• How the game risks changing ahead of the upcoming pre-election period.

Following the conclusion of the demanding Cypriot EU Presidency, Parliament shifts from the spotlight of the European stage to the difficult daily reality of domestic economic management. The submission and debate of the 2027 state budget, viewed through the lens of the Medium-Term Fiscal Framework (MTFF) 2027-2028, represents the first major "crash test" for the new Parliament and Minister of Finance, Makis Keravnos.

According to information obtained by Brief, Mr. Keravnos appears unyielding, steadfastly maintaining his stance on fiscal discipline. Supported by his Ministry's technocrats, he aims to sustain a surplus budget, viewing it as the Cypriot economy's "shield" against international turbulence.

For the Ministry of Finance, the MTFF 2027-2028 is a binding contract with European institutions and rating agencies. The central directive to be issued ahead of drafting the new 2027 budget is zero tolerance for fiscal deviations. However, a segment of the new Parliament does not align with this rhetoric, which they consider overly conservative.

The presence of new parliamentary forces, combined with the pressure exerted by AKEL, appears to be shifting the balance of power. In addition to inflation and Non-Performing Loans (NPLs), which constitute "red lines" for the legislative body, these new political forces, listening to the voices of a large portion of society, are seeking radical solutions that bypass the Ministry's technocratic framework.

The pressure to adopt measures that offer immediate relief to borrowers and vulnerable consumers is intense and, in many instances, collides directly with Keravnos's practices, as well as the directives of the Central Bank of Cyprus.

The new President of the Parliament finds themselves in an exceptionally difficult position, as they will be forced to safeguard the institutional functioning of the House and avert the risk of a political crisis, while simultaneously being called upon to defuse social unrest.

Their role will be pivotal, acting either as a pillar of consensus or as an arena of confrontation. The strategy to be pursued may involve intensive "behind-closed-doors" consultations, during which the Ministry of Finance will be called upon to concede small but substantial social benefits in exchange for maintaining the core indicators of the MTFF.

A Ministry of Finance source stated to Brief that "the stakes for the coming months are crystal clear. The Cypriot economy does not have the luxury of a fiscal derailment." Makis Keravnos’s ability to convince the House that fiscal discipline is the "vehicle" for social prosperity, rather than a roadblock, will be the key to avoiding a prolonged conflict between the executive and legislative branches.

Concurrently, budget management acquires distinct weight as we gradually enter the pre-election period for the presidential elections. Political forces may transform every economic debate into a battlefield, making consensus extraordinarily difficult, as the demand for popular appeal will frequently clash directly with economic rationality.

Source: Brief