recommendation of the European Commission, 
Havi ng regar d to the resolutions of the European Parliament, 
Havi ng regar d to the conclusions of the European Council, 
Havi ng regar d to the opinion of the Emp loyment Committ ee, 
Havi ng regar d to the opinion of the Economic and Financial Committee, 
Havi ng regar d to the opinion of the Social Prote ction Committ ee, 
Havi ng regar d to the opinion of the Economic Policy Committ ee, 
Whereas: 
(1) On 17 December 2019, the Commission adop ted the Annual Sustainable Growth Strateg y, marking the start of the 
2020 European Semeste r for economic policy coordination. It took due account of the European Pillar of Social 
Rights, proclaimed by the European Parliament, the Council and the Commission on 17 November 2017. On 
17 December 2019, on the basis of Regulation (EU) No 1176/2011, the Commission also adopt ed the Aler t 
Mechanis m Repor t, in which it identif ied Cypr us as one of the Member States for whic h an in-dep th review would 
be carried out. On the same date, the Commission also adop ted a recommendation for a Council recommendation 
on the economic policy of the euro area. 
(2) The 2020 countr y repor t for Cypr us was published on 26 Febr uary 2020. It assessed Cypr us’s progress in addressing 
the countr y-specif ic recommendations adopt ed by the Council on 9 July 2019 (3) (‘the 2019 countr y-specific 
recommendations’ ), the follo w-up given to the countr y-specific recommendations adopt ed in previous years and 
Cypr us’s progress towards its national Europe 2020 targets. It also included an in-depth review under Article 5 of 
Regulation (EU) No 1176/2011, the results of which were also published on 26 Febr uary 2020. The Commission’s 
analysis led it to conclude that Cypr us is exper iencing exces sive macroeconomic imbalances. In particular , the 
financial sector is burdened by a very high share of non-performing loans and high stoc ks of private, public and 
external debt weigh on the econom y, in a context of moderate poten tial growth. 
(3) On 11 March 2020, the World Health Org anization officially declared the COVID-19 outbreak a global pandemic. It 
is a severe public health emerg ency for citizens, societies and economies. It is putting national health systems under 
severe strain, disrupti ng global supply chains, causing volatility in financial mark ets, trigge ring consumer demand 
shocks and having negative effects across various sectors. It is threatening people ’s jobs and incomes as well as 
compan ies’ business. It has delivered a major economic shock that is already having serious repercussions in the 
Union. On 13 Marc h 2020, the Commission adopt ed a communication calling for a coordinat ed economic 
response to the crisis, involving all actors at national and Union level. 
(1)OJ L 209, 2.8.1997, p. 1. 
(2)OJ L 306, 23.11.2011, p. 25. 
(3)OJ C 301, 5.9.2019, p. 80. EN Offi cial Jour nal of the European Union C 282/82                                                                                                                                         26.8.2020   
(4) Several Member States have declared a state of emergency or introduced emergency measures. Any emerg ency 
measures should be strictly propor tionat e, necessar y, limited in time, and in line with European and intern ational 
standards. They should be subject to democratic oversight and independent judicial review . 
(5) On 20 March 2020, the Commission adopt ed a communication on the activation of the general escape clause of the 
Stability and Growt h Pact. The general escape clause, as set out in Articles 5(1), 6(3), 9(1) and 10(3) of Regulation 
(EC) No 1466/97 and Articles 3(5) and 5(2) of Council Regulation (EC) No 1467/97 (4), facilita tes the coordination 
of budgetary policies in times of severe economic down turn. In its communication of 20 March 2020, the 
Commission considered that, given the expected severe economic downtur n resulting from the COVID-19 
pandemic, the conditions for the activation of the general escape clause had been met and asked the Council to 
endorse this conclusion. On 23 March 2020, the ministe rs of finance of the Member State s agreed with the 
assessment of the Commission. They agreed that the severe economic downtur n requires a resolut e, ambitious and 
coordinat ed response. The activation of the general escape clause allows for a temporar y depar ture from the 
adjustment path towards the medium-ter m budgetary objective, provid ed that this does not endanger fiscal 
sustainability in the medium term . For the corrective arm, the Council may also decide, on a recommendation from 
the Commission, to adopt a revised fiscal trajector y. The general escape clause does not suspend the procedures of 
the Stability and Growth Pact. It allows Member States to depar t from the budget ary requirements that would 
normally apply while enabling the Commission and the Council to under take the necessar y policy coordination 
measures within the framew ork of the Pact. 
(6) Continued action is required to limit and control the spread of the COVID-19 pandemic, strengthen the resilience of 
the national health system s, mitig ate the socioeconomic consequences of the pandemic through suppor tive 
measures for business and households, and ensure adequate health and safety conditions at the workplace with a 
view to resuming economic activity . The Union should fully use the various tools at its disposal to suppor t Member 
State s’ efforts in those areas. In parallel, Member States and the Union should work together to prepare the measures 
necessar y to bring about a retur n to the normal functioning of our societies and economies and to sustainable 
growth, integratin g, inter alia, the green transition and the digital transf ormation, and drawing lessons from the 
crisis. 
(7) The COVID-19 crisis has highlight ed the flexibility that the internal market offers to adapt to extraordinar y 
situations. Howe ver, in order to ensure a swif t and smooth transition to the reco very phase and the free mov ement 
of goods, services and workers, excep tional measures that prevent the internal mark et from functioning normally 
should be remo ved as soon as they are no long er indispensable. The current crisis has shown the need for crisis 
preparedness plans in the health sector . Impro ved purchasing strateg ies, diversifi ed supply chains and strateg ic 
reser ves of essential supplies are among the key elements for developing broader crisis preparedness plans. 
(8) The Union legislator has already amended the relevant legislative framewor ks by means of Regulations (EU) 
2020/460 (5) and (EU) 2020/558 (6) of the European Parliament and of the Council to allow Member States to 
mobilise all unused resources from the European Structural and Investment Funds so they can address the 
excep tional effects of the COVID-19 pandemic. Those amendments will provide additional flexibility , as well as 
simplified and streamlined procedures. To alleviate cash-f low pressures, Member State s can also benefit from 
a 100 % co-financing rate from the Union budget in the 2020-2021 accounting year. Cypr us is encourag ed to make 
full use of those possibilities to help the individuals and sectors most affect ed. 
(4)Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit 
procedure (OJ L 209, 2.8.1997, p. 6). 
(5)Regulation (EU) 2020/460 of the European Parliament and of the Council of 30 March 2020 amending Regulations (EU) 
No 1301/2013, (EU) No 1303/2013 and (EU) No 508/2014 as regar ds specific measures to mobilise investments in the healthcare 
systems of Member States and in other secto rs of their economies in response to the COVID-19 outbreak (Corona virus Response 
Invest ment Initiative) (OJ L 99, 31.3.2020, p. 5). 
(6)Regulation (EU) 2020/558 of the European Parliament and of the Council of 23 Apr il 2020 amending Regulations (EU) 
No 1301/2013 and (EU) No 1303/2013 as regar ds specific measures to provide excep tional flexibility for the use of the European 
Structural and Investments Funds in response to the COVID-19 outbreak (OJ L 130, 24.4.2020, p. 1). EN Offi cial Jour nal of the European Union 26.8.2020                                                                                                                                         C 282/83   
(9) The socioeconomic consequences of the COVID-19 pandemic are likely to be unevenly distr ibut ed across the 
countr y because of diffe rent specialisation patter ns, in particular in areas mark edly relying on tour ism and more 
generally on face-to-f ace business with consumers. This entails a risk of widening territori al dispar ities within 
Cypr us. Combined with the risk of a temporar y unrav elling of the converg ence process between Member States, the 
current situation calls for target ed policy responses. 
(10) On 7 May 2020, Cypr us submitted its 2020 National Reform Programme and its 2020 Stability Programme. In 
order to take account of their inter linkages, the two programmes have been assessed at the same time. 
(11) Cypr us is currently in the preventive arm of the Stability and Growth Pact and subject to the debt rule. 
(12) In its 2020 Stability Programme, the govern ment plans the headline balance to deter iorate from a surplus of 1,7 % of 
gross domestic product (GDP) in 2019 to a deficit of 4,3 % of GDP in 2020. The deficit is projected to decline to 
0,4 % of GDP in 2021. After decreasing to 95,5 % of GDP in 2019, the general govern ment debt-t o-GDP ratio is 
expecte d to increase to 116,8 % in 2020 according to the 2020 Stability Programme. The macroeconomic and 
fiscal outlook is affected by high uncer tainty because of the COVID-19 pandemic. In addition, there are risks 
underlying the budgetary projections, namely explicit contingent liabilities and poten tial financing needs of public 
hospitals during the first years of the implementation of the National Health Insurance System. 
(13) In response to the COVID-19 pandemic, and as part of a coordinat ed Union approac h, Cypr us has adop ted timely 
budgetary measures to increase the capacity of its health system, contain the pandemic, and provid e relief to those 
individuals and sector s that have been particularly affect ed. According to the 2020 Stability Programme, those 
budgetary measures amounted to 4,4 % of GDP . The measures include strengthening health care services with an 
extra budget of up to 0,5 % of GDP , subsidised wage s to keep emplo yees on the payroll in case of suspended 
business operations (2,7 % of GDP) and income suppor t for the small businesses and the self-emplo yed (0,3 % of 
GDP). In addition, Cypr us has announced measures that, while not having a direct budgetary impact, will contr ibut e 
to provi ding liquidity suppor t to businesses, including for exam ple the defe rral of VAT payment for a period of two 
months. Overall, the measures taken by Cypr us are in line with the guidelines set out in the Commission 
communication of 13 March 2020. The full implementation of the emerge ncy measures and of suppor tive fiscal 
measures, followed by a refocusing of fiscal policies towards achieving prudent medium-ter m fiscal positions when 
economic conditions allow , will contr ibut e to preser ving fiscal sustainability in the medium term . 
(14) Based on the Commission 2020 spring forecast under unchang ed policies, Cypr us’s general government balance is 
forecast at -7 % of GDP in 2020 and -1,8 % of GDP in 2021. The general govern ment debt ratio is projected to 
reach 115,7 % of GDP in 2020 and 105 % of GDP in 2021. 
(15) On 20 May 2020, the Commission issued a repor t prepared in accordance with Article 126(3) of the Treaty because 
of Cypr us’s non-com pliance with the debt rule in 2019 and the planned breach of the 3 %-of-GDP deficit threshold 
in 2020. Overall, the Commission’s analysis sugges ts that the debt criterion as defined in the Treaty and in 
Regulation (EC) No 1467/97 has been complied with, while the deficit criterion has not been fulfilled . 
(16) Cypr us reacted to the COVID-19 outbreak with a range of measures to mitig ate the economic impacts of the crisis. 
On 15 March 2020 the govern ment put forward a financial suppor t programme to safeg uard public health and 
ensure the economic survival of businesses and emplo yers. The programme earmarks EUR 100 million for financial 
suppor t to the health sector to combat the pandemic, including for the recr uitment of additional medical, nursing 
and suppor t staff, and for equipment and infrastr ucture. It sets out a series of measures to suppor t enterpr ises by 
enhancing liquidity , e.g. suppor t schemes for businesses and the self-emplo yed, and temporar y suspension of VAT 
payments for companies. The packag e also includes dedicat ed suppor t of EUR 11 million to help the tour ism sector 
recover . 
(17) The COVID-19 crisis demonstrates the need to channel inve stments to impro ve and moder nise public healthcare, 
restore capacity and implement the healthcare reform. The new healthcare system offers better access to primar y 
care services, appropr iate guidance and treatments based on clinical protocols. It also provid es for universal 
entitlement to affordable health services in the context of the COVID-19 outbreak . Cypr us has an established 
emerge ncy pandemic plan and allocat ed additional resources to prevent and manag e the impact of infection and 
contagion. In the medium term , Cypr us needs to steer investments towards increasing the health syste m’s 
effectiveness, accessibility and overall resilience. Additional resources for the health syste m should prevent future 
shor tages of medical staff, critical medical supplies and infrastr ucture. The smooth implementation of the EN Offi cial Jour nal of the European Union C 282/84                                                                                                                                         26.8.2020   
healthcare reform, as planned, is central to ensur ing access to healthcare and universal coverage. Digital health 
solutions and new applications would contr ibut e to steppin g up the deplo yment of e-health services and improving 
telecon sultations and alert mech anisms. Policies that impro ve hospital capacity , address health workers’ working 
conditions and ensure the deplo yment of personal prote ctive equipment, testing, medicines and medical devices are 
vital. Integration with long-t erm care as well as primar y and community care is crucial in light of demographic 
change and the need to suppor t the most vulnerable, including people with disabilities. 
(18) After consistent positive labour market developments in recent years, Cypr us will now be facing challeng es in term s 
of emplo yment levels due to the health crisis. Further efforts are needed to minimise the socioeconomic impact of 
the crisis. Cypr us has already adopt ed emergency measures including shor t-time work sche mes and the extension of 
unem ployment benefi ts to the self-em ployed. It will be important to retain emplo yment and ensure the 
imp lementation of announced measures, in close consultation with the social partners. Strengthening the capacity 
of the public emplo yment services with permanent staff will be key, in particular by safeg uarding the continuation 
of services of emplo yment counsellors under temporar y contracts expir ing in the second half of 2020. This will 
avoid putting the services under further strain and provid e efficient suppor t to the newly unem ployed and other 
vulnerable groups, such as young people not in education, emplo yment or training, the long-ter m unem ployed and 
persons with disabilities. Suppor t for school -to-work transition and outreach to young people in particular require 
further attention, as recent graduates might face additional difficulti es in finding a job. 
(19) The outbreak of COVID-19 requires appropr iate measures to mitigat e social imp acts and to suppor t households’ 
income and sustain a promp t reco very of the economy . According to the Commission 2020 spring forecast, 
unem ployment is expected to rise to 8,6 % in 2020 and decrease to 7,5 % in 2021. Extern al demand for services is 
set to dip signif icantly , as the tour ism sector is expect ed to be particularly hard hit by the crisis. Adequate income 
replacement should be ensured for all affected workers and self-emplo yed people, including those facing gaps in 
term s of access to social prot ection. Social protection schemes need to protect those in employment, self- 
emplo yment and unem ployment. There is scope for strengthening the overall social protection system in order to 
prevent increases in poverty and inequality levels, in particular by reac hing out to the most vulnerable, including 
children, inactive people, undeclared workers, and people with a migrant backg round. 
(20) The promotion of flexible working arrange ments with the involvement of social partners, particularly in the form of 
telew orking, is of high impor tance. In the shor t term, these will suppor t workers with unforeseen caring 
responsibilities for children and other dependants, while in the long term they will facilitate labour mark et re-entr y 
of the high share of inactive women due to caring responsibilities. Since the elderly and people with chronic 
diseases have increased risks of severe illness due to the virus, investing in quality long-t erm care services is of high 
imp ortance to ensure their continued provision and efficiency in the shor t and medium term. 
(21) Improving the quality , efficiency and labour mark et relevance of education and training is crucial in this crisis 
conte xt and to ensure a fast labour -market recovery . Equipping people with the right skills is even more important 
in times where increased numbers might lose their jobs and need to be ready for job transitions thereaf ter. The 
mobility restr ictions highlight ed the challenge s relat ed to the low digital skills levels in Cypr us. This negativ ely 
affects online activities, such as teleworking, distance learning and the use of e-health services. Equal access to IT 
infrastr ucture and internet, including for disadvantag ed learners, along with well-trained teac hers, are key for quality 
digital education and distance learning. To address low overall educational and training outcomes and imp rove skills 
more broadly , it is essential to continue with the education reform, while investing in solutions for digital learning, 
work-based learning and apprenticeship training, and in developing teachers’ and trainers’ compet ences to use IT 
tools effectively . There is scope to address underach ievement in basic skills, as well as raise participation in adult 
learning. To accelerat e application, retraining programmes could, to the extent possible, be designed for online use 
and then, once the pandemic is contained, integrat e physical presence, as appropr iate. EN Offi cial Jour nal of the European Union 26.8.2020                                                                                                                                         C 282/85   
(22) For the duration of the crisis and its afterm ath, signif icant funds are and will be needed to suppor t businesses. 
Secur ing adequate access to finance and liquidity is essential, especially for small and medium-sized enterprises 
(SMEs), in order to keep compan ies in business and people at work. In the process of designing and implementing 
these measures the resilience of the banking sector needs to be take n into account. Cypr us has implemented a 
specifi c small-business suppor t scheme that subsidises the salar y payments of businesses with up to five emplo yees. 
In addition, the suspension of the increased contr ibutions to the national health syste m and the postponement of tax 
payments (e.g. VAT) will ease the immediate pressure. Swif t administrative coordination, practical suppor t and 
effective communication on the backing available to SMEs, in cooperation with the SME suppor t structures and 
business organisati ons, are essential. The speeding-up of contractual payments by public author ities can also help 
imp rove the cash flow of SMEs. Newly founded start-ups and scale-ups may need specifi c suppor t, e.g. in the form 
of equity stake s by public institutions and incentives for venture capital funds to increase their investments in these 
firms. It remains important to implement financia l instr uments prepared before the crisis (Cypr us Energy Fund of 
Funds). 
(23) To foster the economic recovery , it will be important to front-load mature public investment projects and promote 
private investment, including through relevant reforms. Protect ing and using the countr y’s natural resources 
efficiently is of paramount imp ortance to ensure a sustainable economic recovery and future growth. To maintain 
the countr y’s appeal to touris ts, it is necessar y to address challenges relat ed to the green energy transition, effective 
waste and wate r manag ement and the prot ection of nature and biodiversity . While significant investments have 
already started, more investments in these areas need to be front-loaded. Cypr us faces important challenge s in 
reach ing its 2030 target for greenhouse gas emissions not covered by the EU emissions trading system. These 
challenges need to be addressed by planning and adopting additional measures in a timely manner in accordance 
with the countr y’s National Energy and Climate Plan. Such measures will require inve stments, in particular in areas 
like renewable energy , energy efficiency and sustainable transpor t, which can also help to provide a robust green 
stimulus. Cypr us also needs to impro ve its waste manag ement system and the circular economy . Waste generation 
remains significantly higher than the Union average, while recy cling rates remain significantly lowe r than the Union 
average. The landfi lling rate is also very high. Water and wast e water management, especially in urban areas, is 
character ised by inefficiencies. Droughts and water scarcity are major concer ns and an insuffi cient policy response 
might affect the countr y’s rural economy and tourism. The programming of the Just Transition Fund, which is the 
subject of a Commission proposal, for the period 2021-2027 could help Cypr us to address some of the challenges 
posed by the transition to a climat e-neutral economy , in particular in the territories covered by Annex D to the 
2020 countr y repor t. This would allow Cypr us to mak e the best use of that Fund. 
(24) The importance of a moder n digital infrastr ucture, universal intern et access and the availability of digital services 
was highlight ed by the COVID-19 mobility restr ictions. Investi ng in the digital econom y is essential for bolsteri ng 
productivity and boosting the economic recovery after the crisis. Cypr us rank s at the low end of the Commission’s 
Digital Economy and Society Index (DESI) 2020. Only 45 % of Cypr iots between 16 and 74 years of age have at 
least basic digital skills and ICT specialists still represent a lower propor tion of the workf orce compared to the 
Union averag e (2,7 % vs 3,9 %), ham pering the poten tial of the digital economy . There is a low level of online 
inter action between public author ities and citizens, with only 51 % of Cypr iots intera cting online. The level of e- 
commerce (i.e. SMEs selling online, e-commerce turnover and online cross-border sales) is improving (31,8 % 
in 2019 against 29,4 % in 2018) but it is still below the Union average of 40,1 %. 
(25) Cypr us can further impro ve its research and innovation system to suppor t productivity growth and the required 
digital and envi ronmental transition in a post-pandemic scenar io. Firms’ low researc h and innovation absor ption 
capacity ham per Cypr us’s competitiveness. Improved cooperation between academia and business and the 
commercialisation of research results remain key bottlenecks and require urgent action. However , recent measures 
such as the creation establishment of a new Deputy Ministr y of Research, Innovatio n and Digital Policy , the 
appointment of a new Deputy Minister for Research, Innovatio n and Digital Policy as well as the new Cypr us 
Research and Inno vation Strateg y Framew ork 2019-2023 (‘Inno vate Cypr us’), whic h sets a higher research and 
development target of 1,5 % of GDP by 2023 (up from the current 0,56 %) are promising step s. 
(26) Tackli ng aggressive tax planning is key to improving the efficiency and fairn ess of tax systems , as ackn owle dged in 
the 2020 Recommendation on the economic policy of the euro area. Spillover effects of taxpa yers’ aggressive tax- 
planning strateg ies call for coordinat ed national action to compl ement Union legislation. The economic evidence 
suggest s that Cypr us’s tax rules are used for aggressive tax-planning purposes. Cypr us has take n steps to address 
this by implementing intern ational and European initiatives and taking some additional national measures. 
However , features of the system such as the absence of withholding taxes on outbound dividend, interest and 
royalty payments by Cypr us-based compan ies to third countr y residents, and the corporate tax residency rules, may EN Offi cial Jour nal of the European Union C 282/86                                                                                                                                         26.8.2020   
continue to facilita te aggressive tax planning. The notional inter est deduction scheme needs to be closely monitored. 
Finally , the schem e for the naturalisation of investors in Cypr us by excep tion and the residence-by-in vestment 
schem e have been liste d by the OECD as having a pote ntially high risk for being misused. Cypr us has prepared and 
submitted for legal vetting draf t laws introducing withholding taxes on dividend, inter est and royalty payments to 
countr ies included in Annex I to the EU list of non-cooperative jurisdictions for tax purposes. Cypr us has also 
prepared and submitt ed for legal vetting the introduction of a corporate tax residency test based on incor poration, 
in addition to the existing management and control. The effectiveness of these measures in tack ling aggressive tax 
planning will need to be assessed. 
(27) An effective justice system remains a key factor for an attractive inve stment- and business-fr iendly econom y and will 
be crucial in the reco very process. Serious ineffi ciencies in the justice system continue to under mine contract 
enforcement and prevent the swif t resolution of civil and commercial cases. A series of reforms have been 
announced to address the most critical problems in the justice system in Cypr us, in particular the outdated civil 
procedures rules and digitalisation of the cour ts, the clearance of the large backlog of cases and the lack of lifelong 
training for judg es, but progress remains slow. 
(28) Strengthening the resilience and efficiency of the public administration is key to ensur ing the swif t and effective 
imp lementation of the COVID-19 recovery measures in Cypr us. Improving the coordination between central and 
local government and tackli ng the fragmentation and inefficiencies at local level are necessar y to remove the 
bottlenecks for coherent implementation, investments and service deliver y in the countr y. Pushing forward the 
digitalisation of public administration is key to ensur ing its own business continuity , as well as the continued and 
effective access to public services for citizens and the businesses. 
(29) While the countr y-specif ic recommendations set out in this Recommendation (‘the 2020 countr y-specific 
recommendations’ ) focus on tack ling the socioeconomic impa cts of the pandemic and facilitating the economic 
recovery , the 2019 countr y-specif ic recommendations also covered reforms that are essential to address medium- 
to long-t erm structural challeng es. The 2019 countr y-specific recommendations remain pertinent and will continue 
to be monit ored throughout next year’s European Semeste r. That includes the 2019 countr y-specific 
recommendations regarding investment-related economic policies. All of the 2019 countr y-specif ic 
recommendations should be taken into account for the strateg ic programming of post-2020 cohesion policy 
funding, including for mitigating measures and exit strateg ies with regar d to the current crisis. 
(30) Safegu arding the overall soundness of the banking syste m and managing financial stability risks are essential for 
weather ing the COVID-19 crisis and suppor ting the econom y. While the stability of the banking sector improved 
signif icantly in recent years, the pandemic is posing strains on banks, through an increase in credit risk and 
pressures on prof itability and capitalisation. Vulnerabilities and challenges stem from an over -indebted private secto r 
and a high stock of non-per forming loans (NPLs), whic h limit the scope of credit suppor t. The Cypr iot banking secto r 
has the second highest NPL ratio in the euro area. Theref ore, efforts to reduce NPLs remains a priority, in particular 
addressing lega cy NPLs that are long overdue before the onset of the COVID-19 crisis. To achieve this aim, progress 
on the State-o wned asset manage ment com pany (KEDIPES), including on its organisational model and strategy , is 
essential. The ESTIA scheme appropr iately seeks to suppor t and protect vulnerable borrowers, but it is remains 
essential to balance this aim with improving payment culture. In this respect, strengthening the enforcement of 
claims and promoting the use of insolvency framewor k would help under pin a sustainable workout of bad loans. 
Moreo ver, reducing the backlog in the issuance of title deeds by implementing a structural solution to address the 
inadequacies of the proper ty transaction syste m (i.e. the issuance and transfe r of title deeds) remains an impor tant 
task. 
(31) Continuing efforts to strengthen the framew ork to prevent and penalise corruption is key to ensur ing recovery in the 
aftermath of the COVID-19 crisis and achi eving an effic ient, accountable and transparent allocation and distr ibution 
of funds and resources. While an action plan against corrupti on is being implemented, key measures and legislation 
are still pending adop tion, notably the draf t Acts for the enhancement of transparency in public decision making, the 
establishment of the independent author ity against corrupti on, repor ting corrupti on and the prot ection of whistle- 
blowers. The provisions relat ed to the Law Offi ce’s separation of functions and recr uitment procedures are still 
pending compl etion. EN Offi cial Jour nal of the European Union 26.8.2020                                                                                                                                         C 282/87   
(32) The European Semeste r provid es the framework for continuous economic and emp loyment policy coordination in 
the Union, which can contr ibut e to a sustainable econom y. In their 2020 National Reform Programmes, Member 
State s have taken stock of progress made in the implementation of the United Nations Sustainable Development 
Goals (SDGs). By ensur ing the full implementation of the 2020 countr y-specific recommendations, Cypr us will 
contr ibut e to the progress towards the SDGs and to the common effort of ensur ing compet itive sustainability in the 
Union. 
(33) Close coordination between economies in the economic and monetar y union is key in achi eving a swif t recovery 
from the economic impact of the COVID-19 pandemic. As a Member State whose currency is the euro, Cypr us 
should ensure that its policies remain consistent with the 2020 euro-area recommendations and coordinated with 
those of the other Member States whose currency is the euro, taking into account political guidance from the 
Eurogroup. 
(34) In the conte xt of the 2020 European Semester , the Commission has carried out a compr ehensive analysis of Cypr us’s 
economic policy and published it in the 2020 countr y repor t. It has also assessed the 2020 Stability Programme, the 
2020 National Reform Programme and the follow-up given to the countr y-specific recommendations addressed to 
Cypr us in previous years. The Commission has taken into account not only their relevance for sustainable fiscal and 
socioeconomic policy in Cypr us, but also their compl iance with Union rules and guidance, given the need to 
strengthen the Union’s overall economic govern ance by provi ding Union-level input into future national decisions. 
(35) In the light of this assessment, the Council has examined the 2020 Stability Programme and its opinion (7) is 
reflected in particular in recommendation (1) below . 
(36) In the light of the Commission’s in-dept h review and this assessment, the Council has examined the 2020 National 
Reform Programme and the 2020 Stability Programme. The 2020 countr y-specif ic recommendations take into 
account the need to tackle the COVID-19 pandemic and facilitate the economic reco very as a necessar y first step to 
allow for an adjustment of imbalances. The 2020 countr y-specif ic recommendations directly addressing the 
macroeconomic imbalances identif ied by the Commission under Article 6 of Regulation (EU) No 1176/2011 are 
reflected in recommendations (1), (3) and (4), 
HEREB Y REC OMMENDS that Cypr us take action in 2020 and 2021 to: 
1. Take all necessar y measures, in line with the general escape clause of the Stability and Gro wth Pact, to effectively 
address the COVID-19 pandemic, sustain the economy and suppor t the ensuing recovery . When economic 
conditions allow , pursue fiscal policies aimed at achieving prudent medium-te rm fiscal positions and ensur ing debt 
sustainability , while enhancing investment. Strengthen the resilience and capacity of the health syste m to ensure 
quality and affordable services, including by addressing health workers’ working conditions. 
2. Prov ide adequate income replacement and access to social prote ction for all. Strengthen public emplo yment services, 
promote flexible working arrang ements and improve the labour -marke t relevance of education and training. 
3. Secure adequate access to finance and liquidity , especially for SMEs. Front-load mature public investment projects 
and promot e private investment to foste r the economic recovery . Focus investment on the green and digital 
transition, in particular on clean and efficient production and use of energy , waste and water manage ment, 
sustainable transpor t, digitalisation, researc h and innovation. 
4. Step up action to address features of the tax system that facilitat e aggressive tax planning by individuals and 
multinationals. Improve the efficiency and digitalisation of the judicial system and the public sector . 
Done at Brussels, 20 July 2020.  
For the Council 
The President 
J. KLOE CKNER     
(7)Under Article 5(2) of Regulation (EC) No 1466/97. EN Offi cial Jour nal of the European Union C 282/88                                                                                                                                         26.8.2020